Insolvency Law at Jordan
Jordan's insolvency framework is primarily governed by Insolvency Law No. 21 of 2018, which modernized and unified the approach to insolvency for both individuals and legal entities engaged in economic activities. This law aims to facilitate business continuity, protect creditors' rights, and enhance the investment climate by providing clear procedures for restructuring or liquidation. (Insolvency law toward commercial transactions in Jordan)
⚖️ Legal Framework and Scope
Under Jordanian law, insolvency is defined as the inability of a debtor to pay debts as they become due or when liabilities exceed assets. The Insolvency Law applies to: (Dialogue Session Underscores Role of Insolvency Law in Enhanci...)
Legal Entities: Including civil companies and government-owned companies. (The Purpose of Bankruptcy Law – A Reading of Bankruptcy Law – Jordanian Legal Network)
Natural Persons: Engaged in economic activities, such as merchants and licensed professionals. (The Purpose of Bankruptcy Law – A Reading of Bankruptcy Law – Jordanian Legal Network)
However, the law does not apply to banks, insurance companies, ministries, public institutions, or individuals governed solely by civil law . (Insolvency law toward commercial transactions in Jordan)
🏛️ Insolvency Procedures
The insolvency process in Jordan involves several stages:
Preliminary Stage: The debtor submits an application to the Court of First Instance, detailing financial statements, assets, liabilities, and reasons for insolvency. (Bankruptcy Application – How Do I Apply for Bankruptcy – Jordanian Legal Network)
Reorganization Stage: The debtor and creditors negotiate a reorganization plan to rehabilitate the business. (Bankruptcy Application – How Do I Apply for Bankruptcy – Jordanian Legal Network)
Liquidation Stage: If reorganization fails, the debtor's assets are liquidated to satisfy creditors . (Bankruptcy Application – How Do I Apply for Bankruptcy – Jordanian Legal Network)
Applications can be filed by the debtor, creditors, or company representatives, with priority given to the debtor in cases of actual insolvency. (Bankruptcy Application – How Do I Apply for Bankruptcy – Jordanian Legal Network)
📊 Priority of Claims in Liquidation
During liquidation, creditors' claims are prioritized as follows:
Secured Creditors: Those holding collateral have the first claim on assets. (Understanding Liquidation and Insolvency Procedures in Jordan)
Unsecured Creditors: Including suppliers and service providers. (Understanding Liquidation and Insolvency Procedures in Jordan)
Employees: Claims related to wages and benefits.
Government Claims: Such as taxes and statutory dues .
🔄 Rehabilitation and Business Continuity
The Insolvency Law emphasizes rehabilitation over liquidation, aiming to:
Restructure: Allow businesses to reorganize and continue operations. (Dialogue Session Underscores Role of Insolvency Law in Enhanci...)
Protect: Safeguard employees' rights and maintain business relationships.
Supervise: Court-appointed insolvency agents oversee the process to ensure fairness . (Dialogue Session Underscores Role of Insolvency Law in Enhanci...)
This approach is designed to stabilize the economy and preserve jobs during financial crises.
🛡️ Legal Protections for Debtors
Upon the declaration of insolvency: (The legal implications of the judgment declaring insolvency in accordance with the Jordanian insolvency law no. 21 of 2018.)
Asset Protection: Creditors are prohibited from seizing the debtor's assets. (Insolvency Law a ‘significant step forward’, says JCC Representative | Jordan Times)
Contract Continuity: Existing contracts, including employment and administrative agreements, remain in effect. (Insolvency Law a ‘significant step forward’, says JCC Representative | Jordan Times)
Management Control: Debtors may retain control over operations under supervision, with interest and penalties on debts suspended . (Insolvency Law a ‘significant step forward’, says JCC Representative | Jordan Times)
📈 Impact on Business Environment
The introduction of the Insolvency Law has been viewed positively, with stakeholders noting:
Enhanced Investment Climate: The law aligns Jordan with international best practices, improving its ranking in ease of doing business . (Insolvency Law a ‘significant step forward’, says JCC Representative | Jordan Times)
Support for Troubled Companies: It provides a legal avenue for companies facing financial distress to restructure and continue operations. (Insolvency law toward commercial transactions in Jordan)
Economic Stabilization: By facilitating business continuity, the law aims to mitigate the impact of economic downturns.
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