Ali Zuweid's Political Programme · Proposed legislation · Economy, Finance, Investment and Employment
Bankruptcy, Insolvency and Corporate Restructuring Law
A bill repealing and replacing the old Book Five of Commercial Law No. (149) of 1970, temporarily preserved by Commercial Law No. (30) of 1984 pending an insolvency law. The new system establishes early rescue, a collective enforcement stay, new financing, binding reorganisation plans, rapid liquidation, simplified small-enterprise procedures and cross-border insolvency rules.
Executive Summary
Iraq's current bankruptcy system is not modern despite the current Commercial Law dating from 1984. The final provision of Commercial Law No. (30) of 1984 repealed Commercial Law No. (149) of 1970 but expressly excepted Book Five, Articles (566–791), covering bankruptcy and preventive composition, pending legislation regulating insolvency. More than four decades later, that exception remains the general legislative basis for commercial bankruptcy. Recent Supreme Judicial Council materials confirm continued use of bankruptcy declarations and the collective creditor framework.
The old system centres on a trader who ceases paying commercial debts, with preventive composition as an exception. This model is insufficient for a modern economy involving limited liability and joint-stock companies, corporate groups, secured finance, long-term contracts, digital assets and cross-border supply chains. Waiting until payments actually cease may destroy a business that could have been rescued before liquidity disappeared.
The proposal therefore moves from a binary choice between bankruptcy declaration and composition to a graduated system. Debtors may seek reorganisation upon imminent insolvency, with management normally remaining in control under court and insolvency practitioner supervision. Individual enforcement is stayed for a limited period, collateral value protected, new finance permitted, and a plan addresses debts, operations and ownership. Unviable businesses move rapidly to liquidation or a going-concern sale rather than asset depletion.
The proposal clearly distinguishes Companies Law POL-40 from insolvency law. A solvent company whose shareholders choose closure voluntarily liquidates under company law; a company unable to pay or needing collective protection enters this Law. This removes overlapping liquidation and bankruptcy rules that troubled the historical system.
The law also addresses new financing during distress. A troubled business may have orders, assets and workers yet lack money for next month's wages. Without priority and protection, no new lender will finance it. The proposal therefore permits priority financing and, where necessary, security over specified assets while protecting existing secured creditors against value erosion.
Small enterprises receive a different path from large companies: simpler forms, lower costs, fewer meetings, possible continued owner management and faster discharge for honest individual traders. The aim is to prevent insolvency procedure costs exceeding business value and commercial failure permanently pushing entrepreneurs into informality.
For cross-border insolvency, the proposal draws on the UNCITRAL Model Law: recognition of foreign main or non-main proceedings, foreign representative access to Iraqi courts, direct court and practitioner cooperation, and protection of local creditors. Iraq needs no new treaty to adopt these principles domestically, but they do not independently create international obligations beyond applicable legislation and treaties.
The proposal also covers corporate groups, directors' duties approaching insolvency, avoidable transactions, priorities, worker protection and prevention of imprisonment merely for debt, while retaining criminal liability for fraud, asset concealment and forgery. Honest business failure should become an orderly economic and legal process rather than an indefinite end to civil life.
Current law and the historical gap
Commercial Law No. (30) of 1984 expressly repealed Commercial Law No. (149) of 1970 except Book Five on bankruptcy and preventive composition, preserving Articles (566–791) pending legislation regulating insolvency. The legislature itself thus regarded the 1970 chapter's survival as transitional rather than permanent.
The old Book begins with bankruptcy for a trader ceasing commercial debt payments, effective only by court judgment, and governs the bankruptcy trustee, creditors collectively, bankruptcy effects, contracts, company bankruptcy, preventive composition and rehabilitation. It was relatively advanced for its time: it recognised stays within collective proceedings, support for a company's position before bankruptcy declaration and composition's preventive function. However, its tools do not comprehensively address new financing, debtor-in-possession arrangements, class voting, corporate groups, cross-border cases and simplified insolvency.
Recent Supreme Judicial Council publications also confirm that commercial law continues to govern bankruptcy declarations and their effects, with creditors moving from individual actions to a collective framework after declaration. The need thus concerns law actually in force rather than a hypothetical issue.
Need for a new law
In a recent assessment of Iraq's business environment, the World Bank recommended comprehensive insolvency legislation or substantial amendment of the current framework, noting its reliance on the Commercial Law bankruptcy chapter and the need for modern reorganisation available to debtors and creditors to protect viable companies.
| Issue | Old system | New proposal |
|---|---|---|
| Entry point | Cessation of commercial debt payments. | Actual inability to pay or imminent insolvency for reorganisation. |
| Rescue | Preventive composition and limited historical mechanisms. | Full reorganisation plan, classes, voting and judicial confirmation. |
| Management | Displacement of debtor control and administration of the bankruptcy estate. | Debtor in possession as the reorganisation default, with control transferred for mismanagement. |
| Financing | No modern post-commencement finance framework. | Priority, new financing and security subject to controls. |
| Small enterprises | A single burdensome procedure. | A simplified low-cost path and faster discharge. |
| International insolvency | No modern recognition and cooperation framework. | A chapter based on UNCITRAL Model Law principles. |
Proposed legislative policy
The proposal is neither a law shielding debtors from creditors nor one rushing liquidation for creditors' benefit. It seeks fair maximisation of overall value: a viable business may better serve creditors, workers and investors by continuing; for an unviable business, delay consumes value and sale or liquidation should follow.
Security rights are preserved, not abolished, but secured creditors cannot dismantle a business in the first days if rescue is possible and collateral value protected. Taxes also receive no unlimited priority, because broad government preferences reduce commercial creditor recovery and weaken credit.
Jurisdiction rests with specialised commercial courts where established by the Supreme Judicial Council, with competent Courts of First Instance elsewhere until expansion. This is more practical than requiring a new nationwide bankruptcy court network before implementation.
