EGYPT Law and Practice Contributed by: Mahmoud S. Bassiouny, Iman Nassar, Habiba Gamaleldin and Israa Mostafa, Matouk Bassiouny
entitled to cancel the decision issued in respect of the resolution of a distressed bank at any time if the grounds for issuing such decision no longer apply. If the CBE has decided that a bank is in financial distress, the consequences will be as follows: • All the competencies related to the general ordinary and extraordinary assemblies, the board of directors and the executive adminis - tration will be transferred to the CBE, unless otherwise determined by the CBE. • The distribution of any profits or any other form of capital distribution to the sharehold - ers or others will be suspended. • The disbursement of due payments to the senior executives will be suspended, except those related to the businesses or services determined by the CBE. • Any lawsuits filed by the creditors against a bank subject to resolution will be sus - pended for a period of 90 days as of the date on which the bank’s financial distress was announced. Moreover, the CBE may reschedule all or part of the dues owed by a bank for a period not exceeding 60 days, except for clients’ deposits as well as dues related to payment and settle - ment systems, operators of such systems or the participants therein. It may also suspend the application for early termination of financial contracts to which the bank subject to resolution is a party, according to certain regulations. The CBE may undertake any of the below proce - dures, upon publishing that a bank is in financial distress without obtaining the approval of the bank’s shareholders, creditors or debtors:
• dissolving the distressed bank’s board of directors and appointing a delegate to carry out the management activities; • fully or partially suspending the bank’s opera - tions or certain activities; • reducing the nominal value of the bank’s shares or the number of issued shares; • recapitalising the bank by issuing new shares or any other tradable securities; • reducing the value of some of the bank’s lia - bilities or converting such liabilities to shares in its capital or in the interim bank; • terminating or amending any provisions of any contract or debt securities to which the bank subject to resolution is a party; • assigning all or some of the rights, liabilities and assets owned by the distressed bank to another bank or the interim bank; • merging the distressed bank with another bank or transferring its title to shares; and • filing civil lawsuits claiming compensation or in order to recover any monies; such lawsuits will be filed against any of the shareholders or senior executives, or the employees responsi - ble for such financial distress. As per the New Banking Law, if the resolu - tion process of a distressed bank requires the approval of the Financial Regulatory Authority or any other competent authority, such request shall be reviewed within three business days of the application date. Upon undertaking resolution procedures, the CBE shall observe the following: • the ranking of the creditors pursuant to Article 175 of the New Banking Law, notwithstand - ing the CBE’s authority to exclude some of such obligations as per Article 163 of the New Banking Law; and
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