Corporate bankruptcy requirements and impacts under the Egyptian law

الملخص EN

The term “Merchant” does not only make reference to a natural person, but can also mean a moral person and, more precisely, corporations.

As firms acquire commercial capacity, they become subject to the same legal regulations governing individual merchants.

They can then be declared bankrupt just at the moment that they stop paying their commercial debts.

While much emphasis has been placed on the provisions of bankruptcy generally in jurisprudence and legislation, the bankruptcy provisions of corporations are somehow overlooked, although such provisions are those which should have been given due attention, for two reasons: First, the role of a trading corporation is far more significant than that performed by individual merchants in the business field.

Trading corporations bring together all efforts and savings of individuals into one whole.

They undertake large-scale economic projects that individuals alone can not complete, irrespective of their abilities and potentials, making them the perfect tool for economic advancement.

And so, with the growth of such significance, these corporations, and particularly joint venture companies, gained power that only the power of the state prevails over.

They are recognized as a social and economic power, which are held in great respect by their country that feels like it is its duty to watch over them so that they continue on the right path, in order not to become a tool for social exploitation or political control[1].

Second, corporation bankruptcy has the most dangerous effect on national economy and the greatest influence on trade credit.

The capital of these firms is, in most cases, quite as huge as their debts.

What is more, not only does the bankruptcy of a corporation influence the life of such corporation, but also affects the creditors, partners, administrative structure, and even the employees whose number could reach thousands in some cases.

And this will unquestionably culminate in affecting the national economy system in general.

In light of the ancient commercial codification, texts only contained very few provisions concerning partnerships.

These include: Article 198, which provides for the determination of the names of joint partners as well as their domicile in the “cessation of payment” report submitted by the company, and Article 241, which requires affixation of seals upon bankruptcy of partnerships or commandite companies on the “headquarters of the company and the other separate branches of each of the joint partners, as well as Article 341 that authorizes conciliation, upon bankruptcy of a partnership, with one or more joint partners, and Article 408 detailing the conditions for a joint partner to regain capacity (to be discharged of bankruptcy) upon bankruptcy.

With respect to non partnerships, such as joint venture companies, texts made no mention of such companies[2].

The fifth and last chapters of the new commercial law are devoted to bankruptcy.

The law also deals with corporate bankruptcy in the seventh section of this chapter.

Article 698 of chapter 7 stipulated that the provisions set forth in this chapter and the following rules shall apply to corporate bankruptcy.

That is to say, the rules provided for in section 7 of chapter 5 shall first apply when it comes to corporate bankruptcy.

Where such rules make no mention of corporate bankruptcy, the rules set out in the fifth chapter concerning bankruptcy generally shall apply, in consistency with the nature and confidentiality of the company, factors that distinguish it from individual merchants.