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The Bankruptcy Law and its Regulations of Saudi Arabia
Article 1:
Wherever contained herein and unless the context requires otherwise, the following terms and phrases shall
have the meaning ascribed below:
Law: The Insolvency Law.
Regulations: The Implementing Regulations of the Law.
Court: The Commercial Court.
Ministry: The Ministry of Commerce and Investment.
Minister: The Minister of Commerce and Investment.
Person: A natural or juristic personality.
Debtor: A person proven to be indebted.
Creditor: A person proven to be owed a Debt payable by a Debtor.
Debt: A proven financial obligation owed by a Debtor.
Small Debtor: Debtor who meets the criteria adopted by the Insolvency Committee in coordination with
the General Authority for Small and Medium Entities.
Owner: A person holding a quota or a share in the Debtor's capital.
Related Party:
1. Debtor’s manager, a member of its Board of Directors or the like, Debtor’s partner and Owner, the
relatives of the foregoing persons and of the Debtor’s up to the third degree.
2. Whoever has an employment relationship with the Debtor.
3. A Person who along with the Debtor is controlled directly or indirectly by another Person or Persons
holding over fifty percent of the capital of each of them.
4. The Person directly or indirectly controlling the Debtor and holding over fifty percent of the
Debtor’s capital.
5. The Person directly or indirectly controlled by the Debtor and holding over fifty percent of its
capital.
Distressed Debtor: A Debtor who stopped paying a due Debt on its due date.
Insolvent: A Debtor whose Debts have consumed all of its Assets.
Regulated Entities: A Person authorized to practice a financial activity or administrates a public utility in
accordance with the provisions of Article (3) of the Law.
Competent Authority: The Authority in charge of regulating, controlling and supervising the activities of
the Regulated Entities.
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Insolvency Officeholder or Officeholder: Whoever appointed by the Court or an applicant – as the case
may be – to perform the tasks and duties entrusted to him in accordance with the type of procedure. This
shall include the Financial Restructuring Officeholder and the Liquidation Officeholder.
Insolvency Officeholders’ List: A list prepared by the Insolvency Committee in which the Officeholders
meeting the conditions provided for in the Regulations are listed.
Experts List: A list prepared by the Insolvency Committee in which the Experts meeting the conditions
provided for in the Regulations are listed.
Protective Settlement Procedure: A procedure aiming to facilitate reaching an agreement between the
Debtor and its Creditors to settle its Debts, where the Debtor maintains the right to manage its activities.
Financial Restructuring Procedure: A procedure under the supervision of the Financial Restructuring
Officeholder, aiming to facilitate reaching an agreement between the Debtor and its Creditors for the
financial restructuring of the Debtor’s activity.
Liquidation Procedure: A procedure under the management of the Liquidation Officeholder, aiming to
account for Creditors’ claims, the sale of the Insolvency Assets and the distribution of the sale proceeds to
the Creditors.
Administrative Liquidation Procedure: A procedure under the management of the Insolvency
Committee, aiming to sell the Insolvency Assets which sale proceeds are not expected to cover the expenses
of the Liquidation Procedure or the Small Debtors’ Liquidation Procedure.
Assets: Movable and immovable assets, intellectual property rights, entitlements due from third parties
whether due or not, and any rights attached thereto and other assets which may have current or future
financial value.
Insolvency Assets: The debtor’s Assets on the date of the commencement of any of the Insolvency
Procedures provided for under this Law or during the process of any of the Insolvency Procedures.
Moratorium: The suspension of the right to take or continue any procedure or action or file a claim against
the Debtor, its Assets or against the guarantor of the Debtor's Debts during a specific period under the
provisions of the Law.
Insolvency Debts: The Debts proven to be owed by the Debtor at the commencement date of any
Liquidation Procedures provided for under this Law or arising from contracts or liabilities predating the
date of commencement of any of such procedures; including the Debts of a Debtor who is a natural person
and arising from practicing a Commercial Activity, Professional Activity or any activity aiming to generate
profit or any other Debts.
Commercial Activities: Commercial activities as provided for under any relevant laws.
Professional Activity: Activities professionally practiced by a Person, for its own account, pursuant to its
expertise, qualifications, talents or skills, without the entry into any employment agreement with the
beneficiary which subject him to the beneficiary’s subordination, supervision or responsibility.
Insolvency Register: A register created, managed and maintained by the Insolvency Committee under the
provisions hereof.
Judicial Depository: A filing made by the Officeholder – who has agreed with the Small Debtor or the
Competent Authority – to deliver to the court a resolution issued by those who have been agreed with to
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commence a Small Debtors’ Financial Restructuring Procedure or a Small Debtor Liquidation Procedure–
in compliance with all the legal requirements - and the acceptance by the Court of such filing.
Proposal: A Proposal of a Protective Settlement Procedure, or Small Debtor’s Protective Settlement
Procedure, the Financial Restructuring Procedure, or Small Debtors’ Financial Restructuring Procedure to
be voted thereupon.
Plan: The accepted or ratified Proposal, depending on the type of procedure.
Regulation 1:
1. Wherever contained herein, the following terms and phrases shall have the meaning ascribed to
them under Article (1) of the Insolvency Law issued by Royal Decree No. (M/50) dated
28/5/1439H.
2. Wherever contained herein and unless the context requires otherwise, the following terms and
phrases shall have the meaning ascribed below:
Insolvency Procedure: Any of the insolvency procedures provided for under Article (2) of the Law.
Information and Documents: Information and documents identified by the Insolvency Committee in
coordination with the Ministry of Justice.
Meetings Management Rules: Rules to be issued by the Minister for the management of Insolvency
Procedures meetings.
Article 2 :
This Law aims to regulate the following Insolvency Procedures: 1. Protective Settlement. 2. Financial
Restructuring. 3. Liquidation. 4. Small Debtors' Protective Settlement. 5. Small Debtors' Financial
Restructuring. 6. Small Debtors' Liquidation. 7. Administrative Liquidation.
Regulation 2 :
1. The following are considered Regulated Entities:
a) Companies engaged in providing healthcare services and healthcare products, and are subject to
the Regulated Entity standards set by the Competent Authority.
b) Companies whose activity is to provide educational services and materials, and are subject to the
Regulatory Entity standards set by the Competent Authority.
2. In coordination with the Insolvency Committee, the Competent Authority shall determine the
Regulated Entities falling under its competence, in accordance with the standards set for that
purpose
Article 3:
1. The following are considered Regulated Entities under this Law: (a) banking companies, financing
companies, insurance companies and exchange houses; (b) persons licensed to trade in securities; (c) the
Capital Market and the settlement, clearing and deposit companies; (d) credit rating companies; (e) credit
information and record companies; (f) telecommunications, water, electricity and gas companies; (g)
companies operating in the exploration of energy and mineral resources; (h) companies operating the main
activities in airports, railways, ports and the like, as specified in the Regulations; (i) special purpose
facilities; (j) any other Person specified in the Regulations. 2. Any application for the initiation of a
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Insolvency Procedure or a Judicial Depository in relation to a Regulated Entity shall not be accepted without
the issuance of a favorable decision by the Competent Authority. 3. The Competent Authority shall – after
the submission of a complete application - issue a decision approving or rejecting the application, within a
period not exceeding thirty (30) days, and approval shall be deemed to have been granted by the Competent
Authority if the latter failed to decide within the prescribed timeframe. 4. The Court shall have jurisdiction
to hear proceedings arising from the Competent Authority’s decision under paragraph (3) of this Article.
Regulation 3:
The members of the Board of Directors, managers, members of the board of managers and the like of the
Debtor must submit the following to the Ministry or the Capital Market Authority, as the case may be, prior
including a voluntary liquidation item for a vote at the shareholders or partners Assembly:
a) A report prepared by the Auditor accompanied by an updated budget, assuring the sufficiency of
the Debtor's Assets to repay all of its Debts by the end of the proposed voluntary liquidation period,
and such report shall be submitted within a period not exceeding fourteen days from the date of its
preparation.
b) A written acknowledgement stating that the Debtor continues to pay its debts.
