Debt collection in Egypt

The debt collection procedure in Egypt begins with an assessment of the debtor’s solvency, his field of activity, the history of the enterprise, the availability of documentary evidence of the debt, current court cases and enforcement procedures, as well as the possibility of challenging the debt. This assessment determines the strategy that will be used on behalf of the client during the collection process.

If the debtor does not have current court cases or outstanding court decisions on debt collection, and he is actively engaged in commercial activities, then it is advisable to use the stage of amicable debt collection.

This stage involves active negotiations with the debtor to reach an agreement to pay the creditor’s claims or other possible settlement options (for example, return of goods, transfer of debt to a third party, exchange of services or goods).

Interaction with the debtor begins immediately after sending the notification by mail, email, telephone or instant messengers. This process involves intensive communication with the debtor in order to apply constant pressure. The main task is to establish contact with key decision makers to achieve speedy debt repayment.

The average time for informal out-of-court collection is up to 60 days (except in cases where an installment plan for debt repayment has been agreed upon). If this stage does not bring the expected results, or after an initial analysis it becomes clear that it is not applicable, you should proceed to judicial collection.

Before initiating legal action, you should pay attention to the statute of limitations. The statute of limitations in Egypt for obligations is 15 years from the date the obligation becomes due. Moreover, if the deadline for fulfilling the obligation depends on the will of the creditor, then the limitation period begins to be calculated from the moment the creditor declares his will. The limitation period may be interrupted in cases where the debtor acknowledged the debt indirectly or directly.

Missing the statute of limitations does not prevent the creditor from going to court, but if the debtor applies to the court with an application to apply the consequences of missing the deadline, then the claim will be denied.

Egyptian legislation provides for two types of debt collection through the court, by issuing a court order and through general claims proceedings.

The procedure for issuing a court order is applicable to claims for the collection of debt, which is confirmed by a debt document. To carry out this procedure, the creditor should instruct the debtor to make payment within at least five days, and if the debtor fails to fulfill this obligation, apply to the court with a corresponding petition. The order must be issued within three days of receipt of the creditor’s petition. During the specified period, if the judge has any inaccuracies/doubts, the latter may refrain from issuing an order and schedule a meeting to consider the case in court, instructing the creditor to notify the debtor about this.

An issued order is considered non-existent until the debtor is notified of it. Within 10 days from the date of receipt of the order, the debtor has the right to file a complaint against it. In this case, the complaint must be justified, and not filed with the aim of delaying the process. Otherwise, the complaint is considered invalid by default.

The general procedure for litigation is carried out by filing a statement of claim in court. Before filing a lawsuit, the parties have the right to agree that the decision of the trial court will be final. The decision of the court of first instance acquires the force of a final decision if it is not appealed on appeal within forty days from the date of its adoption. If the decision of the court of first instance was made on the basis of deception committed by the opponent or the use of a forged document, then the period for appeal begins to count from the day when such a circumstance was discovered.

If an appeal is filed, it must be considered within a reasonable time. The decision of the appellate court is recognized as final from the moment of its adoption. The decision of the court of appeal can be appealed in cassation within 60 days. Filing a cassation appeal does not suspend the execution of the appealed decision. However, the court of cassation may order a temporary stay of execution of the decision if the applicant so requests and if there is concern that the execution of the decision will cause irreparable serious harm. The decision of the cassation court comes into force from the moment it is announced and is not subject to subsequent appeal.

After receiving a final court decision, if the debtor refuses to voluntarily comply with the court decision, a writ of execution must be presented to the bailiff for execution. The creditor’s claims based on the writ of execution can be satisfied by seizing the debtor’s accounts and writing off money from them; seizure of the debtor’s property with their subsequent sale or forced management of it; foreclosure on funds or property due to the debtor from third parties; removal of fruits and crops (but not less than 45 days before their ripening); confiscation of shares and dividends with their subsequent sale.

An alternative option for debt collection may be bankruptcy proceedings. The creditor of an undisputed commercial debt or civil debt has the right to initiate bankruptcy proceedings if the debtor stops paying. A creditor with a deferred debt has the right to file for bankruptcy, provided that the debtor ignores the creditor, closes its stores/offices, or takes actions that harm the creditor.

This procedure is interesting because if the debtor company is declared bankrupt, then all its founders/partners must be declared bankrupt, including the participant who left the company after it stopped paying. In addition, the court has the right to declare bankruptcy every person who, under the guise of such a debtor company, carried out commercial activities at his own expense and managed the company’s funds, as if they were his own funds. Such opportunities influence these individuals to repay the company’s debt in order to avoid receiving bankruptcy status with all the ensuing consequences.

Also, if it appears that the company’s assets are insufficient to pay at least 20% of its debts, the court may order all or some of the heads, jointly or independently, to pay all or some of the company’s debts, unless they prove that they have exercised diligence in management affairs of the company.

As part of bankruptcy proceedings, the bankruptcy trustee may require company owners to pay off the remaining balance of their shares in the authorized capital (which they have not yet paid for) even if the payment is not due. In this case, the court has the right to limit such payment to the amount necessary to repay the company’s debts.

An additional lever for debt collection, in the presence of certain circumstances, may be the creation of a threat of bringing to criminal liability the controlling persons of the debtor or the debtor himself.

Articles 328-334 of the Penal Code of the Arab Republic of Egypt provide for a number of penalties (fine or imprisonment) for committing deception bankruptcy (if the debtor embezzles or hides part of his money to the detriment of creditors; if the debtor admits or makes himself a debtor of amounts that he actually does not owes; if the debtor hides or destroys accounting records), negligent bankruptcy (if the debtor caused losses to its creditors due to indecisiveness or gross negligence), fraudulent bankruptcy (if the controlling persons of the company committed actions that led to the bankruptcy of the company, for example, by distributing fictitious profits or by obtaining more for yourself than is permitted in the company’s regulations).

If you have any questions or need support for international debt collection in the Arab Republic of Egypt, our company is ready to provide our expert assistance to effectively resolve your financial issue. Please contact us to receive additional information and professional support from specialists of the leading debt collection agency.

# DEBT COLLECTION AGENCY EGYPT

18.11.2024

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