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Resolving Insolvency in

Congo, Rep

Below is a description of the time, cost and outcome of the most common insolvency proceeding in each economy under the case study assumptions, as well as the strengths and weaknesses in existing insolvency regulations in four areas: commencement of proceedings, management of debtor’s assets, reorganization proceedings and creditor participation.

This information was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 190 economies. The most recent round of data collection was completed in June 2016.

Compare Congo, Rep to 189 other economies.

  • Indicator Explanation Answer
    Recovery rate (cents on the dollar) 17.9
    Proceeding As Mirage will not be able to settle its current liabilities with its available assets, it will file a declaration of cessation of payments (article 25 of the Uniform Act Organizing Collective Proceedings for Wiping Off Debts). In order to continue operating, Mirage will try to obtain the opening of reorganization proceedings and avoid liquidation. Under article 27, a composition proposal is a proposal lodged no later than 15 days following the declaration of cessation of payments, specifying the measures and conditions envisaged to redress the company. According to our information, Mirage will not reach an agreement with its creditors, so the composition proposal will not succeed and the court will convert the proceedings to liquidation some months after the lodging of the proposal (article 33 of the Uniform Act). A reorganization proceeding that is later converted into liquidation is the most likely proceeding in the Republic of Congo. liquidation (after an attempt at reorganization)
    Outcome According to our estimations, the reorganization attempt will fail and the proceedings will probably be converted to liquidation. The hotel will stop operating and will be dismantled, and the assets of the debtor will be sold separately. piecemeal sale
    Time (in years) Mirage will file a declaration of cessation of payments to obtain the opening of reorganization proceedings. The declaration has to be done 30 days following the cessation of payments. The competent court will then declare cessation of payments and open reorganization proceedings. The composition proposal will fail, so the proceedings will be converted to liquidation. According to our estimations, the complete process of a reorganization attempt that is then converted to liquidation takes approximately 40 months. 3.3
    Cost (% of estate) According to our estimations, a reorganization attempt that is later converted into liquidation costs approximately XAF 31,700,000 (25% of the value of the estate). The following cost components are applicable: lawyer fees (15%), fees of the official receiver and receivers (5%) and bailiffs and assignees (5%) appointed under articles 39, 41 and 48. 25.0
    Answer Score
    Strength of insolvency framework index (0-16) 9.0
    Commencement of proceedings index (0-3) 2.0
    What procedures are available to a DEBTOR when commencing insolvency proceedings? (c) Debtor may file for reorganization only 0.5
    Does the insolvency framework allow a CREDITOR to file for insolvency of the debtor? (b) Yes, but a creditor may file for liquidation only 0.5
    What basis for commencement of the insolvency proceedings is allowed under the insolvency framework? (a) Debtor is generally unable to pay its debts as they mature 1.0
    Management of debtor's assets index (0-6) 5.5
    Does the insolvency framework allow the continuation of contracts supplying essential goods and services to the debtor? Yes 1.0
    Does the insolvency framework allow the rejection by the debtor of overly burdensome contracts? Yes 1.0
    Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0
    Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0
    Does the insolvency framework provide for the possibility of the debtor obtaining credit after commencement of insolvency proceedings? Yes 1.0
    Does the insolvency framework assign priority to post-commencement credit? (a) Yes over all pre-commencement creditors, secured or unsecured 0.5
    Reorganization proceedings index (0-3) 0.5
    Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5
    Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a liquidation? No 0.0
    Are the creditors devided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in the same class treated equally? No 0.0
    Creditor participation index (0-4) 1.0
    Does the insolvency framework require approval by the creditors for selection or appointment of the insolvency representative? No 0.0
    Does the insolvency framework require approval by the creditors for sale of substantial assets of the debtor? No 0.0
    Does the insolvency framework provide that a creditor has the right to request information from the insolvency representative? No 0.0
    Does the insolvency framework provide that a creditor has the right to object to decisions accepting or rejecting creditors' claims? Yes 1.0