Article 4:
The provisions of this Law shall apply to: (a) a natural Person practicing a Commercial Activity or a
Professional Activity or any activity with an aim to generate profits in the Kingdom; (b) commercial,
professional and civil companies, Regulated Entities as well as other entities or establishment with an aim
to realize profits, registered in the Kingdom; (c) non-Saudi investors, whether natural or juristic Persons,
holding assets or practicing a Commercial Activity or a Professional Activity or any activity with an aim
to generate profits through a licensed entity in the Kingdom. The Law shall only apply to the investor Assets
located in the Kingdom.
Regulation 4:
1. The application for the commencement of the Insolvency Procedure shall be submitted to the Court
accompanied by the Information and Documents specified therefor.
2. For the purpose of Judicial Depository, the Officeholder shall submit the decision of the Small Debtor
or the Competent Authority, accompanied by the Information and Documents specified therefor.
3. If a person other than the Debtor submitted an application for the commencement of an Insolvency
Procedure, the Court may order the Debtor to provide the Information and Documents referred to under
paragraph (1) of this article.
Article 5 :
The Insolvency Procedures aim to achieve the following: (a) enable the Insolvent Debtor or the Distressed
Debtor or the Debtor expected to suffer from financial difficulties to benefit from the Insolvency Procedures
in order to restructure its financial position, maintain its activities with an aim to contribute to the economy
and support it; (b) consider the Creditor’s Rights and to ensure a fair treatment among the Creditors; (c)
maximize the value of Insolvency Assets, ensure a controlled sale of such assets, and a fair distribution of
the sale proceeds to the Creditors upon liquidation; (d) reduce procedural costs and timeframe, and increase
the efficiency thereof especially in restructuring of the position of the Small Debtors or the sale of the
Insolvency Assets and the distribution of the sale proceeds among the same in a fair manner within a
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specified timeframe; (e) undertake Administrative Liquidation of the Debtor where the Assets are not
expected to cover the costs of the Liquidation Procedure or Small Debtors’ Liquidation Procedure.
Regulation 5:
After recording the application to commencement any of the Insolvency Procedures, the Court may, at its
own discretion or at the request of an interested party, order any of the following:
1. Appoint an Officeholder from among those listed in the Officeholders’ List to replace the Debtor in the
conduct of its activities and the fulfilment of his statutory duties until the judgment of the Court is
issued in relation to the application for the commencement of the Procedure.
2. Attach the Assets of the Debtor which are in the possession of the latter or third parties.
Article 6 :
The Court shall issue the necessary judgements and decisions to implement the procedures provided for
under this Law, oversee the implementation thereof, hear all disputes arising therefrom and impose the
penalties and sanctions provided for under the Law.
Regulation 6 :
1. Notification by the Debtor, Officeholder or Insolvency Committee shall be made in accordance with
the provisions of the Law and Regulations as per the prescribed form.
2. Notification by the Debtor, Officeholder or Insolvency Committee shall be made in accordance with
the provisions of the Law and Regulations on the Insolvency Committee’s website.
3. If the notification stipulated in the Law and Regulations is not possible, then it shall be announced to
those who were not notified, the notification shall be effective as of the date thereof the announcement.
4. The Court may order the Debtor, Officeholder or Insolvency Committee to notify or announce any
judgment, decision or action.
Article 7 :
1. Subject to Article (4) hereof, no person shall be liquidated under any other law unless the Assets of the
Debtor are sufficient to cover all its Debts and that such Person is not distressed.
2. If the Debtor undergoes a voluntary dissolution in violation of the provisions of Paragraph (1) of this
Article, the members of Debtor’s board of directors or the members of its board of managers, and the like,
shall be jointly liable for any outstanding Debts of the Debtor.
3. It is prohibited to include the Debtor’s voluntary liquidation item on the agenda of the general assembly
or the shareholders’ assembly in violation of Paragraph (1) of this Article.
4. The Regulations shall specify the provisions necessary for the implementation of this Article.
Regulation 7:
The Debtor and Officeholder shall document in writing all actions undertaken as part of the Insolvency
Procedure
Article 8:
The Regulations shall set out the special provisions pertaining to cross border Insolvency procedures.
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Regulation 8:
1. Notifications, documents, information and the like, in accordance with the provisions of the Law and
Regulations, may be sent to the national address or via electronic means, including text messages sent
through a verified mobile phone, e-mail, and accounts registered in any e-Government system.
2. When there are multiple Officeholders, the notification of Officeholder selected by the Court to be the
chair of the Officeholders – and any delivery of Information or Documents thereto, shall be deemed to be
a duly notification or delivery of all remaining Officeholders.
3. The invitation to hold any meeting shall include the date, time and place thereof.
Article 9 :
1. Pursuant to a Council of Ministers' resolution, a committee titled "Insolvency Committee" shall be
formed comprising five (5) or more experienced and qualified members, as nominated by the Minister, for
a three (3) year renewable term. The Committee shall possess a juridical personality and be financially and
administratively independent, under the supervision of the Minister.
2. The Insolvency Committee, in addition to the technical and administrative functions provided for herein,
shall have the following competences:
(a) establishing and managing the Insolvency Register;
(b) licensing Insolvency Officeholders and experts in accordance with the Regulations;
(c) preparing a Insolvency Officeholders and experts list in accordance with the Regulations;
(d) issuing the rules governing the work of Insolvency Officeholders and experts;
(e) conducting inspections and verifications in respect of any Insolvency Procedures implemented in
accordance with the provisions hereof;
(f) submitting its recommendations to the minister regarding updating the list of Regulated Entities, in
coordination with the competent authorities;
(g) setting out the Small Debtors standards in coordination with the General Authority for Small and
Medium Enterprises;
(h) determining the minimum Debt amount of the Debt that gives Creditors the right to request the initiation
of liquidation proceedings;
(i) managing Administrative Liquidation Procedures;
(j) establishing, maintaining and managing the register provided for in Article (204) (2) hereof;
(k) issuing the forms and documents provided for in the Regulations and Rules;
(l) organizing and sponsoring initiatives to increase awareness about the Law;
(m) making the necessary Proposals to enhance the effective implementation and development of the
provisions hereof, including conducting studies and research;
(n) conducting activities and participating in the events relevant to its competences;
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(o) conducting periodic reviews of the provisions of the Law and its Regulations, as well as the relevant
rules and instructions, and propose any amendments to the Minister in coordination with the competent
authorities;
(p) provisions of consultations, services and training with or without a consideration.
(q) conducting any other competences specified in the Regulations or in the formation decision
Regulation 9:
All correspondences, notifications, approvals, agreements, warnings, requests and any other documents
required under the provisions of the Law or Regulations shall be in writing
Article 10 :
1. Insolvency Committee’s rules and work procedures shall be issued by a ministerial resolution, and shall
include: (a) rules and regulations for convening its meetings, voting on its decisions, preparing its meeting
minutes and the like; (b) establishing a general secretariat for the Committee and defining its duties, work
rules and procedures.
2. The Committee shall submit periodic reports to the Minister on its activities, achievements, difficulties
encountered, and any relevant suggestions enabling it to efficiently undertake its functions and duties
Regulation 10:
1. The Creditors Committee, Creditor and Debtor shall have the right to access the Information and
Documents held with the Officeholder or the Insolvency Committee relating to the commenced Debtor’s
Insolvency Procedure unless the Officeholder, Insolvency Committee or Competent Authority decides that
it is confidential for reasons to maintain the value of Insolvency Assets, or continuing the Procedure or
activity overseen by the Competent Authority.
2. The Creditors’ Committee, Creditor and Debtor may challenge the Information and Documents
confidentiality decision before the Court, which may, upon overturning said decision, specify conditions
for the disclosure of such Information and Documents.
