Bankruptcy

Bankruptcy

1. Please describe the specifics of bankruptcy of companies with foreign participation. Are there any requirements different from local companies?

In Egypt, bankruptcy and insolvency matters are primarily governed by the Restructuring, Preventive Composition and Bankruptcy Law No. 11 of 2018.

As a general principle, companies with foreign participation are subject to the same insolvency framework as purely local companies. Egyptian law does not impose a separate bankruptcy regime solely due to foreign shareholding.

However, certain practical aspects may differ in cases involving foreign shareholders, including:

• Cross-border elements: If assets, creditors, or guarantees exist outside Egypt, issues of jurisdiction and recognition of foreign judgments may arise.

• Foreign currency obligations: Claims denominated in foreign currencies are typically converted into Egyptian pounds at the applicable official rate at the time determined by the court.

• Repatriation and capital movements: Any distribution of liquidation proceeds abroad must comply with foreign exchange regulations.

• Investment incentives: If the company benefits from special incentives under investment legislation, coordination with relevant authorities may be required.

The insolvency procedures available include:

• Restructuring (aimed at preserving business continuity).

• Preventive composition (amicable settlement with creditors).

• Bankruptcy and liquidation (in case of cessation of payments).

Foreign shareholders benefit from limited liability according to the legal form of the company (e.g., LLC or JSC), provided there is no fraud or personal guarantee.

2. How does the bankruptcy process of a foreign legal entity work in practice?

The treatment of a foreign legal entity depends on whether it has a legal presence in Egypt.

If the foreign company has a branch or conducts business in Egypt:

• Egyptian courts may assume jurisdiction over assets and activities located in Egypt.

• Bankruptcy proceedings may be initiated before the competent Economic Court if the branch ceases payment of its commercial debts.

• The proceedings generally apply to the assets located within Egypt.

• If the foreign company does not have a registered presence but has assets or creditors in Egypt:

• Egyptian courts may recognize and enforce foreign bankruptcy judgments subject to reciprocity and public policy considerations.

• Creditors in Egypt may initiate individual enforcement actions unless a recognized foreign insolvency proceeding restricts such actions.

In practice, cross-border insolvency coordination remains largely governed by domestic procedural rules, as Egypt has not adopted a comprehensive cross-border insolvency framework similar to the UNCITRAL Model Law.

The process typically includes:

• Filing for bankruptcy before the competent Economic Court.

• Court appointment of a bankruptcy trustee.

• Inventory and verification of claims.

• Asset liquidation and proportional distribution to creditors according to statutory priority rules.

Secured creditors generally retain priority over secured assets, while employees’ wages and certain tax claims may enjoy statutory preference.

Overall, while the substantive regime does not discriminate against foreign participation, cross-border enforcement, currency considerations, and asset location play a significant practical role in cases involving foreign entities.