Insolvency Law… A New Trend for Doing Business in Jordan

By: Dr. Nida’ N. Goussous
Talal Abu Ghazaleh Legal

Jordanian Insolvency Law No. (21) was issued  on the Year 2018 to comply with the requirements of international commerce and investment through providing better investment environment for foreign and local investors. The Law abolished the provision of Bankruptcy and conciliation from Bankruptcy provided under the Law of Commerce No.(12) for the Year 1966 and its amendments which is a synonym to insolvency in light of the new Law.

Insolvency means the stoppage or the disability of the debtor to pay his due debts on due dates or when the total amount of his financial obligations exceeds the total value of his assets.

The new Law provides for more flexible conditions and lighter repercussions for insolvency which help the insolvent person to re-manage his financial obligations without being dismissed from his society, whereas the bankruptcy former provisions provided under the Law of Commerce No.(12) for the Year 1966 used to bar the bankrupted person from practicing his political rights such as participating in the elections, however the situation has been changed under the new Insolvency Law.

Insolvency Law widened the scope of application whereas more categories can benefit from the insolvency legal option by applying the Law to any person whether natural or legal who hold an economic activity, and the said Law defined the economic activity as any commercial, industrial, agriculture,  professional, services or Hotels. 

The Law also mentioned examples for those concerned persons who hold economic activity, i.e. legal entities civil companies to

ether with companies owned by the Government, merchants who own individual institutions registered and licensed owners of professions. 

Though, the Law excluded from the application therefrom, banks, insurance companies, municipalities, associations and clubs unless are included later by virtue of law. 

Further, the Law provided for detailed provisions to handle several matters related to insolvency to guarantee the stability of both; debtor and creditor(s), such as the categories of concerned creditors in the insolvency matter, the legal repercussions of insolvency declaration on several levels, the reorganization plan and its procedures, the scope of tasks the insolvency administrator.

Though and despite the fact that the Insolvency Law has conferred more flexibility to handle insolvency for the favor of the debtor, however the Law also provided for penalties in case the insolvent has a bad intent in declaring his insolvency or he committed any of the criminal actions provided under the respective Law, which indicates his fraudulent intents from such declaration.

On top of that, the Law also provided for a new scope of application which balances the local legal commercial system with the current  international trend of investment, by applying what is so-called International Insolvency which allows the application of foreign verdict related to insolvency through the Jordanian Courts. This new trend helps foreign investors who handle transnational commercial activities to protect their rights. By that, the new Law widens the umbrella of foreign investments protection.

By complying our local laws with the international requirements in many fields in this globalized world, attention to keep our our local requirements as a priority should be always taken in consideration.