Article 11 :
In the performance of its functions, the Insolvency Committee may: (a) seek assistance from those having
experience in financial, regulatory and other fields; (b) vest its executive and administrative powers to
whom it deems appropriate.
Regulation 11:
The sale of Insolvency Assets shall be carried out by the Officeholder after the judgment or decision to
commence a Liquidation or a Small Debtors Liquidation Procedure becomes final.
Article 12 :
1. The Ministry undertakes to provide the Insolvency Committee with the financial resources necessary to
perform its functions and duties, including the remunerations of Committee members and allocations for
entering into contracts with experts, specialists and employees, as well as providing them with suitable
premises.
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2. The Insolvency Committee shall be entitled to receive financial consideration for the issuing of licenses
and the provision of its services and business, or for the evaluation of activities. The Minister shall
determine such consideration and methods of payment.
3. The Committee shall deposit its cash funds in its own name in one or more local banks, and shall use
said funds to pay for its works, secretariat and employees in accordance with administrative and financial
regulations to be established by the Committee for this purpose and approved by the Minister.
Regulation 12 :
Taking enforcement actions on Assets securing the Debtor’s Debt shall take place during the Moratorium
period, in accordance with the relevant regulations.
Article 13 :
1. Without prejudice to any provisions of related regulations, the Debtor may file with the Court an
application form for the commencement of a Protective Settlement Procedure in any of the following cases:
(a) if he is more likely to suffer financial difficulties leading to Distress; (b) if Distressed; (c) if Insolvent.
2. A Debtor may not file an application for the commencement of a Protective Settlement Procedure if the
Debtor has already been subject to such procedure or to a Small Debtors’ Protective Settlement Procedure
during the twelve (12) months preceding the application to commence this procedure.
Regulation 13 :
The Creditor shall submit its claim to the Officeholder or Insolvency Committee within the period specified
for submitting said claims as in accordance with the prescribed form.
Article 14 :
1. The application request for the commencement of a Protective Settlement Procedure shall be registered
with the Court after filing such request together with the Proposal, information and related documents in
accordance with the provisions of the Regulations. 2. The Proposal must include background information
on the financial position of the Debtor, the effects of the economic situation thereon and classification of
Creditors into categories in accordance with the provisions of Article (29) hereof.
Regulation 14 :
1. The Officeholder or Insolvency Committee, as the procedure may be, shall review Creditor claims, taking
into account the veracity and value of each thereof and the information provided to establish such claims.
2. The Officeholder or Insolvency Committee shall prepare the Creditors’ Statement of Claims on the basis
of the information submitted thereto, provided that said Statement is submitted to the Court within fourteen
(14) days from the expiry of the period specified for the submission of claims for validation. The Statement
must include the following:
a) Creditor’s name, address, and claimed amount;
b) identify the secured Creditors, the details of the security interest held by the secured Creditors, in addition
to an evaluation of the value of assets subject of such security interests;
c) debts that may be set off;
d) A recommendation in relation to each submitted claim, to accept, reject or refer to an expert;
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e) the Information and Documents specified therefor.
Article 15 :
1. The Court shall set a date for considering the application for the commencement of a Protective
Settlement Procedure, provided that the date should be within forty (40) days from the date of registration
of the said application. The Court shall notify the Debtor of the hearing date within five (5) days from the
date of registering the application. The Court shall decide on any of the following: (a) Commencement of
the Procedure if: (i) the Debtor’s activities are likely to continue, and the Creditors' claims will be settled
within a reasonable timeframe; (ii) the Debtor is Distressed, Insolvent or is likely to suffer financial
difficulties leading to Distress; (iii) the Debtor submits the information and documents referred to in Article
(14) hereof; (iv) the Debtor has classified with due care the Creditors into categories, in a fair manner. (b)
Rejection of the application in the following cases if: (i) the application does not satisfy legal requirements
or is incomplete without legal justification; (ii) the applicant acted in bad faith or commits any of the
offenses provided for under the Law. If the application is rejected, the Court may order the commencement
of another suitable Insolvency Procedure. (c) Adjourn the hearing for a period not to exceed twenty-one
(21) days for any of the following reasons: (i) the submission of any additional information or documents
requested by the Court from the Debtor; (ii) the Court requesting the Debtor to amend Creditor
classifications as stated in the Proposal to ensure that such classification is fair. The Debtor shall provide
the Court with the relevant information or documentation or evidence of the amendment of Creditors
classification on the date set by the Court, prior to the date of the adjourned hearing, and the Court should
either order the commencement of the Procedure or reject the application in accordance with the provisions
of this Article. 2. The Court may, at its own discretion, or upon the request of the Debtor or any of the
Creditors, summon to attend its hearing any Person holding information or documents relevant to the
application request for the commencement of the procedure, and the summoned Person shall provide the
Court with the necessary information or documents. 3. The Debtor shall notify the Creditors specified in
the Proposal of the Court judgement as per the requirements of the Regulations, and shall deposit a copy of
the Court judgment at the Insolvency Register.
Regulation 15 :
Meeting Management Rules shall apply to any meeting - for Creditors or Creditors’ Committee - to be held
under the provisions of the Law or Regulations, unless otherwise agreed
Article 16 :
1. In the judgment ordering the commencement of the Protective Settlement Procedure, the Court shall
determine the date on which the Creditors shall vote on the Proposal. Such date should be within be within
no later than forty (40) days from the commencement date of the Procedure, unless the Court decides at its
sole discretion, to set a further date thereafter which shall be within no later than an additional period of
forty (40) days. 2. The Debtor shall publish the commencement of the Procedures within seven (7) days
from the date of the issuance of the Court’s judgement in that regard.
Regulation 16 :
Depending on the case, the Proposal shall include the following:
a) Information on the Debtor and the activities thereof;
b) A statement of the Debtor’s financial position and the impact of the economic situation thereon;
c) Identifying the Debtor's Assets and evaluating the aggregate value thereof;
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d) any security provided by third parties for Debts owed by the Debtor and a description of said security
provided by a Related Party;
e) any security in relation to the Proposal - whether in-kind or personal - provided by the Owners or
managers of the Debtor or any other third party;
f) identifying Debtor Assets that are securing any Debts;
g) identifying Debtor Assets excluded from the Proposal and the value thereof;
h) detailed data on non-debtor assets to be included in the Proposal, indicating the sources of said assets,
and any condition associated with their inclusion;
i) a list of the claims and lawsuits filed by the Debtor as at the date of the submission of the Proposal to the
Court or any claims that are likely to be made and the estimated value thereof;
j) a list of debts owed by the Debtor, including the following:
1. The value, origin and due date of the Debt;
2. specify how Creditor claims, including those of secured Creditors, and those claiming to be secured
Creditors are dealt with;
3. indicate the proposed method of dealing with Creditors if they are Related Parties;
4. disclose any circumstances that may lead to potential claims under Chapter Thirteen of the Law in the
event of the initiations of any Liquidation Procedure and any Proposal to provide partial or full
compensation to Debtors in the event of such circumstances.
k) identify claims and lawsuits filed against the Debtor on the date of submission of the Proposal to the
Court, or any potential claims and the estimated value thereof;
l) details of any proposed settlement, including the restructuring of the debtor's business, activities, capital
or debt, whether due or not, reduction, deferral, installment or conversion thereof into capital in the Debtor
or otherwise;
m) dates of distributions to affected Creditors and amounts thereof;
n) the Debtor's manner of doing business during the Procedure;
o) detailed data on any new financing the Debtor desires to obtain, and the manner by which to meet the
obligations arising therefrom;.
p) detailed data on any existing or potential cross borders insolvency proceedings.
q) classification of Creditors, taking into account any criterion affecting said classification, including the
following:
1. Each class shall include similar rights holders;
2. the extent to which the Proposal affects said rights and Creditor classification into more than one class.
r) voting procedures;
s) defining the circumstances under which the Debtor may propose to modify the plan;
t) an item to deal with late claims not included by the Debtor in the Proposal;
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u) the timetable for plan implementation.