Draft Bankruptcy, Insolvency and Corporate Restructuring Law
Chapter One — General Provisions
Article 1 — Title
This Law shall be called the Bankruptcy, Insolvency and Corporate Restructuring Law.
Article 2 — Objectives
This Law aims to rescue viable businesses, swiftly and orderly liquidate unviable ones, maximise debtor asset value, treat similarly situated creditors fairly, protect lawful financing, jobs and going-concern value where possible, establish simplified small-enterprise procedures, regulate cross-border insolvency and corporate groups, and reduce the stigma of honest business failure.
Article 3 — Scope of Application
This Law applies to companies, commercial legal persons, individual traders and sole proprietorships conducting economic activity, and to mixed and state-controlled companies in commercial form unless special law provides otherwise. It does not apply to ministries, the Treasury or sovereign bodies.
Article 4 — Sectoral exceptions
Banks, financial institutions, insurers, pension funds and other institutions assigned a special liquidation or resolution regime by law shall follow that regime. This Law applies only as referred to by special law.
Article 5 — Relationship with company law
Company law governs solvent dissolution and voluntary liquidation. Where companies cannot or may become unable to pay debts and seek protection, restructuring or collective liquidation, this Law applies.
Article 6 — Relationship with commercial law
This Law replaces Book Five of Commercial Law No. (149) of 1970, preserved by Article (331/First) of Commercial Law No. (30) of 1984 pending legislation regulating insolvency.
Article 7 — Definitions
“Debtor” means a person subject to this Law; “insolvency”, inability regularly to pay debts when due or liabilities exceeding assets in a manner indicating unsustainability; “reorganisation”, judicial or quasi-judicial restructuring of debts or business to continue the enterprise; “liquidation”, collecting, realising and distributing debtor assets and ending business under this Law; “insolvency practitioner”, a licensed person appointed by the court to administer or supervise proceedings; “debtor in possession”, continued debtor management under court and practitioner supervision; “stay of proceedings”, suspension of individual enforcement, actions and proceedings under this Law; “encumbered assets”, assets subject to an effective security right; “new financing”, financing provided after commencement or at a preventive stage under this Law; “related creditor”, a creditor connected through ownership, control, management or another relationship affecting independence; “small enterprise”, a debtor meeting regulatory asset, revenue and workforce criteria; and “centre of main interests”, the place from which the debtor regularly administers its interests in a manner ascertainable by third parties.
Article 8 — Application principles
This Law shall be applied promptly, transparently and proportionately, preserving business value and secured creditor, worker and creditor rights, protecting bona fide third parties, and preventing use of proceedings to delay creditors without a plan or conceal assets.
Article 9 — Rescue before liquidation
For economically viable businesses, reorganisation or a going-concern sale shall have priority where producing greater value than piecemeal liquidation, without forcing creditors into a plan giving less than the lawful alternative.
Article 10 — Procedural economy
Electronic filing, notices, voting, registers and meetings shall be used where possible. Courts shall set deadlines preventing protracted proceedings and asset-value erosion.
Chapter Two — Judicial and institutional jurisdiction
Article 11 — Competent court
Where the Supreme Judicial Council has established commercial jurisdiction, the Court of First Instance competent for commercial cases in the debtor's main-centre district shall hear proceedings. Elsewhere, the competent Court of First Instance under judicial organisation rules shall have jurisdiction until specialisation expands.
Article 12 — Territorial jurisdiction
Jurisdiction lies where the debtor's centre of main interests is located. A sham relocation after distress arises or one intended for forum shopping shall not alter jurisdiction.
Article 13 — Comprehensive jurisdiction
The insolvency court shall hear all directly related applications, including claim admission, enforcement stays, transaction avoidance, and approval of financing, sales and plans, unless special law assigns exclusive jurisdiction elsewhere.
Article 14 — Appeals
Final decisions and those specified by this Law may be appealed under procedural law. Appeals shall be expedited and shall not stay enforcement except by reasoned decision.
Article 15 — Supervising judge
The Supreme Judicial Council may designate insolvency judges or panels and provide specialist training in accounting, finance, restructuring and cross-border assets.
Article 16 — Insolvency register
A national electronic register shall record commencement, the practitioner, deadlines, plans, judgments and closure, protecting personal data and trade secrets not requiring publication.
Article 17 — Insolvency practitioners
A professional register shall be established. Only persons meeting competence, integrity, independence, professional insurance and continuing training standards may be appointed.
Article 18 — Practitioner licensing
The Ministry of Justice, with the Judicial Council and professional bodies, shall regulate licensing, examination, renewal and discipline. Practitioners may be lawyers, accountants or qualified experts under regulations.
Article 19 — Practitioner conflicts
Before appointment, practitioners shall disclose any relationship with the debtor, creditors, shareholders or management and shall not be appointed where conflicts materially impair independence.
Article 20 — Practitioner fees
Fees shall reflect work size and complexity and value preserved or recovered, subject to court approval and disclosure. Fee systems encouraging liquidation over viable rescue are prohibited.
Article 21 — Creditors' committee
A committee representing creditor classes may be formed in medium and large proceedings, with statutory advisory, oversight and information-access powers.
Article 22 — Information protection
Courts may protect commercially sensitive information disclosed to creditors or the public, provided rightsholders retain information necessary to vote or object.
Chapter Three — Commencement criteria
Article 23 — Inability-to-pay test
A debtor is insolvent if unable regularly to pay debts when due. A genuine dispute over one debt is insufficient to establish insolvency.
Article 24 — Balance-sheet test
Liabilities exceeding asset value or strong unsustainability indicators may be relied upon, considering going-concern as well as liquidation value.
Article 25 — Imminent insolvency
Debtors may seek reorganisation before actual inability to pay where reasonably expected to become unable to pay within the next six months without debt or business restructuring.
Article 26 — Debtor application
Debtors may seek reorganisation or liquidation with financial statements and information on creditors, assets, contracts, employees, litigation, security interests and material matters.
