Insolvency Law at Iraq
Iraq's insolvency framework is primarily governed by the Iraqi Civil Code No. 40 of 1951 and the Iraqi Code of Commerce No. 149 of 1970. These laws outline the procedures for bankruptcy, liquidation, and rehabilitation of both individuals and businesses. Additionally, the Iraqi Banking Law No. 94 of 2004 provides specific provisions for the insolvency of banks. (Liquidation and Rehabilitation of banks in Iraq - Liquidation and Rehabilitation of banks in Iraq)
Personal Bankruptcy
Under the Iraqi Civil Code, a debtor may file for bankruptcy if they are unable to meet their financial obligations. The process can be initiated by the debtor themselves or by creditors. If initiated by the debtor, the bankruptcy request must be filed within 15 days of the date of payment suspension, with a possible extension to 45 days if the debtor has notified creditors about their financial difficulties. Creditors holding claims exceeding 500,000 IQD can also file for bankruptcy on behalf of the debtor. The request is submitted to the specialized court, which will take necessary actions to protect and manage the debtor's assets . (Guardianship and Bankruptcy: Provisions and Interrelation Between Them Under the Iraqi Banking Law - Muayad & Associates)
Corporate Insolvency
For businesses, the Iraqi Code of Commerce outlines the procedures for bankruptcy and liquidation. The process begins with the filing of a bankruptcy petition, which must include a report explaining the reasons for payment suspension and supporting evidence. The court will then assess the petition and may appoint a bankruptcy trustee to manage the liquidation of assets. Creditors are required to submit their claims within a specified period, and a creditors' meeting is convened to discuss the distribution of assets . (Guardianship and Bankruptcy: Provisions and Interrelation Between Them Under the Iraqi Banking Law - Muayad & Associates, Understanding Liquidation and Insolvency Procedures in Iraq)
Banking Sector Insolvency
The Iraqi Banking Law No. 94 of 2004 establishes a distinct framework for the insolvency of banks. A bank is considered insolvent if it fails to pay financial obligations on their due dates, if its capital falls below 25% of the required amount, or if its assets are less than its liabilities. The insolvency process can be initiated by the Central Bank of Iraq or by creditors holding claims exceeding 4 billion IQD. The Financial Services Tribunal evaluates the petition and may decide to declare the bank bankrupt, order its liquidation, or rehabilitate the bank to preserve stability in the banking system . (Liquidation and Rehabilitation of banks in Iraq - Liquidation and Rehabilitation of banks in Iraq)
Creditor Rights
Creditors in Iraq have the right to file claims against the debtor's estate during insolvency proceedings. They may attend court hearings, participate in discussions concerning the management of assets, and vote on decisions regarding the distribution of recoveries. Secured creditors have preferential rights over unsecured creditors, meaning they are paid first from the proceeds of secured assets . (Understanding Liquidation and Insolvency Procedures in Iraq)
Recent Reforms
Iraq has been working on reforms to modernize its insolvency laws. A proposed Federal Law on Financial Restructuring and Bankruptcy aims to introduce structured arrangements under court supervision, balancing the needs of debtors and creditors. The law applies to companies incorporated under the Commercial Companies Law, establishments, and individuals engaged in commercial activity, excluding governmental authorities and entities in financial free zones. A new regulatory body, the Committee of Financial Restructuring and Bankruptcy, is proposed to administer the law's procedures . (Summary of the Draft Bankruptcy Law [Lexis® Middle East])
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