Article 17 :
Upon applying for the commencement of a Protective Settlement Procedure, the Debtor may request the
Court to order a Moratorium, provided that the Debtor request must be accompanied with a report signed
by an Officeholder, registered in the Officeholder’s List stating that, in his opinion, the Protective
Settlement Proposal will likely be approved by the majority of the Creditors and is capable of being
implemented.
Regulation 17 :
1. The Meetings Management Rules shall govern the Proposal voting process.
2. The Debtor or Officeholder, as the procedure may be, shall prepare the minutes for the Creditors Meeting
to vote on the Proposal, which shall include: the date of the meeting, its time and place, the names of the
Creditors present and their classification, the value of each debt and the result of the vote on the Proposal.
3. The Debtor or Officeholder, as the procedure may be, shall deposit the Proposal voting result with the
Court, accompanied by the Information and Documents specified therefor.
Article 18 :
1. Without prejudice to the provisions of Chapter Fourteen of the Law, the Court may order a Moratorium
for a period not exceeding ninety (90) days at the request of the Debtor from the date of ordering the
commencement of the procedure and may extend such period to thirty (30) days for one or more times at
the request of the Debtor. In all circumstances, the duration of a Moratorium should not exceed one hundred
and eighty (180) days. 2. A Moratorium shall expire upon the lapse of the period specified in paragraph (1)
of this Article or at an earlier date by the Court's ratification of the Proposal or termination of the Procedure.
Regulation 18:
1. Upon initiating any Protective Settlement or Financial Restructuring Procedure, the Debtor shall include
any document issued on its behalf, the type of initiated Procedure and, in the case of a Financial
Restructuring Procedures, the Officeholder shall ensure the Debtor's compliance therewith.
2. Upon initiating any Liquidation Procedure, the Officeholder or Insolvency Committee, as the procedure
may be, shall state in any document issued on behalf of the Debtor, the type of initiated Procedure.
Article 19 :
The Debtor undertakes to notify the Creditors of the Court’s decision ordering a Claim Moratorium
immediately upon the issuance of the decision, and to exercise the necessary and further undertakes to exert
the due effort in convincing the Creditors to vote in favor the Proposal during the Moratorium.
Regulation 19 :
Insolvency Procedure expenses shall be paid out of the Insolvency Assets, unless misuse or abuse is proven
to have occurred.
Article 20 :
1. During a Moratorium, it is not permitted to take or complete any of the following Procedures or actions:
(a) any procedure, action or disposal against the Debtor or its Assets, including filing any application for
the commencement of any Insolvency Procedures; (b) any enforcement procedure over any Insolvency
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Assets provided as security interest, except with the consent of the Court; (c) any action or disposition
against the personal guarantor or the in-kind guarantor of the Debtor’s Debt, except with the consent of the
Court. (d) any of the procedures or actions provided for in the Regulations. 2. Any action contrary to the
provision of paragraph (1) of this Article shall be null and void. 3. The Court may, at its sole discretion or
at the request of a Person with interest, order to recover any Assets disposed of during the period of the
Moratorium or take any other appropriate action, taking into account the rights of the third parties (in good
faith). The person suffering from any harm may file a claim for compensation.
Regulation 20:
1. A request for termination of Insolvency Procedure shall be submitted accompanied by the Information
and Documents specified for that purpose.
2. The Debtor or Officeholder - as the procedure may be - shall notify the Creditors before submitting the
request for termination of Insolvency Procedure to the Court, and any interested party may object to the
application before the Court within 14 days from the date of its submission.
3. The Creditor shall notify the Debtor or the Officeholder - as the procedure may be – prior to submitting
the request for termination of Insolvency Procedure to the Court. Any interested party may object to the
application before the Court within 14 days from the date of its submission.
4. Interested parties shall notify the Debtor or Officeholder - as the procedure may be - prior to submitting
the request for termination of Insolvency Procedure to the Court. Debtors and Officeholders may object to
the application before the Court within 14 days from the date of its submission.
5. The notification provided for in paragraphs (2), (3) and (4) of this Article shall include the following:
a) The date on which the request for termination of Insolvency Procedure is submitted to the Court;
b) the reasons for submitting the request.
6. Upon conclusion of the plan, the Debtor or Officeholder - as the procedure may be - must petition the
Court to declare the termination of Insolvency Procedure, accompanied by the Information and Documents
specified therefor.
Article 21 :
1. During the Moratorium period, the Court shall approve the enforcement application over any of the
Insolvency Assets or the Assets of the Debtor’s guarantor provided as security interest in the following two
cases: (a) If the enforcement does not affect the ability of the Debtor to continue its activity, or does not
affect the ability of the Debtor to obtain the Creditors and the Owners’ consent on the Proposal. (b) If the
rejection of such application could cause serious damages to the secured creditor where the Debtor will be
unable to compensate for, and where such damage outweighs the damages that would be affect the Debtor
and the other Creditors.
2. During the Moratorium period, and in accordance with the Regulations, the Court shall consider the
application of a Creditor whose majority funds are in the possession of the Debtor.
3. As an exception to Article (18), the Court may, at the request of a party with interest, suspend the Claim
Moratorium for specific claims, in respect of which an action has been taken prior to the Claim Moratorium,
if the Court finds that such an action will be in the interest of the Debtor and the majority of Creditors.
Regulation 21 :
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1. A natural Debtor - who was not discharged from a debt - shall notify his Creditors when he commences
a commercial, professional or profit-making activity within (24) months from the termination date of any
Liquidation Procedures
2. If funds were received by a natural Debtor -who was not discharged from a debt- within twenty four (24)
months from the date of any Liquidation Procedure, the Debtor must submit a petition to the Court
requesting the distribution of such fund. His request must be accompanied with Expert's report stating the
following:
a) The amount of money retained by him and allowing him and his dependents to live comfortably;
b) the amount of money retained by him for the continuation of his activity (if any);
c) the amount of money to be paid to Creditors, each according to their shareholdings and priority.
3. If the Debtor fails to submit to the Court in accordance with the provisions of this Article, then the
Creditors may apply to the Court to claim their share of the money received by the Debtor, with said Court
deciding the right of Creditors to claim their debts with the competent court
Article 22 :
Without prejudice to the provisions of Chapter Fourteen of this Law, the registration of an application for
the commencement of a Protective Settlement Procedure or the commencement of such procedure, shall
not render due any undue debts neither should any undue payments under a contract become due. Any
condition to the contrary shall be deemed as null and void.
Regulation 22:
1. The Officeholder shall start his duties from the date of initiating the Insolvency Procedures, unless the
judgment of the Court stipulates another such date.
2. A judgment of the Court stipulating the appointment of more than one Officeholder must state the
respective duties and powers thereof.
3. If the Court decides that another person shall be subject to the Procedure initiated for the Debtor, then it
shall appoint an Officeholder for that person from the Officeholders’ List.
4. Immediately upon the end of the Insolvency Procedure, the Officeholder shall submit to the Debtor all
Debtor assets, records, correspondences, claims and any other Information or Documents relating to the
Procedure acquired or generated thereby during his tenure as Officeholder.
Article 23:
Without prejudice to the provisions of Chapter Fourteen of the Law, the registration of an application for
the commencement of a Protective Settlement Procedure or the commencement of such procedures shall
not have any effects on any contract to which the Debtor is a party. Any condition to the contrary shall be
deemed as null and void
Regulation 23 :
1. The Insolvency Committee shall notify the Court of the cancellation, suspension or non-renewal of the
license of the Officeholder or Expert, in order to consider his dismissal or continuation in managing the
Insolvency Procedure to which he was assigned.
