Corporate Bankruptcy in Libya: Legal Procedures for Protecting Creditors and Company Owners

Abstract

This paper aims to provide a comprehensive analysis of the current legal framework in Libya and assess its effectiveness in balancing the rights of creditors and the interests of business owners. The paper begins by clarifying the concept of bankruptcy in Libyan law, identifying the conditions required for declaring bankruptcy, and distinguishing it from other cases, such as insolvency. The paper then reviews the legal procedures followed, a series of steps beginning with filing a bankruptcy petition with the competent court, followed by judicial proceedings, and finally, a final court decision that may lead to the liquidation or reorganization of the company. In a key focus, the study highlights how the law protects the rights of creditors—individuals and entities with debts owed by the bankrupt company. The paper explains mechanisms such as determining debt repayment priority, which ensures that preferred creditors receive their rights before others. It also addresses how to manage and liquidate company assets to maximize creditor repayments. Furthermore, the paper does not neglect the rights of business owners, examining their legal responsibilities in bankruptcy and how the law can provide them with protection mechanisms or opportunities to restructure and mitigate losses. The paper concludes with a critical analysis of the challenges facing the implementation of bankruptcy laws in Libya, such as lengthy procedures, the lack of clarity in some legal provisions, and the lack of effective mechanisms to expedite the liquidation process. In light of this analysis, the paper presents a set of recommendations and suggestions to improve the current legal framework and make it more compatible with the modern economic and commercial environment, thus ensuring the rights of all stakeholders.