Article 27 — Creditor application
One or more creditors may seek commencement where debts are due, not genuinely disputed and insolvency indicators exist. Applications shall not pressure payment of disputed debts.
Article 28 — Creditor application threshold
Regulations may set a minimum debt or number of creditors to prevent vexatious applications without denying material creditors protection.
Article 29 — Public-body applications
Tax, social security and other public creditors may apply under the same conditions as other creditors, with no procedural advantage in proving insolvency.
Article 30 — Management duties during distress
At imminent insolvency, management shall consider creditor as well as company interests, take reasonable steps to minimise losses and preserve assets, and assess rescue or timely commencement.
Article 31 — Deliberate delay prohibited
Directors continuing increasingly loss-making activity after it becomes reasonably clear that no realistic prospect of avoiding insolvency exists shall be liable if they fail to minimise harm under this Law.
Article 32 — Pre-commencement provisional measures
Where assets face urgent risk, courts may issue limited provisional orders such as freezing a specified transaction or appointing a temporary monitor, protecting debtors from vexatious applications and compensating abuse.
Chapter Four — Commencement and immediate effects
Article 33 — Commencement decision
Where conditions are established, the court shall commence reorganisation or liquidation, specifying the start date, practitioner and whether the debtor retains possession and management.
Article 34 — Publication
Commencement shall be published in the insolvency register and notified to the debtor, known creditors, security registries, commercial register and relevant supervisors.
Article 35 — Stay of individual proceedings
Commencement triggers a temporary stay of individual actions, enforcement, attachment and collection against debtor assets, including security enforcement within this Law's limits.
Article 36 — Stay scope
The stay covers recovery of pre-commencement debts, repossession of assets held by the debtor and termination solely for insolvency. It excludes criminal or regulatory measures and claims exempted by the court to protect a fundamental public interest.
Article 37 — Reorganisation stay duration
The initial stay lasts one hundred and twenty days and may be extended in stages by reasoned decision where necessary for a viable plan without disproportionate creditor harm.
Article 38 — Lifting the stay
Secured creditors or interested persons may seek relief where protection is inadequate, the asset is unnecessary for reorganisation or collateral value declines without suitable compensation.
Article 39 — Collateral value protection
Courts may require payments, security, maintenance or insurance to preserve pledged asset value during the stay.
Article 40 — Essential-service continuity
Electricity, water, telecommunications or other essential providers shall not discontinue solely for earlier debts if post-commencement service is paid for and reasonable security supplied where needed.
Article 41 — Bank accounts
Operating accounts shall continue unless the court orders otherwise. Banks shall not freeze them solely for earlier debts where this obstructs proceedings, subject to lawful set-off and security rights.
Article 42 — Ineffective automatic insolvency clauses
Clauses automatically terminating or modifying contracts solely on an insolvency application or commencement shall be ineffective insofar as conflicting with this Law, except statutory personal or financial contracts.
Article 43 — Protective orders
Courts may issue necessary orders preserving assets, records and data and preventing harm to creditors collectively pending resolution of material issues.
Article 44 — Interest suspension
For distribution purposes, interest on unsecured debts ceases from commencement. Secured-debt interest accrues within collateral value under the law and plan.
Chapter Five — Debtor possession and business management
Article 45 — Debtor in possession as the default
During reorganisation, debtors normally retain assets and business management under practitioner and court supervision unless serious grounds justify transferring control.
Article 46 — Transfer of management
Courts may end debtor possession and appoint the practitioner to manage where fraud, concealment, gross mismanagement, loss of trust, asset risk or clear inability to fulfil procedural duties exists.
Article 47 — Ordinary transactions
Debtors may conduct ordinary transactions necessary for business continuity within the approved business plan and cash budget.
Article 48 — Extraordinary transactions
Material transactions outside ordinary business, including major asset sales, substantial borrowing, new security or related-party settlements, require court approval after practitioner advice.
Article 49 — Cash budget
Debtors shall promptly submit a rolling cash budget showing flows, wages, taxes, essential payments and financing needs, with periodic review.
Article 50 — Separate accounts
Post-commencement transactions shall be clearly recorded, distinguishing new debts and expenses from earlier claims.
Article 51 — Cooperation duty
Management, employees and accountants shall provide records, access credentials, documents and information to the practitioner and court. Destruction or concealment is a serious violation.
Article 52 — Current wages and services
Post-commencement wages, goods and services shall be paid on ordinary terms as proceeding expenses unless the court decides otherwise.
Article 53 — New supplier protection
New suppliers shall not be forced to extend credit and may require advance payment or reasonable security for subsequent transactions.
Article 54 — Operating reports
Debtors and practitioners shall submit concise periodic reports on liquidity, sales, collections, payments, material events and plan preparation.
Article 55 — Inspection and information
Creditors and committees may obtain reasonable information on proceedings and business performance without competitive secrets unnecessary for decision-making.
Article 56 — Management liability during proceedings
Management remains responsible for compliance with laws, taxes, labour, environmental and safety requirements. Commencement does not exempt subsequent obligations.
Chapter Six — Practitioner and estate administration
Article 57 — Practitioner duties
The practitioner shall inventory and verify assets and liabilities, monitor management or manage when appointed, examine earlier transactions, receive claims, support plan preparation and report to the court.
Article 58 — Independence and impartiality
Practitioners act for creditors collectively and the proceedings, not a particular creditor or shareholder, observing impartiality, confidentiality and disclosure of subsequent conflicts.
Article 59 — Experts
Practitioners may engage lawyers, accountants, valuers and technical experts with court approval for material work, their fees constituting proceeding expenses.
Article 60 — Inventory
Within a court-set period, the practitioner shall inventory assets, rights, actions, contracts, security and digital records, updating when new assets are found.
Article 61 — Possession of records
Practitioners may copy, preserve or secure paper and electronic records and backups, including lawfully accessible third-party-hosted data.
Article 62 — Asset recovery
Practitioners shall recover debtor assets held by others and avoidably transferred funds, including through litigation inside and outside Iraq.