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2. The Officeholder may submit his resignation to the Court based on legitimate grounds accepted by the
Court, including the following:
a) Health conditions that preclude the performance of his duties and responsibilities;
b) the emergence of a conflict of interest affecting his impartiality and independence in the performance of
his duties and responsibilities.
3. If the Court decided to accept the Officeholder’s resignation, he shall inform the Creditors of the decision
thereof or make an announcement pertaining thereto within seven (7) days of the date thereof.
4. The resigned or dismissed Officeholder shall deposit with the Insolvency Register the decision of the
Court to dismiss him or accept his resignation.
5. The decision of the Court to dismiss the Officeholder or accept his resignation must include the
appointment of a new Officeholder from the Officeholders’ List, and the appointed Officeholder must
deposit with the Insolvency Register the decision of the Court to appoint him.
6. If the Officeholder is dismissed or resigned during the Insolvency Procedure, he shall, within fourteen
(14) days from the date of the Court’s decision to dismiss him or accept his resignation, gives possession
to the new Officeholder – pursuant to minutes signed by both - all the Debtor’s Assets, as well as all
Procedure related records, correspondences, claims and any other Documents and Information he held or
created during his tenure as Officeholder.
Article 24 :
1. The Contracts to which the Debtor is a party shall remain valid, regardless of the commencement of the
Protective Settlement Procedure. The counterparty shall be obliged to perform the contractual obligations
after the commencement of such procedure provided that the Debtor continues to satisfy all the obligations
arising after the commencement of the Procedure. Any Debtor’s obligations which have not been met prior
to the commencement of the Procedure shall be included in the claims list.
2. If after the commencement of the Procedure, the Debtor fails to satisfy its obligations under contracts to
which he is party pursuant to Paragraph (1) of this Article, the Court may, at the request of the counterparty,
terminate the contract and discharge the counterparty from its contractual obligations without of its
contractual obligations arising after the commencement of the Procedure, including the immediate
performance of such obligations or provide alterative guarantees to guaranteeing the counterparty’s rights
upon its fulfilment of its obligations as specified in the Regulations.
3. The Debtor must perform its obligations arising after the commencement of the Procedure on the due
dates unless otherwise agreed with the counterparty
Regulation 24:
1. The Creditors’ Committee shall consist of at least three Creditors (members) appointed by a decision of
the Court at its own discretion or at the request of the Officeholder or Creditors whose claims represent
50% of the total value of Debts, in cases where the Court determines that the formation of said Committee
is appropriate.
2. Upon deciding to form a Creditors’ Committee, the Court shall notify the Officeholder thereof, who,
within five (5) days of the date of notification, shall seek candidates from the ranks of Creditors. Creditors
wishing to apply shall submit their applications to the Officeholder within (14) days from the date of
notification.
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3. For creditor to be candidates to the Creditors’ Committee must:
a) have an admissible claim in the Statement of Claims;
b) the debt, subject of the claim, must not be secured in its entirety.
4. The Officeholder shall submit to the Court a list of candidates accompanied by the proposed composition
and its justification, taking into account equitable representation of Creditors. The Court shall issue its
decision to form the Creditors’ Committee and appoint one of the members thereof as Chairman. The
Officeholder shall deposit a copy of the Court decision in the Insolvency Register. The decision shall come
into effect from the date of its deposit in the Register.
Article 25:
1. The Court may, upon the request of the Debtor during a court hearing notified to the counterparty,
terminate any contract to which the Debtor is a party to if such termination is necessary to protect the
Debtor’s activity and if such termination is in the interest of the majority of the Creditors, provided that
such termination should not cause serious damage to the counterparty and that such court order must be
notified to the counterparty, if the latter did not attend the court hearing. The Regulations shall specify the
relevant mechanism thereof. 2. As an exception to Paragraph (1) above, no contracts with security interests
shall be terminated, including pledge agreements, except in accordance with the provisions of the Law or
the relevant Regulations.
Regulation 25:
1- Creditor membership in the Creditors’ Committee shall terminate when:
a) the Court decides to initiate an Insolvency procedure for the relevant member;
b) If the member does not attend 3 consecutive meetings without an excuse acceptable to the Chairman of
the Committee;
c) if the member is no longer a Creditor.
d) If the member requested termination of its own membership by a letter to the Officeholder.
2- The Officeholder shall notify the court of the expiry of the membership of the Creditors Committee’s
membership, and the court may – at its discretion or at the request of the Officeholder - appoint a
replacement.
Article 26 :
1. The provisions of Articles (22) through (25) of the Law shall not apply to government tenders and
procurements entered between governmental authorities and the Debtor. 2. The provisions of Articles
(23) through (25) of the Law shall not apply to financing contracts entered into between banking or
financing companies and the Debtor.
Regulation 26 :
1. The Creditors’ Committee undertakes to represent the Creditors in fulfilling the responsibilities stipulated
in the Law and Regulation, including:
a) approving the sale of any Asset the value of which exceeds one quarter of the aggregate value of
Insolvency Assets;
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b) Counsel the Officeholder - at his request - when making decisions regarding the sale of Insolvency
Assets;
c) provide an opinion when preparing the Proposal and the Proposal modification plan.
d) provide an opinion on Debtors receiving secured financing;
e) report any violation of the Law or Regulations;
f) provide an opinion on terminating the Debtor's contracts;
g) any other responsibility assigned thereto by the Court or provided for in the plan.
2. The Creditors’ Committee shall hold its meetings at the time and place determined by the Chairman of
the Committee.
Article 27 :
The Proposal shall be only voted upon by the Creditor or the Owner whose statutory or contractual rights
will be affected by such Proposal as determined by the Regulations.
Regulation 27 :
1. The Chairman of the Creditors’ Committee shall manage its meetings, and may, in his absence, delegate
anther member in writing to perform said duties;
2. a Creditors’ Committee meeting shall be quorate if only attended by majority of its members ( at least)
and shall adopt decisions by a majority vote of the members present;
3. meetings of the Creditors’ Committee, its deliberations and voting on its decisions may be conducted by
modern technological means;
4. Minutes of meeting shall be drafted for the meeting of the Creditors’ Committee where decisions shall
be recorded. The Committee shall provide the Officeholder with a copy of said minutes
Article 28 :
Without prejudice to provisions of Article (16) hereof, if the Proposal would affect the Owners' rights, then
the Debtor must invite them to vote thereon in accordance with the provisions of the relevant regulations,
provided that their voting precedes the vote of the Creditors.
Regulation 28 :
Any reasonable expenses incurred by a member of the Creditors’ Committee to attend meetings thereof
shall be covered out of the Insolvency Assets.
Article 29 :
If there are numerous Creditors with Debts or rights of different nature, then the Debtor must classify them
into categories as stipulated in the Regulations.
Regulation 29:
Membership to the Creditors’ Committee shall not preclude dealing with the Debtor so long it is in good
faith and for fair value.
Article 30 :
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1. If there were Creditors disputed claims, then an expert shall be appointed from among the Expert’s List
approved by the Court, to estimate the value of such claims, for inclusion in the Proposal to be subject of
the voted.
2. Subject to Court approval, the Proposal shall include Creditors’ claims which have not been listed in the
Proposal for reasons attributable to the Debtor
Regulation 30:
During the Moratorium period, the Court shall consider the requests of Creditors whose [assets/funds] are
in the Debtor’s possession and shall order the restitution of the said [assets/funds] in the following cases:
a) If the value of said [assets/funds] has not changed either by an increase, decrease, modification or mixed
with another person’s [assets/funds], changing the nature thereof;
b) if the Creditor has not recovered any portion of said [assets/funds];
c) if the Creditor submitted its application within 5 days from the Moratorium date.
Article 31:
1. Creditors shall vote on the Proposal in accordance with the Procedures set forth therein and after the
Owners (if any) have voted to accept the same in accordance with Article (28) hereof.
