Insolvency Law at Mozambique
Mozambique's insolvency framework is governed by Decree-Law No. 1/2013, enacted on July 4, 2013, which establishes procedures for judicial and extrajudicial reorganization, as well as liquidation. This legal framework aims to provide mechanisms for distressed companies to restructure and continue operations, while also ensuring equitable treatment of creditors. (The Mozambican Insolvency Law | Global Regulation Tomorrow)
đïž Key Insolvency Procedures in Mozambique
1. Judicial Reorganization (Recuperação Judicial)
Initiation: The debtor proposes a two-year reorganization plan, which must be submitted within 90 days of declaring insolvency.
Approval: The plan requires approval by a majority of creditors in each class and confirmation by the court.
Effect: Upon approval, a 180-day stay is imposed, preventing creditors from initiating or continuing legal actions.
Exclusions: Tax claims are excluded from the reorganization and may be paid in installments; labor claims must be settled within specified periods.
Binding Nature: The plan is binding on all creditors, including dissenting ones.
Consequences of Non-Performance: Failure to adhere to the plan allows creditors to enforce their rights or seek liquidation. (The Mozambican Insolvency Law | Global Regulation Tomorrow)
2. Extrajudicial Reorganization (Recuperação Extrajudicial)
Voluntary Agreement: Debtors and creditors negotiate a reorganization plan outside of court.
Approval Threshold: Requires approval by at least 60% of claims in any class, excluding labor and tax claims.
Limitations: Does not provide a stay on creditor actions or protection against liquidation requests by unaffected creditors.
Legal Framework: Governed by the Arbitration, Mediation, and Conciliation Law (Law No. 11/99). (The Mozambican Insolvency Law | Global Regulation Tomorrow)
3. Liquidation (InsolvĂȘncia)
Initiation: Either the debtor or creditors can petition the court for liquidation.
Process: Assets are collected and sold to pay creditors.
Priority of Claims:
Judicial administrator's fees and legal costs.
Supplies and loans during reorganization.
Labor-related claims.
Secured claims.
Tax claims (excluding fines).
Ordinary claims.
Subordinated claims. (The Mozambican Insolvency Law | Global Regulation Tomorrow)
âïž Director Liabilities
Directors in Mozambique face both civil and criminal liabilities under the insolvency law if they:
Engage in fraudulent activities such as falsifying documents or concealing assets.
Provide false information during insolvency proceedings.
Illicitly dispose of or dissipate company assets.
Fail to maintain proper accounting records.
Disobey court orders during insolvency procedures. (Liabilities of directors in Mozambique - DLA Piper Global Guide to Directorsâ Duties)
Convictions can result in:
Prohibition from serving as a director or engaging in commercial activities.
Criminal penalties, including imprisonment. (Liabilities of directors in Mozambique - DLA Piper Global Guide to Directorsâ Duties)
đ Recent Developments
Recent reforms in Mozambique's insolvency law have focused on:
SME Support: Streamlining procedures to assist small and medium-sized enterprises in financial distress.
Digitalization: Implementing electronic platforms for filing insolvency petitions to reduce administrative delays.
Out-of-Court Settlements: Encouraging negotiations between debtors and creditors to reach agreements without formal proceedings.
Early Warning Mechanisms: Introducing systems to identify financial difficulties early, allowing for timely intervention. (Understanding Liquidation and Insolvency Procedures in Mozambique)
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