Article 63 — Asset protection
Practitioners shall maintain insurance, maintenance, guarding and risk management to prevent unnecessary value loss.
Article 64 — Asset sales
Practitioners may sell assets in liquidation or unnecessary assets in reorganisation with court approval, appropriate notice and valuation where needed.
Article 65 — Auction or competitive sale
Sales shall normally be competitive and transparent. Direct negotiation is permitted if the practitioner demonstrates greater value or that the asset's nature precludes effective competition.
Article 66 — Going-concern sale
Sale of a business or economic unit as a going concern shall take priority where it yields greater value and preserves jobs and contracts compared with piecemeal liquidation.
Article 67 — Sale free of rights
Courts may authorise sale free of certain rights and mortgages, transferring those rights to proceeds according to rank while protecting their economic value.
Article 68 — Related parties
Material assets shall not be sold to related parties without full disclosure, independent valuation and competition or proof that the transaction provides fair value exceeding alternatives.
Chapter Seven — Ongoing contracts, set-off and security
Article 69 — Executory contracts
With court permission, practitioners or debtors in possession may assume or reject incompletely performed reciprocal contracts where serving proceedings' interests.
Article 70 — Election deadline
Counterparties may request a reasonable deadline for assumption or rejection. Courts shall consider contract nature and delay effects.
Article 71 — Effect of assumption
Assumption requires curing remediable defaults and providing adequate assurance of future performance. Subsequent obligations constitute proceeding expenses.
Article 72 — Effect of rejection
Upon rejection, the counterparty has a termination or non-performance damages claim treated as pre-commencement unless secured or specially prioritised.
Article 73 — Employment contracts
Employment contracts remain subject to labour law and collective rights. Restructuring-related termination or amendment is permitted under statutory procedures, safeguards and compensation.
Article 74 — Leases
Leases of necessary premises or equipment may continue with subsequent payments. Insolvency alone shall not terminate them where current performance continues.
Article 75 — Licences and concessions
Licences, concessions or regulatory rights requiring public approval shall transfer only after lawful approval. Insolvency shall not circumvent licensing conditions.
Article 76 — Set-off
Set-off shall be recognised for mutual pre-commencement debts meeting legal conditions. It shall not arise from debt purchased after knowledge of insolvency to obtain preference.
Article 77 — Secured rights
Effective security rights remain valid in insolvency. This Law governs only their enforcement, stay and distribution of proceeds.
Article 78 — Unregistered security
Security requiring registration or perfection but unperfected before commencement shall not bind creditors collectively, subject to bona fide third-party rights.
Article 79 — Floating or all-assets security
Security over pools of assets or future assets may be recognised if permitted by secured-transactions law and properly registered, subject to tracing and priority rules.
Article 80 — Collateral surplus
Where collateral value exceeds debt and expenses, the surplus returns to the estate. Any shortfall becomes an unsecured claim.
Article 81 — Finance leases and retention of title
Economic substance determines whether a transaction is a genuine lease or secured financing. Form shall not conceal a financial right subject to security rules.
Article 82 — Qualified financial agreements
Certain close-out netting and financial collateral arrangements in regulated markets may be exempt from the stay to the extent special law requires for financial stability.
Chapter Eight — New financing during proceedings
Article 83 — Permitted new financing
Debtors may obtain new financing necessary for business continuity or reorganisation implementation after disclosing costs, security and risks.
Article 84 — New-financing priority
Authorised new financing debts constitute proceeding expenses with priority over earlier unsecured debt within court-determined limits.
Article 85 — Security over unencumbered assets
New lenders may receive security over unencumbered assets without earlier creditor consent where financing is necessary and fair.
Article 86 — Junior security
Junior security may be granted over encumbered assets if existing creditors remain adequately protected and their economic rank unharmed.
Article 87 — Priming security
New financing shall not rank ahead of existing security without creditor consent or full court-ordered protection of its value and proof that no reasonable alternative financing exists.
Article 88 — Related-party financing
Shareholder or related-party funding may be accepted on fair terms without unjustified plan control, subject to disclosure and independent review.
Article 89 — Interim financing before confirmation
Interim financing during plan preparation is permitted where the business is viable and funding necessary to prevent value collapse.
Article 90 — Good-faith lender protection
Financing finally authorised by the court shall not be invalidated solely because reorganisation later fails, unless fraud or material misrepresentation is established.
Chapter Nine — Claims and creditors
Article 91 — Filing claims
The practitioner shall invite known creditors to file electronically or as the court directs, with notice stating the deadline, documents, security and currency requirements.
Article 92 — Secured claims
Secured creditors shall state the debt, security, value, registration location, interest and expenses. Filing does not waive security.
Article 93 — Government claims
Tax, social security and public bodies shall file within proceedings, subject to verification and prescribed ranking. Notification deadlines apply unless legislation exempts them.
Article 94 — Employee claims
Practitioners may prepare preliminary employee entitlement lists from debtor records to reduce filing burdens. Workers may correct or object.
Article 95 — Late claims
Late claims may be accepted for reasonable cause if not disproportionately disruptive. Creditors may bear added costs or lose distributions finalised before acceptance.
Article 96 — Contingent and unliquidated claims
Future, contingent or unquantified claims may be proved, estimated or reserved for so proceedings can advance.
Article 97 — Foreign-currency claims
For voting and distribution, claims shall convert to dinars at the commencement-date adopted rate, subject to contracts, hedges and special rules.
Article 98 — Verification
Practitioners shall examine claims and accept or object wholly or partly, notifying creditors and debtors of reasoned decisions.
Article 99 — Dispute determination
Courts shall decide disputed claims or refer technical questions to experts. Creditors may provisionally vote at an estimated value while disputes remain unresolved.
Article 100 — Claim list
A register of admitted, rejected and disputed claims shall be published within confidentiality limits and updated for new decisions.
Article 101 — Creditors' meetings
In-person or electronic meetings may discuss plans, practitioner performance, material sales or committee formation. The practitioner shall set agendas and necessary information.