2. The Proposal shall be deemed approved if approved by each class of Creditors. A class of Creditors shall
be deemed to have approved the Proposal, if the Creditors whose claims represent two-thirds of the value
of Debts owed to voters in the same class and such voting class included Creditors whose claims represent
more than half of the non-Related Party's Debts (if any).
3. The Regulations shall specify the mechanism necessary to manage the voting process referred to in
paragraph (1) of this Article.
4. Upon the completion of the voting process, the Debtor shall notify the Creditors and the Owners of the
voting result and shall deposit the results with the Court. 5. If the vote of the Creditors on the Proposal did
not take place at the time scheduled by the Court, then the Court shall, at its discretion, decide as it deems
appropriate to postpone the voting to a later date or terminate the Procedure.
6. The Regulations shall specify the mechanisms required for modifying the Plan.
Regulation 31:
1. The Court shall, at the request of the Debtor or Officeholder and pursuant to the relevant procedure, as
the procedure may be, submit a proposal to the Creditors and Owners to modify the plan, and shall set a
date for voting thereon in any of the following cases:
a) Upon actual occurrence of any of the events necessitating a modification;
b) if a situation arises affecting the implementation of the plan that is not mentioned in the plan, provided
that the request must be submitted within 14 days of the occurrence of the following effective cases:
1. Force majeure events.
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2. Emergencies, such as exceptional economic or financial disturbances or the death of the plan's guarantor.
3. The commencement of an Insolvency Procedure affecting one of the Debtor’s contractors whose goods
or services are necessary for the Debtor's continued activity.
c) If the modification is proposed by one or more Creditors whose claims represent 50% or more of the
total value of Creditor debts as set out in the plan or when said Creditors approve the request for
modification submitted by the Debtor.
2. The Plan modification request provided for in paragraph (1) of this Article shall be accompanied by the
Information and Documents specified for that purpose.
3. The Court may, upon the request of the Debtor or Officeholder, suspend the claims if the reason for the
modification of the Plan is the occurrence of a material event.
4. The provisions governing voting by the Creditors and Owners on the Proposal and the ratification thereof,
as well as all those governing all relevant notifications and announcements, shall apply to any vote on the
Proposal to modify and ratify the Plan.
Article 32 :
If the Creditors accept the Proposal, then the Debtor must request that the Court ratifies it and, prior to
submitting its application, must inform the Creditors accordingly. The Court shall set a date for the
ratification hearing
Regulation 32:
The Proposal accompanying the application for the commencement of a Protective Settlement Procedure
shall be annotated by the Officeholder whose name is included on the Officeholders List indicating that
Information and Document requirements have been satisfied.
Article 33 :
The commencement of a Protective Settlement Procedure and the ratification of the Proposal shall not
relieve the Debtor of any of the obligations relating to its activity under any other regulations.
Regulation 33:
1. The Debtor shall notify the Creditors specified in the Proposal of the Court’s judgment to commence a
Protective Settlement Procedure within seven (7) days from the date of its issuance, and invite them to vote
on the Proposal, provided that the notification is accompanied by a copy of the Proposal or information
pertaining to granting access thereto by any electronic means determined by the Insolvency Committee.
2. The Creditor - whose claim has not been included in the Proposal - shall apply to the Court for inclusion
therein within fourteen (14) days from the date on which the Debtor announces the commencement of the
Procedure provided for in paragraph (2) of Article (16) of the Law.
Article 34 :
1. The Court shall ratify the Proposal after verifying that it has been accepted by the Creditors and is in
compliance the standards of fairness.
2. The Creditor shall have the right to object to the Proposal before the Court at the ratification hearing on
the grounds of breach of the standards of fairness if such Creditor has voted against such Proposal and
reasonably believes that the Proposal is prejudicial to its position.
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Regulation 34 :
The Debtor shall deposit the Court’s decision to approve the claims Moratorium request or the extension
of the claim application period in the Insolvency Register immediately upon its issuance.
Article 35 :
The Proposal shall be in compliance with the standards of fairness if the following conditions are met: (a)
the Creditors' voting procedures have been complied with; (b) the Creditors have received sufficient
information to study the Proposal and the alternatives available to the Debtor compared to the items
contained in the Proposal; (c) observing the existing rights of Creditors, especially in respect of sharing the
losses and the distribution of new rights, benefits and security interest.
Regulation 35 :
The application shall be submitted pursuant to paragraphs (1) and (3) of Article 11 of the Law, with the
Information and Documents specified therefor attached thereto.
Article 36 :
Immediately upon ratification of the Proposal by the Court, the Debtor shall notify the Creditors of the
ratification and shall file a copy thereof with the Insolvency Register.
Regulation 36 :
The due of care exerted for the Debtor's fulfilment of its contractual obligations arising after the
commencement of the Protective Settlement Procedure - in accordance with the provisions of paragraph (3)
of Article (24) of the Law – shall comprise the following:
a) The provision of security from the Debtor, without prejudice to the provisions pertaining to secured
financing provided for in the Law;
b) provide third party security.
Article 37:
The Plan shall be binding upon the Debtor, the Creditors and the Owners, and the Debtor must complete
the procedures provided for by the relevant regulations.
Regulation 37 :
1. Debtors wishing to terminate any of the contracts to which they are a party to shall submit the request
for termination to the Court along with the request for commencement a Protective Settlement Procedure,
accompanied by a report from an Officeholder from among those listed in the Officeholders’ List indicating
that termination is necessary to protect the Debtor's business and the interests of the majority of Creditors,
and does not cause grave harm to the counterparty.
2. Debtors shall notify the counterparty of the date of the Court's hearing pertaining to the termination
request at least five (5) days prior to its date and of the Court’s decision to terminate within (five) days from
the date of its issuance if the counterparty did not attend the hearing.
Article 38 :
Upon full implementation of the Plan, the Debtor undertakes to apply to the Court to rule out terminating
the Protective Settlement Procedure. The application must be accompanied by the information and
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documents provided for in the Regulations, and the Debtor must notify the Creditors of this application
prior to its submission to the Court. Each party having interest shall have the right to object to this
application before the Court within fourteen (14) days from the date of submission of the application by the
Debtor.
Regulation 38:
1. Debtors may, for acceptable reason, apply to the Court for approving the Modification of the Proposal.
2. In approving the proposed Modification, the Court shall take into account the voting date and may amend
said date so as to enable Creditors to study the Modification.
3. Debtors shall notify Creditors of the Proposal Modification and of the voting date within five (5) days of
Court’s approval pertaining thereto, as well as attach to the notification a copy of the Proposal or
information pertaining to getting access thereto by any electronic means determined by the Insolvency
Committee, and deposit a copy thereof with the Court.
Article 39:
The Court may terminate the Protective Settlement Procedure in any of the following cases: (a) if the
Debtor's submits a termination application to the Court following the completion of the Plan
implementation; (b) if the required voting quorum is not met by the Owners or Creditors on the Proposal,
or if it was not possible for the Owners or Creditors to vote on the Proposal at the specified time, without
prejudice to Article (31) (5) hereof; (c) if the Court refuses to ratify the Proposal; (d) if the Debtor’s submits
a termination application if the conditions for commencement of the procedure do no longer apply to the
Debtor; (e) if the Debtor or the Creditor submits a request to terminate the procedure due a failure to
implement the Plan; (f) if the Debtor submits an application to terminate the procedure due to its intent not
to continue its activities or to continue the implementation of the Plan; (g) if a party having interest submits
an application requesting the termination of the procedure due to material breaches during the procedure or
due to the Debtor committing any of the offences prohibited under the Law.
Regulation 39 :
Only the Creditor or Owner whose legal or contractual rights will be affected by the Proposal including the
reduction, delay or instalment in the fulfilment of rights , shall have the right to vote thereon.
Article 40 :
The Debtor shall file the judgement ordering the termination of the procedure with the Insolvency Register
within no later than five (5) days.
