Jordanian Court of Appeal Judgment on Avoiding Bankruptcy
Type
E-journal
Date
8 Apr 2016
Jurisdiction
Jordan
Taxonomy
Bankruptcy
Copyright
LexisNexis
Relevant company
Al Tamimi & Company
Analysis
Article 295 of the Jordanian Commerce Law 1966 allows a merchant on the verge of bankruptcy to avoid bankruptcy and gain protection from creditors executing judgments against the merchant by initiating a court-sponsored settlement process with the creditors (‘preventive composition').
However, the practical ramifications of this article have been that merchants use this it to delay payment of debts without having any serious intention to follow up with the settlement process while at the same time preventing creditors from declaring these merchants bankrupt. In this article, we will discuss a recent judgment from the Court of Appeal which changes the practical usage of this article and sets certain conditions for merchants to qualify for its protection.
Facts of the case:
A judgment for the payment of the sum of JOD 1,603,000 (USD 2.26m) was enforced against the appellant in this case by the plaintiff in addition to all the fees and legal expenses.