Article 102 — Unsecured creditors' committee
An unsecured creditor committee may be formed. The estate shall bear reasonable expenses where it adds value and the court approves.
Article 103 — Class representation
Committees or representatives may be established for other creditors, bondholders or workers where necessary for fair, effective proceedings.
Article 104 — Related creditors
Related creditors shall disclose their connection. Voting may be restricted or claims examined further where the relationship may impair claim independence.
Article 105 — Claim purchases
Claims may trade after commencement unless their nature prevents it. Buyers shall notify the practitioner and acquire voting and distribution rights within legal limits.
Article 106 — Sham disputes
After hearing parties, courts may disregard sham claims or arrangements created to control voting or distribution.
Chapter Ten — Avoidable transactions
Article 107 — Purpose
Pre-commencement transactions harming creditors collectively or unjustifiably preferring a creditor may be avoided under this Chapter.
Article 108 — Preferences
Payments, security or transfers within ninety days before application may be avoided if enabling greater recovery than liquidation where the debtor was insolvent or became so through the transaction.
Article 109 — Related parties
The preference review period for related parties is one year before application, with proof of good faith and fair value permitted in statutory cases.
Article 110 — Undervalue transactions
Gifts, sales or transfers materially below fair value within two years before application may be avoided where harming creditors, occurring during insolvency or causing insolvency.
Article 111 — Fraudulent transactions
Transactions actually intended to conceal assets, delay or harm creditors within five years before commencement may be avoided, without prejudice to longer fraud or corruption periods.
Article 112 — Late security
Security for earlier debt during the preference period may be avoided if unsupported by new financing or value and unfairly preferring the creditor.
Article 113 — Ordinary transactions
Ordinary-course transactions on customary terms for reasonable value shall not be avoided solely because they fall within the review period.
Article 114 — Contemporaneous exchange
Fair contemporaneous exchanges of new value for a lawful commercial purpose shall not be avoided.
Article 115 — Bona fide third parties
Rights of good-faith purchasers for value from the transferee shall be protected. Courts may order the first recipient to pay value instead of recovering the asset.
Article 116 — Recovery of benefits
Courts may order return of assets, value or benefits received, deducting new value returned to the estate where fair.
Article 117 — Burden of proof
Practitioners bear the burden of proving avoidance conditions. Rebuttable presumptions of debtor insolvency or related-party knowledge may apply within specified periods.
Article 118 — Settlements
Practitioners may settle avoidance actions with court approval where settlement maximises recovery relative to litigation cost and duration.
Chapter Eleven — Reorganisation and rescue plan
Article 119 — Plan submission
Debtors may submit plans within court-set periods. Creditors or practitioners may submit alternatives after debtor exclusivity ends or with court permission.
Article 120 — Debtor exclusivity
Debtors initially have ninety days to propose a plan, reasonably extendable for good-faith negotiations where exclusivity is not used to delay.
Article 121 — Plan contents
Plans shall describe the business, distress causes, cash-flow projections, treatment of each creditor and shareholder class, financing, operational changes, asset sales, management, implementation duration and liquidation comparison.
Article 122 — Restructuring methods
Plans may include extensions, debt reductions, debt-equity conversion, asset or business sales, capital increases, new investors, merger or division, contract amendments, new financing and other lawful methods.
Article 123 — Disclosure
Voting shall await sufficient information to assess the plan, including valuations, assumptions, risks, alternatives and the proposer's particular interests.
Article 124 — Creditor classification
Classes shall combine reasonably similar legal and economic rights. Splitting classes or combining dissimilar rights to manipulate voting is prohibited.
Article 125 — Unimpaired classes
Classes receiving full legal entitlements when due or whose rights are not materially changed shall not vote and are deemed accepting.
Article 126 — Classes without economic value
An equity or subordinated claim class may be considered economically unaffected if valuation shows no recovery under any realistic alternative, subject to its right to challenge valuation.
Article 127 — Voting within classes
A class accepts if approving creditors represent more than half the number voting and two thirds of the value voted. Regulations may simplify the numerical requirement for numerous creditors or traded claims.
Article 128 — Shareholder voting
Where shareholder rights are affected, the company's required majority or this Law's percentage shall apply, subject to confirmation despite rejection where the company is insolvent and their rights have no residual value.
Article 129 — Best-interests-of-creditors test
No plan shall be confirmed if a dissenting creditor receives less than expected in orderly liquidation or a going-concern sale under the appropriate alternative.
Article 130 — No unfair discrimination
Similarly situated creditors shall not receive different treatment without a reasonable economic or legal justification. Special treatment shall be disclosed.
Article 131 — Consensual confirmation
Where all impaired classes accept and legal requirements are met, the court shall confirm unless fraud, public-policy conflict or clear infeasibility exists.
Article 132 — Confirmation over class rejection
Courts may confirm despite a rejecting class if an impaired class with an economic interest accepts, best-interests and non-discrimination tests are met, and priorities are respected or an exceptionally fair reason justifies departure.
Article 133 — Creditors' priority over shareholders
Shareholders shall not retain value or receive ownership-based distributions while senior impaired classes have not received agreed rights or priority-required value, except with class consent or a fair new contribution.
Article 134 — New capital contributions
Existing shareholders may reinvest where contributions are necessary, fairly valued and market-tested or proven the best available offer.
Article 135 — Feasibility
Plans shall demonstrate on reasonable assumptions that implementation is feasible and rapid return to insolvency unlikely, with clear financing, management and monitoring indicators.
Article 136 — Confirmation effect
From confirmation, plans bind covered debtors, creditors and shareholders, including non-voters and dissenters, within legal limits.
Article 137 — Plan implementation
A monitoring officer may be appointed or the practitioner retained where the court considers necessary. The plan shall specify reports, deadlines and default events.
Article 138 — Pre-confirmation amendments
Plans may be amended before confirmation if affected creditors receive adequate time and information to reconsider and vote where necessary.
