The insolvency rules currently in effect in Mozambique
have their origins in 1939 when the Civil Procedure Code
was enacted. Although there have been amendments over
the years, particularly in 1961 and 1967, more significant
changes were made in 2005 and 2009 under the guidance
of the Legal Reform Technical Unit (UTREL). However, these
changes did not impact the content of what is commonly
referred to as “bankruptcy law.” The decision to establish
an independent bankruptcy law, separate from the Code
of Civil Procedure, was already underway, aligning with the
approach taken in most legal systems.

Consequently, the Mozambican government initiated
a process of legislative and administrative reforms to
create modern laws and institutions that address the
current challenges of fostering an enabling environment
conducive for new investments, job creation, and economic
development. Legal codes that were established include
the new Commercial Code (Decree-Law 1/2022, dated May
25), amendments to the Civil Procedure Code (Decree-Law
1/2005, dated December 27), the Notary Code (Decree-Law
4/2006, dated August 23), and Decree-Law 1/2006, dated
May 3, which establishes the Registrar of Legal Entities,
approves its Regulations, and repeals Decree-Law 42644
and Decree 42654, both dated November 14, 1959.

Furthermore, the economic, political, and social landscape of
the Republic of Mozambique necessitated modifications to
the legislation concerning bankruptcy and insolvency, which
were previously incorporated into the Code of Civil Procedure
(1967). In this regard, the Legal Regime for Insolvency and
Corporate Reorganisation (RJIREC) was approved through
Decree-Law 1/2013, dated July 4, with a focus on business
owner recovery. The newly approved regime aims to achieve
two primary objectives: (i) enhance economic efficiency, which
should always be promoted and encouraged by the law, and
(ii) provide social value to legislation by ensuring its usefulness
to the applicable society.

With the enactment of the new insolvency regime, the
terms “bankruptcy” and “bankrupt” in the Code of Civil
Procedure were replaced with “insolvency” and “insolvent.”
Therefore, under the new legislation, insolvency should not
be confused with bankruptcy, as the inability to fulfill past
due obligations does not necessarily imply the economic
unviability of the company or negligent management by
the business owner(s).
In fact, the current Legal Regime for Insolvency and
Recovery of Commercial Business Owners in the Republic
of Mozambique has a dual nature. Firstly, it establishes

procedural rules that are essential for conducting
insolvencies and business recoveries, and ensuring their
timely resolution. Secondly, it sets out substantive rules
that determine the circumstances and conditions under
which business owners have the right to state protection
for recovery, and if recovery is not possible, how the
process should be conducted to remove them from their
activities. The new insolvency regime incorporates several
guiding principles, including the preservation of business
owners, the recovery of viable businesses, the protection
of workers, legal certainty, active participation of creditors,
maximization of the insolvent party’s asset value, and
reduction of financial costs.

Despite the provisions outlined in new insolvency Law,
the use in practice of the legislation has been limited. To
implement the new legal regime, the Government approved
the Statute of the Insolvency Administrator through Decree
36/2019, dated May 16, which was subsequently amended
by Decree 64/2022, dated November 30.

This legal instrument governs private individuals or
entities who fulfill the role of Insolvency Administrator or
provide supervision and guidance in the insolvency and
recovery process. These individuals must be certified by
the Ministry of Justice, subject to passing an entrance
exam administered by the competent entity. The legislation
also defines the rights and duties of the Insolvency
Administrator, regulating their application, examination,
and registration, as well as the exercise of their functions,
suspension and termination of office, remuneration,
conduct, ethics and discipline, and the disciplinary
procedure, while also establishing a sanctioning regime.

To organize and oversee the competent entity, the Insolvency
Administrator Certification and Registration Department was
established under the Ministry of Justice. This department’s
main responsibilities include organizing and administering
training programs for Insolvency Administrators, certifying
and registering Insolvency Administrators nationwide,
monitoring and supervising the activities of Insolvency
Administrators and their assistants, and exercising
disciplinary power over Insolvency Administrators in cases of
misconduct or delegation of duties.

It is worth noting that while there are numerous companies
that are technically bankrupt, only a small fraction of them
have been officially declared bankrupt through judicial
proceedings. The majority of cases in Mozambique come
to a halt due to inaction on the part of the involved parties,
resulting in no sale of assets or payment to creditors.

Despite recent legal and institutional reforms, it is
important to address existing capacity-building challenges
required to ensure the efficiency of the Insolvency
Administrator Certification and Registration Department.

Consequently, the government is collaborating with various
partners to develop its technical capacity. In particular, the
International Finance Corporation (IFC) of the World Bank
provides assistance to help strengthen the implementation
of Mozambique’s insolvency framework and is helping
to build the capacity of the insolvency department, the
judiciary and of the profession of insolvency administrators.



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