Insolvency Law at Madagascar
Madagascar's insolvency framework is primarily governed by Law No. 2003-042, enacted on September 3, 2004, which outlines procedures for collective liability clearance. This law provides a structured approach to address situations where a debtor is unable to meet their financial obligations. (Comparisons | Global Practice Guides | Chambers and Partners)
⚖️ Key Procedures Under Law No. 2003-042
1. Preventive Settlement (Règlement Préventif)
This procedure is designed to assist debtors facing financial difficulties before they reach a state of payment cessation. The company's manager can petition the commercial court, detailing the company's economic and financial situation and proposing reorganization plans. If the court deems these proposals viable, a conciliator is appointed to facilitate negotiations between the debtor and creditors to reach an agreement. (Comparisons | Global Practice Guides | Chambers and Partners)
2. Judicial Reorganization (Redressement Judiciaire)
Applicable when a debtor has ceased payments, this procedure allows the debtor to propose a composition plan to settle debts. The court may grant extensions or approve the plan even if some creditors dissent. The debtor retains control over their assets under the supervision of a trustee, who represents the creditors' interests. (Machine Translation of "Law N ° 2003-042 On The Collective Liability Clearance Procedures" (Madagascar))
3. Liquidation (Liquidation Judiciaire)
If reorganization is not feasible, the court may order liquidation. A liquidator is appointed to sell the debtor's assets and distribute the proceeds among creditors. The law outlines the hierarchy of claims, ensuring that certain creditors, such as employees and tax authorities, are prioritized. (Understanding Liquidation and Insolvency Procedures in Madagascar)
⚠️ Bankruptcy Offenses
Law No. 2003-042 criminalizes various bankruptcy offenses, including: (USDOS – US Department of State (Author): “2015 Investment Climate Statements - Madagascar”, Document #1145419 - ecoi.net)
Simple Bankruptcy: Occurs when a debtor, in a state of payment cessation, engages in actions like contracting excessive debts without receiving equivalent value or failing to declare their insolvency within the stipulated time. (Machine Translation of "Law N ° 2003-042 On The Collective Liability Clearance Procedures" (Madagascar))
Fraudulent Bankruptcy: Involves deliberate actions to defraud creditors, such as concealing assets or providing false information.
Penalties for these offenses range from fines to imprisonment, depending on the severity and intent. (Machine Translation of "Law N ° 2003-042 On The Collective Liability Clearance Procedures" (Madagascar))
📊 Practical Considerations
Duration: The time to resolve insolvency in Madagascar is approximately 3 years, according to World Bank data. (Madagascar - Time to resolve insolvency (years))
Creditor Rights: Creditors have the right to initiate liquidation proceedings and vote on reorganization plans. However, their ability to participate in the selection of insolvency representatives or approve significant asset sales may be limited. (USDOS – US Department of State (Author): “2015 Investment Climate Statements - Madagascar”, Document #1145419 - ecoi.net)
Court's Role: The commercial court plays a central role in overseeing insolvency proceedings, appointing trustees, and ensuring compliance with the law. (Understanding Liquidation and Insolvency Procedures in Madagascar)
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