Regulation 40 :
If the Debtor does not deposit the outcome of the voting on the Proposal with the Court in accordance with
paragraph (4) of Article (31) of the Law, the Court may take any action as it deems fit.
Article 41 :
The Court shall, at its discretion or at the request of the Debtor or any of the Creditors, order the
commencement of another appropriate Insolvency Procedure if the following conditions are met: (a) the
Debtor is Distressed or Insolvent; (b) the conditions required for the commencement of the appropriate
Insolvency Procedure are met; (c) the termination of the Protective Settlement Procedure must be based on
paragraph (b), paragraph (c), paragraph (e), paragraph (f) or paragraph (g) of Article (39) of the Law.
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Regulation41 :
The Debtor shall submit to the Court the request for ratification of the Proposal, accompanied by the
Information and Documents specified for that purpose.
Article 42 :
1. Without prejudice to the provisions of the relevant laws, the Debtor, the Creditor or the Competent
Authority may apply to the Court for the commencement of a Financial Restructuring Procedure in any of
the following cases: (a) if it is more likely that the Debtor will suffer financial or economic difficulties
leading to distress; (b) if the Debtor is Distressed; (c) if the Debtor is Insolvent.
2. An application for the commencement of a Financial Restructuring Procedure may not be made if the
Debtor has been subjected to such Procedure or to Small Debtor’s Financial Restructuring Procedure during
the twelve (12) months preceding the commencement application form.
Regulation 42 :
The Debtor, Owner, manager, the person in charge, board member or auditor shall be exempted from
applying the provisions of the Companies’ Law with respect to the Debtor's losses reaching the percentage
specified in the Companies Law, if the petition for the Financial Restructuring Procedure is recorded before
the expiry of the period specified in said Law, unless the Court rejects the commencement of or the
termination of the Procedure.
Article 43 :
The application for the commencement of a Financial Restructuring Procedure shall be registered with the
Court after submitting the application accompanied by the relevant information and documents as specified
in the Regulations.
Regulation 43 :
A person whose owns assets are either held or ceased by the Debtor shall file a claim to the court for
restitution thereof, accompanied by the Information and Documents specified for that purpose.
Article 44 :
If a request for the commencement of a Financial Restructuring Procedure is made by a person other than
the Debtor, then the Court must notify the Debtor thereof within a period not exceeding five (5) days from
the date of the submission of the request. The Debtor may object to the application before the Court at the
scheduled hearing , in any of the following cases: (a) if the conditions for the commencement of the
procedure are not applicable; (b) if the Debt is disputed; (c) if the Creditor aims to abuse the procedure. The
Court shall be entitled to order the Debtor to submit information and documents as specified in the
Regulations.
Regulation 44 :
The Officeholder shall permit the Creditors to have access to the Statement of Claims ratified by the Court.
Article 45 :
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The Debtor, Owner, manager, responsible, board member or auditor shall be exempt from implementing
the provisions of the Companies’ Law with regard to company’s losses reaching a specific percentage as
specified in that Law and in the manner specified in the Regulations
Regulation 45 :
1. When depositing the Proposal with the Court, the Officeholder shall attach to the Proposal his report
indicating his opinion whether or not the Creditors would approve the Proposal and the enforceability of
the Proposal .
2. Subject to Officeholder's approval, the Debtor shall notify the Creditors and Owners affected by the
Proposal of the voting date in accordance with the prescribed form, provided that a copy of the Proposal is
attached to the notification or is made accessible by any electronic means determined by the Insolvency
Committee.
Article 46 :
The filing of an application for the commencement of a Financial Restructuring Procedure or the
commencement of such Procedure shall result in a Claim Moratorium until such date where the
commencement application is rejected, or when the Court ratifies the Proposal or the termination of the
procedure is ordered at a prior date.
Regulation 46:
1. The Owners’ meetings shall be quorate only when attended by the Owners representing at least one
quarter of the Company's capital. The Owners' resolution shall be passed by a two-thirds majority of the
shares or voting shares represented unless the Company's Articles of Association or Bylaws provide
otherwise.
2. Creditors shall vote on the Proposal at the scheduled date, even if the Owners voted against or were
unable to vote on the Proposal.
3. The Officeholder shall deposit the result of the vote on the Proposal with the Court and request the
ratification of the Proposal or the termination of the Financial Restructuring Procedure.
4. In the event that the Creditors were unable to vote on the Proposal, the Officeholder shall submit a request
to the Court to determine another date for the vote or request to terminate the Procedure, and attach to said
request the Information and Documents specified for that purpose.
Article 47 :
1. A Financial Restructuring Procedure shall commence by virtue of a Court order pursuant to Article (41)
of the Law, or pursuant to paragraph (2) of this Article.
2. The Court shall set a date for considering the application for the commencement of a Financial
Restructuring Procedure, provided that the date should be within forty (40) days from the date of registration
of said application. The Court shall notify the applicant and the Debtor of the hearing date within five (5)
days from the date of registering the application. The Court shall decide on any of the following: (a)
Commencement of the Procedure if: (i) the Debtor’s activities are likely to continue and the Creditors'
claims will be settled within a reasonable timeframe; (ii) the Debtor is Distressed, Insolvent or is likely to
suffer financial difficulties leading to Distress; (iii) the Debtor submits the information and documents
referred to in Article (43) hereof. (b) Rejection of the application in the following cases if: (i) the application
does not satisfy legal requirements or is incomplete without legal justification; (ii) the applicant acted in
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bad faith or commits any of the offenses provided for under the Law. If the application is rejected, the Court
may order the commencement of another suitable Insolvency Procedure. (c) Adjourn the hearing for a
period not to exceed twenty-one (21) days for the submission of any additional information or documents
requested by the Court from the Debtor. The Debtor shall provide the Court with the relevant information
or documentation on the date set by the Court, prior to the date of the adjourned hearing, and the Court
should either order the commencement of the Procedure or reject the application in accordance with the
provisions of this Articles.
3. The Court shall notify the Debtor - who failed to attend the hearing – of its judgment within five (5) days
from the date of its issuance.
Regulation 47:
The Debtor shall prepare a report every three months on the progress of the implementation of the plan and
the management of the Debtor's business and submit it to the Officeholder provided that such report should
include the following:
a) A statement on the status of the accomplished parts of the plan during report period;
b) a statement on the difficulties faced by the Debtor in the implementation of the plan and the steps taken
or proposed to be taken under the plan to overcome said difficulties;
c) financial statements if the Debtor is a juristic person, and a financial position statement if a natural person;
d) any other information or data determined by the Insolvency Committee.
Article 48 :
The Court may, at its own discretion, or upon the request of any person who has interest, summon to attend
its hearing any Person holding information or documents relevant to the application request for the
commencement of the Financial Restructuring Procedure, and the summoned Person shall provide the Court
with the necessary information or documents within the specified timeframe.
Regulation 48 :
The Creditor's demand for payment issued to the Debtor under paragraph (2/c) of Article (93) of the Law
must be dated and specifies the amount of debt and the reason for debt initiation.
Article 49 :
1. The Court may order that an Asset be subjected to a Financial Restructuring Procedure, if the Debtor
jointly owns such Asset with another Person and it is not possible to divide said Asset between them,
without prejudice to the rights of the Debtors’ Creditors and the Creditors of the co-owner of such Asset.
2. The Court may order that another Person be subjected to the procedure if the subjection of such other
person – who is subject to the conditions of commencement of the procedure – to the procedure represents
an interest to the Debtor and to this such Person, and if undergoing the procedures by each of them
dependently will be costly and un-feasible and provided that the rights of the Debtor’s Creditors and to the
Creditors of the other Person must protected.
Regulation 49:
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The Debtor must, when submitting a request to commence a Liquidation Procedure shall inform the
Creditors of such request and the date of court hearing scheduled in this regard within seven (7) days from
the submission date. `The Creditor may object to the submission before the Court at least five (5) days prior
to the date of the hearing session.
