Until recently, liquidation, insolvency and bankruptcy of companies were regulated under the provisions set out from article 1122º to 1325º of the Code of Civil Procedures approved by Decree – Law n.º 44 129 of 28th of December of 1961 which become applicable to Mozambique through the Ministerial Order no. 19 305 of 30th of July of 1962.However, in 2013, it was approved the Decree-Law no. 1/2013, of July 4th which revoked all provisions regarding insolvency and bankruptcy matters contained in the Code of Civil Procedures and approved the Legal Regime of Insolvency and Recovery of Commercial Entrepreneurs (the “Insolvency Law”).The Insolvency Law eliminated the concept of “bankruptcy” replacing such concept by the term “insolvency”. As such, in Mozambique, there is no longer a status of bankruptcy, only insolvency.The Insolvency Law has introduced the institute of Commercial Business Recovery (“Business Rescue”), which can be pursued either judicial or extra judicially. This is a major novelty introduced by the Insolvency Law as in the Code of the Civil Procedures it was not considered the possibility to “rescue” a company before taking the heavy decision of liquidating it by declaring such company insolvent. As such, currently and under the Insolvency Law, if a company is in a financial distress but it is possible to recover it, it can enter in a “business rescue” procedure instead of being declared straight away as insolvent.A judicial Business Rescue is initiated at the instance of the debtor and will, at all times, be regulated and accompanied by the court, whereas the extra judicial Business Rescue, initiated with the agreement of the creditors, is conducted in the of the rules for conciliation, mediation and arbitration in Mozambique.If the Business Rescue is not possible or does not succeed than the procedures for declaring the relevant company as insolvent shall be applied to it and at its conclusion the insolvent company will be liquidated.
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