Article 139 — Post-confirmation amendments
Material post-confirmation changes require affected-class consent or fresh confirmation as needed, protecting good-faith completed transactions.
Article 140 — Plan failure
If a plan fails or a material irremediable breach occurs, courts may modify proceedings, convert to liquidation or approve an alternative yielding greater value.
Article 141 — Closing reorganisation
Courts shall close proceedings when substantial plan conditions are achieved or judicial supervision ends, while continuing plan obligations remain enforceable.
Chapter Twelve — Preventive restructuring and pre-negotiated agreements
Article 142 — Preventive proceedings
Debtors not yet insolvent but facing likely insolvency may seek limited preventive restructuring to negotiate with creditors before business collapse.
Article 143 — Initial confidentiality
Preventive negotiations may begin confidentially for a limited period where publication threatens rescue without impairing third-party rights. Proceedings become public upon seeking a general stay or confirmation binding dissenting classes.
Article 144 — Selective stay
Courts may briefly stay specified creditor actions to support negotiations where necessary and proportionate and protecting creditors against unreasonable harm.
Article 145 — Management continuity
Debtors normally retain management during preventive proceedings. A mediator or supervisor may facilitate negotiations and verify information where needed.
Article 146 — Restructuring agreement
Debtors and creditors may agree changes to debt, security, financing, ownership and contracts. Agreements bind signatories under contract law without judicial confirmation where no effect on non-signatories is sought.
Article 147 — Pre-negotiated plan
Plans negotiated and voted on before commencement may receive expedited court confirmation if disclosure, voting and protection requirements are met.
Article 148 — Preventive financing protection
Reasonable new funding during restructuring negotiations may be protected from later avoidance where provided in good faith, necessary for continuity and not intended to harm creditors.
Article 149 — Preparatory transaction protection
Reasonable adviser fees, negotiation and preparatory restructuring measures shall not be avoided solely because they precede insolvency, unless involving fraud, inflation or unfair benefit.
Article 150 — Ending preventive proceedings
Proceedings end upon agreement, plan confirmation, time expiry or absence of a reasonable rescue prospect. Insolvency may trigger direct transition to full proceedings.
Chapter Thirteen — Liquidation
Article 151 — Commencement of liquidation
Liquidation begins where the debtor is insolvent with no realistic reorganisation prospect, the debtor requests it, reorganisation fails or another statutory condition occurs.
Article 152 — Management effects
From liquidation commencement, management loses powers over estate assets. The practitioner handles preservation, sale and closure with management cooperation.
Article 153 — Temporary business continuation
Practitioners may briefly continue business to improve going-concern sale value or preserve inventory, contracts or jobs.
Article 154 — Liquidation plan
Practitioners shall propose assets, sale methods, valuation, contracts, claims, duration, costs and going-concern sale where possible.
Article 155 — Business sale
All operating assets or an integrated economic unit may be sold to one buyer if the offer exceeds expected piecemeal value or yields a justifiably better economic benefit.
Article 156 — Expedited sale
Perishable, volatile-value or costly-to-maintain assets may be sold rapidly after notifying reachable parties and obtaining court approval.
Article 157 — Asset valuation
Material sales shall rely on professional valuation or sufficient market information. Independent valuation may be omitted for liquid-market assets with published prices.
Article 158 — Asset auctions
Auctions shall be public or electronic with published terms. Related-party offers require disclosure, scrutiny and court approval.
Article 159 — Receivable collection
Practitioners may collect receivables and claims and make reasonable settlements considering litigation cost, duration and recovery likelihood.
Article 160 — Contract termination
Contracts unnecessary for liquidation may be rejected or terminated under ongoing-contract provisions. Compensation claims shall rank accordingly.
Article 161 — Joint assets
For jointly or commonly owned assets, courts may regulate sale, partition or compensation to protect co-owners and prevent value deterioration.
Article 162 — Excluded property
Assets not owned by the debtor or held in trust or for others do not enter the estate, subject to lawful proof of rights.
Article 163 — Partial closure
Realised proceeds may be distributed before full liquidation completion if sufficient reserves remain for expenses and disputed claims.
Article 164 — Final report
After sales and collections, practitioners shall submit a final report and account of distributions, actions, expenses and unrecoverable assets.
Article 165 — Deregistering legal persons
After final distribution and closure, courts shall order company or legal-person deregistration under company law, preserving fraud claims against responsible persons within limitation periods.
Article 166 — Reopening liquidation
Proceedings may reopen upon discovery of material assets, fraud or claims unknowable before closure where benefits exceed costs.
Chapter Fourteen — Priorities and distribution
Article 167 — Equal treatment
Creditors within the same-ranking class share proportionately to claims unless law establishes a property right or specific priority.
Article 168 — Proceeding expenses
Necessary reasonable proceeding, court, practitioner and asset-preservation expenses and priority new financing under this Law shall be paid first.
Article 169 — Priority employee claims
Unpaid wages and employment entitlements for a statutory pre-commencement period receive social priority up to a reasonable per-worker cap. Excess remains ordinary unless special law grants higher rank.
Article 170 — Withheld deductions
Amounts withheld from wages for tax, social security or pensions but not remitted shall be treated according to their legal nature and receive statutory protection.
Article 171 — Secured debts
Secured creditors recover from collateral proceeds, after related preservation and sale expenses, according to rank. Shortfalls become unsecured claims.
Article 172 — Other statutory priorities
Tax, fee and government claim preferences shall be confined to express law and reasonable periods and caps. Public debt receives no blanket priority exhausting distributions.
Article 173 — Unsecured debts
Remaining proceeds shall be distributed proportionately among admitted ordinary unsecured claims.
Article 174 — Related-party debts
Courts may subordinate related-party claims arising from unfair transactions, disguised equity or abuse of control. Genuine market-term claims shall not be subordinated merely because of relationship.