Article 50 :
1. In its judgment ordering the commencement of Financial Restructuring Procedures, the Court shall
appoint an Officeholder from among those listed in the list of Officeholders’ List. The applicant for the
commencement of the Financial Restructuring Procedure may suggest to the Court the name of the
Officeholder that he desires to be appointed from among those on the list.
2. The financial capabilities, qualifications of the Officeholder and those of the team must be considered
for the appointment of the Officeholder.
3. The Officeholder must exercise the necessary duty of care to safeguard the interests of Creditors.
4. Without prejudice to Paragraph 2 of this Article, the Officeholder may, after obtaining Court approval,
delegate some of the functions to one of those listed on the Officeholders List or Experts List in order to
carry out the task assigned to him, if necessary, provided that the functions entrusted to said delegate are
carefully described in the Court's order.
5. The Court may, when necessary, appoint more than one Officeholder to jointly act in accordance with
the Law and the Court’s instructions, provided that the Court should appoint a Chairperson among them.
All Officeholders shall be jointly liable for their actions. The Regulations shall set out the mechanisms of
their duties.
6. The Officeholder shall deposit a copy of the Court’s judgment ordering the commencement of the
procedure and his appointment in the Insolvency Register.
Regulation 50:
1. The Officeholder shall request from the Court to identify the Insolvency Assets which must be subject
to declaration before their sale, accompanied by the Information and Documents specified for that purpose.
2. When identifying Insolvency Assets subject sale announcement, the following factors must be taken into
account:
a) The Assets are material Insolvency Assets;
b) the effect of the announcement on the value of said Asset;
c) the cost of the announcement.
3. The Court shall determine the publication means as it deems appropriate.
Article 51 :
The Court may, at the request of the Officeholder, appoint an expert from those listed in the Expert’s List
or others to assist the Officeholder in the performance of its duties.
Regulation 51:
If any of the Insolvency Assets are subject to dispute, the Officeholder shall only sell the said Asset after
obtaining the Court’s approval.
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Article 52 :
1. None of the following may be appointed as an Officeholder or an expert: (a) the Debtor’s Creditor,
spouse, son-in-law or relative down to the fourth degree; (b) the Debtor’s partner, employee, auditor or
agent during the two years preceding the commencement of procedure.
2. Prior to its appointment, the Officeholder or expert must disclose to the Court his relationship with the
Debtor and Creditors, and must disclose his relationship with the Creditors on submitting the statement of
claims to the Court.
3. If the expert or Officeholder violates the provisions of paragraph (2) of this Article, he shall be terminated
without the right to receive any fees.
Regulation 52 :
The commencement of a Liquidation Procedure shall not affect any discounts due to the Debtor prior to
commencement, even if otherwise agreed.
Article 53 :
The Court, at its sole discretion, may appoint one or more judges to supervise the Financial Restructuring
Procedure, and shall determine his/their duties
Regulation 53:
1. The request of Officeholder’s submitted to the Court- with regard to the termination of the employment
contracts of the employees of the Debtor- shall include the reasons for said request and a detailed statement
of such contracts.
2. The remuneration of employees who continue to perform their duties after the commencement of the
Liquidation Procedure shall be paid as soon as they are due until either the expiry of their contracts or the
termination of the Procedure.
Article 54 :
1. The Court may, at its sole discretion or at the request of a person with interest, dismiss the Officeholder
and appoint a new Officeholder from among those listed on the Officeholders’ List or dismiss the expert
and appoint a new one from among those listed on the Experts’ List or others, for legitimate cause, without
prejudicing their rights or obligations.
2. A Officeholder or an expert may not resign from his duty after his appointment without legitimate cause
acceptable to the Court, and without prejudice to his rights and obligations.
Regulation 54:
1. The decision of the distribution to the Creditors shall include the following:
a) A statement listing the Insolvency Assets that were sold and the sale proceeds;
b) a statement specifying the method and date of the distribution of the proceeds generated from the sale of
Insolvency;
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c) the names of the Creditors and the amounts allocated to each of them in accordance of the order of
priority, taking into account the deductions resulting the profits realized from the early repayment of future
dues, profit deductions in the case of early repayment upon distribution to the Creditors.
2. If the event where the Officeholders discovers an event that necessitates amending the decision of
distribution, then the Officeholder shall petition the Court to approve said amendment, provided that he
submits material in support such request
Article 55 :
The Regulations shall specify the mechanism for determining the fees of the Officeholder, the expert and
any related expenses.
Regulation 55:
The Officeholder shall restitute to a natural Debtor or Owner of a juristic Debtor the balance of proceeds
from the sale of the Insolvency Assets once all Creditors rights have been fulfilled.
Article 56 :
1. A Officeholder shall, within seven (7) days from the date of his appointment, in the method prescribed
in the Regulations, publish the Court's decision to commence the Financial Restructuring Procedure and
invite the Creditors to submit their claims within a period not exceeding ninety (90) days from the date of
the publication.
2. The Officeholder shall notify the Creditors known to him of said Court judgment and invite them to
submit their claims within a period not to exceed ninety (90) days from the date of notification.
Regulation 56:
At the Debtor’s request, the Officeholder may submit a petition the Court to postpone the termination of a
Liquidation Procedure for acceptable grounds, including taking proceedings against third parties for
obtaining compensation or restitution of an asset; such petition to include the Information and Documents
specified for that purpose.
Article 57 :
The Officeholder shall supervise the activity of the Debtor during the Financial Restructuring Procedure
period to verify the fairness of the Procedure, and implement the Plan in such way as to ensure speed of
performance and provide the necessary protection to the interests of those affected by the procedure in
accordance with the provisions of the Law.
Regulation 57 :
1. Small debtors wishing to terminate any of the contracts to which they are a party shall submit a request
for termination to the Court after depositing the decision to commence a Small Debtors' Protective
Settlement Procedure with the Insolvency Register prior the Creditors’ vote on the Proposal, to be
accompanied by a report from an Officeholder from those appearing the Officeholders’ List indicating that
termination is necessary to protect the Debtor's business and the interests of the majority of Creditors, and
does not cause serious harm to the counterparty.
2. Small Debtors shall inform the counterparty of the date of the Court hearing at least five (5) days prior
to the date set therefor, and of the Court’s decision to terminate within five (5) days from the date of its
issuance if the counterparty did not attend the hearing.
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Article 58 :
1. During the period of the Financial Restructuring Procedure, in addition to the original duties and powers
provided for in this Law and the Regulations, the Officeholder shall have the following duties and powers:
(a) verify the soundness of the Debtor's management of its activities and to monitor Debtor’s financial
operations; (b) attend litigation hearings, Creditors meetings and meetings on other matters related to the
Debtor and the procedure; (c) carry out any ancillary or incidental actions to his original functions and
powers; (d) perform the duties entrusted to him by the Court; (e) perform any other duties under the
Regulations.
2. In carrying out his duties and responsibilities, the Officeholder must be trustworthy and honest
Regulation 58:
Small Debtors shall notify the Creditors named in the Proposal of the date for voting thereon, and shall
attach a copy of the Proposal to the notification or provide access thereto by any electronic means
determined by the Insolvency Committee.
Article 59:
1. An Officeholder shall have the right to access all the Debtors information or documents held by the
Court. The Debtor shall also provide the Officeholder with any additional information or documents as
soon as he becomes aware of such information, as well as the amounts owed by the Debtor to third parties
but undisclosed to the Court, any contracts, or judicial proceedings to which he is a party to.
2. The Officeholder shall have the right to obtain and maintain all information and documents relating to
the Insolvency Assets, the licenses pertaining to the Debtor's activity and any other information or
documents relevant to the Debtor's activity.
3. The Officeholder may request that the Creditor submits additional information or documents in support
of his claim or that amends the nature or amount of the Debt.
4. A Officeholder shall have the right to obtain any information about the