The Court of Cassation’s acceptance of the insolvency claim
of the
Jordanian cement manufacturing company Lafarge marks the first
insolvency case since the Insolvency Law came into effect at the beginning of
2019, giving more positive flexibility to the local business environment and
protecting companies from the threat of liquidation.
اضافة اعلان
Under today’s insolvency decision, Lafarge evaded mandatory
liquidation, after its total losses reached JD120 million, exceeding its paid
capital (JD60 million). It has thereby protecting itself, its employees, its
investors, and its 30,000 shareholders from a conclusive exit from the market
as a result of liquidation.
The Insolvency Law is deemed one of the most important
positive instruments that adds significant flexibility to the business
environment by ensuring the continuation of companies that are no longer able
to fulfill their financial obligations to their employees and creditors. It is
the final means for companies to remain in the market and avoid mandatory
liquidation — a situation in which everyone would lose, including investors,
shareholders, creditors, suppliers, employees, and others with affiliations to
the company and its business.
Once it is ruled insolvent, the courts appoint an insolvency
agent to manage a large portion of the company. In agreement with all
stakeholders, the agent draws up and executes a plan to reenergize the
business, with the goal of, eventually, getting the company back on track in
regards to investment, production, and marketing.
Insolvency would allow the company to restructure its
finances with creditors on all levels, and reschedule its debts until the
completion of the agreed-upon plan, as alleviating itself from financial
burdens such as loan and interest payments can take time.
Insolvency offers protection to the company from any
financial claims during the allotted period, and gives it the right to
restructure its operations, including its workforce. However, there will not be
heavy repercussions for Lafarge’s workers from labor restructuring in the
coming period, as the company has already restructured itself a short while
before the insolvency declaration, costing it tens of millions of dinars in
sizable financial incentives for its employees.
Under the Insolvency Law, the company’s operational plan
would be dependent upon the consensus of all company stakeholders, who will be
represented by a committee formed for this purpose, hence, rendering them on
equal footing with the company’s administration in saving the company and
bringing it back on track.
Insolvency is the final tool for protecting companies from a
final exit from the market and avoiding losses for everyone. Many companies
around the world have filed for insolvency and were able to successfully
navigate their way out of that insolvency.
Lafarge’s insolvency claim opens the door for other
companies that are struggling financially to file for insolvency and avoid
liquidation. The judiciary is today more aware and experienced in the statuses
of companies and the market’s need for an Insolvency Law to protect the
economy and sustain its various sectors.
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