Article 175 — Post-commencement interest
Post-commencement unsecured interest is paid only after principal of all admitted claims. Special rules apply to secured debts within collateral value.
Article 176 — Fines and financial penalties
Non-compensatory civil fines and financial penalties rank after ordinary unsecured debts unless criminal or special law provides otherwise.
Article 177 — Equity rights
Partners and shareholders receive capital-based distributions only after statutory priority and ordinary creditor claims are paid.
Article 178 — Interim distributions
Practitioners may distribute provisionally with court approval if liquidity suffices and reserves cover expenses and disputed claims.
Article 179 — Unclaimed amounts
Uncollected distributions shall be deposited in an official trust account for the statutory period, then treated under property and trust-funds law.
Article 180 — Distribution report
Practitioners shall publish the distribution schedule, ranking and recovery rate by class. Creditors may object within the specified period.
Chapter Fifteen — Small and micro enterprises
Article 181 — Simplified procedure
A swift, low-cost simplified route shall cover small and micro enterprise reorganisation and liquidation.
Article 182 — Eligibility
Regulations shall set asset, revenue, workforce, debt and activity criteria. Courts may remove complex debtors or suspected abuse from the simplified route.
Article 183 — Simplified application
Limited-data standard forms shall include assets, debts, income, expenses and workers. Courts or accredited support bodies shall assist completion without biased advice.
Article 184 — Cost reduction
Simplified proceedings may be exempt from disproportionate meeting, creditor committee or independent valuation requirements, preserving notice, objection and transparency.
Article 185 — Self-management
Small debtors normally retain management; a full practitioner is appointed only where needed. A limited-fee supervisor or facilitator may be used.
Article 186 — Simplified plan
Plans may include a simple payment schedule, reduction, partial sale, new financing or business transfer, with fewer classes where creditor rights are similar.
Article 187 — Inactive creditors
Voting rules may prevent plan failure solely from properly notified small creditors' non-participation, while protecting actual dissenters.
Article 188 — Simplified liquidation
Assets may be sold and distributed through abbreviated procedures where low in value or clearly owned and without material disputes.
Article 189 — Rapid discharge
Honest individual traders may obtain discharge of residual commercial debt after simplified liquidation or a repayment plan under the discharge Chapter.
Article 190 — Abuse prevention
Simplified proceedings may be refused or cancelled for concealed assets, bad-faith repeated applications, sham debts or transfers to relatives to evade creditors.
Article 191 — Guidance and awareness
The Ministry of Justice and Companies Registration Department shall publish simple guides and electronic forms enabling small enterprises to seek proceedings early.
Chapter Sixteen — Individual traders and debt discharge
Article 192 — Scope of this Chapter
This Chapter applies to natural persons conducting commercial or professional activity and subject to business insolvency. This Law creates no general consumer insolvency system for non-traders.
Article 193 — Consolidation of business debts
Business-related commercial debts shall enter proceedings. Personal debts linked to business guarantees may be coordinated under the law to prevent conflicting proceedings.
Article 194 — Exempt necessities
Reasonable essential tools, possessions, housing or subsistence income prescribed by laws and regulations shall be exempt from liquidation, balancing dignity and creditor rights.
Article 195 — Discharge
Courts may discharge honest debtors from unpaid commercial debts after completing proceedings or the repayment plan and statutory period.
Article 196 — Discharge period
In simplified proceedings, discharge normally follows liquidation or a repayment-plan period not exceeding three years, subject to justified shortening or extension.
Article 197 — Non-dischargeable debts
Discharge excludes maintenance, compensation for crimes or deliberate fraud, debts from debtor fraud and other statutory categories justified by compelling reasons.
Article 198 — Discharge effect
Creditors may not personally pursue discharged debt. Discharge does not affect security over assets unaddressed in proceedings or an undischarged guarantor's liability unless law provides otherwise.
Article 199 — Refusal of discharge
Discharge may be refused for asset concealment, false data, record destruction, fraud or material breach of cooperation duties.
Article 200 — Revocation of discharge
Within a specified period, discharge may be revoked for material fraud that would have prevented it, protecting bona fide third-party transactions.
Article 201 — Commercial rehabilitation
Discharged debtors regain the right to trade and manage companies unless independently barred by court for crime or mismanagement. Honest bankruptcy alone shall not prolong disqualification.
Chapter Seventeen — Corporate groups
Article 202 — Multiple proceedings
Where two or more group companies enter insolvency, proceedings may be coordinated to reduce costs and unify information and meetings without abolishing separate personality.
Article 203 — Procedural coordination
The same judge or practitioner may serve multiple members absent conflicts, with concurrent files, information sharing and coordinated plans.
Article 204 — Group plan
A coordinated plan may cover several companies, stating effects on each and its creditors. Value shall not transfer between estates without a legal basis and approval.
Article 205 — Intra-group financing
Post-commencement financing between group companies is permitted with court approval where benefiting both or fairly compensating the lender.
Article 206 — Intra-group transactions
Group transfers and guarantees shall undergo examination and avoidance under this Law, with regard to genuine commercial arrangements and value supplied.
Article 207 — Exceptional substantive consolidation
Assets and debts of separate companies shall be pooled only exceptionally where patrimonies are inseparably commingled at reasonable cost or legal persons were used fraudulently, under a reasoned judgment.
Article 208 — Each company's creditors
Coordinated plans shall protect each entity's creditors as if treated separately unless they consent or the court permits departure under plan safeguards.
Article 209 — Group business sales
Several companies or assets may be sold together if demonstrably yielding greater value, with prices fairly allocated among estates.
Article 210 — Foreign group companies
Cross-border insolvency provisions apply to foreign members, permitting coordination with foreign courts and representatives.
Chapter Eighteen — Cross-border insolvency
Article 211 — Chapter objectives
This Chapter seeks Iraqi-foreign court and authority cooperation, greater legal certainty, protection of debtor asset value and creditors' investment, and easier rescue of cross-border businesses.
Article 212 — Direct access
Foreign representatives may directly seek recognition of foreign proceedings or related relief before competent Iraqi courts, normally without reciprocity requirements.
Article 213 — Recognition application
Applications shall include the foreign commencement and representative appointment decision, a foreign court certificate or other acceptable evidence, with certified Arabic translation where needed.
Article 214 — Foreign main proceeding
Proceedings are recognised as main where conducted in the state of the debtor's centre of main interests, presumed to be the registered-office state unless disproved.
Article 215 — Foreign non-main proceeding
Non-main proceedings are recognised where the debtor has an actual establishment conducting non-transitory economic activity in the foreign state.
Article 216 — Provisional measures
Before recognition, courts may protect Iraqi assets, stay specific enforcement or appoint an administrator where urgent to preserve value.
Article 217 — Effects of main-proceeding recognition
Recognition stays individual proceedings and dealings in Iraqi debtor assets to this Law's extent, protecting local creditor rights.
Article 218 — Post-recognition relief
Courts may grant further relief, including evidence gathering, appointment of an asset administrator and foreign-proceeding coordination, where creditor interests are adequately protected.
Article 219 — Direct judicial cooperation
Courts may communicate and cooperate directly with foreign courts or representatives under Judicial Council rules, recording communications and ensuring parties' knowledge and participation where required.
Article 220 — Practitioner cooperation
Iraqi practitioners may share information and establish coordination protocols with foreign representatives with court permission and data and confidentiality safeguards.
Article 221 — Concurrent proceedings
Where Iraqi and foreign proceedings concern the same debtor, courts shall coordinate measures to avoid conflicts, ensure fair distribution and prevent over-recovery beyond full debt.
Article 222 — Foreign creditors
Foreign creditors shall receive equal treatment in filing, voting and distribution, except priorities inherently linked to national law.
Article 223 — Public policy
Recognition or relief may be refused where manifestly contrary to Iraqi public policy or fundamental rights. This exception shall be narrowly construed.
Article 224 — Foreign creditor notification
Known foreign creditors shall receive the same material information on proceedings and claim deadlines. Local publication alone is insufficient where direct notification is possible.
Article 225 — Transfers abroad
Distributions or assets may transfer to recognised foreign proceedings after protecting local priority claims and ensuring fair treatment.
Article 226 — Model Law
This Chapter shall, as far as possible, be interpreted consistently with the UNCITRAL Model Law on Cross-Border Insolvency and its international principles.
Chapter Nineteen — Workers and social rights
Article 227 — Employment contract continuity
Commencement does not automatically end employment contracts. They continue while the business operates until lawfully amended or terminated under labour law and this Law.
Article 228 — Subsequent wages
Wages and entitlements for actual post-commencement work and continuing services constitute proceeding expenses.
Article 229 — Earlier wages
Earlier wages and entitlements receive distribution priority within statutory caps and periods. Excess is not extinguished but treated at the prescribed rank.
Article 230 — Economic dismissals
Where reorganisation requires workforce reductions, labour-law notice, compensation and consultation procedures apply. Plans shall state employment effects and costs.
Article 231 — Workers on business sale
Employment contracts may transfer to a purchaser under labour law and sale terms, identifying pre-transfer entitlements and responsibility for them.
Article 232 — Pension and social security obligations
Competent bodies shall claim unpaid contributions. Individual worker rights follow pension and social security laws; withheld worker funds shall not pay other creditors.
Article 233 — Worker representative
Workers may select a representative for creditor meetings or a special committee where plans materially affect employment, without making the representative a creditor for rights not personally held.
Article 234 — Worker information
Workers shall be informed of material changes, sales and terminations affecting them in time to understand rights and exercise lawful objections.
Article 235 — Non-discrimination
Insolvency shall not settle workplace grievances or enable prohibited discrimination. Retention or redundancy criteria shall reflect need and professional requirements.
Article 236 — Job-preservation programmes
Plans may include training, redeployment, agreed temporary hours reductions or other labour-law arrangements preserving viable jobs.
Chapter Twenty — Directors' duties and liability near insolvency
Article 237 — Monitoring duty
Boards and directors shall monitor liquidity, solvency and risks and act early on material distress indicators.
Article 238 — Creditor interests at imminent insolvency
As insolvency seriously approaches, management's duty to consider creditor interests and prevent asset erosion increases without transferring management to creditors.
Article 239 — Reasonable steps
Reasonable steps include current financial information, halting unnecessary dealings, specialist advice, creditor negotiations, financing or reorganisation assessment and timely applications.
Article 240 — Trading during insolvency
Directors are liable for net increases in creditor losses if continuing business after knowing or being expected to know that avoiding insolvency was unrealistic, without reasonable loss-minimising steps.
Article 241 — Reasonable rescue exception
Continuation alone creates no liability where a reasonable evidence-supported rescue plan exists and professional assessment expects operation to preserve more value than immediate closure.
Article 242 — Related-party dealings
Asset transfers, exceptional repayments or security for shareholders, directors or related parties near insolvency shall receive enhanced scrutiny and may entail restitution and liability.
Article 243 — Records
Failure to maintain sufficient financial and business records or their destruction near insolvency may evidence mismanagement as courts determine, without replacing proof of liability elements.
Article 244 — Distribution prohibition
Dividends, capital returns and share buybacks are prohibited during insolvency or where causing it. Bad-faith recipients and breaching directors shall be liable to restore funds.
Article 245 — Compensation claims
Practitioners may sue directors for the estate. Creditors may seek permission if practitioners refuse without reasonable cause.
Article 246 — Compensation assessment
Compensation shall be limited to causally resulting harm or increased loss, rather than disproportionate civil punishment.
Article 247 — Management disqualification
Courts may bar directors found fraudulent or grossly negligent from company management for a defined, proportionate period, subject to appeal.
Article 248 — Business judgement protection
Good-faith professional decisions based on reasonable information without conflicts create no director liability merely because economic results were negative.
Chapter Twenty-One — Offences and insolvency abuse
Article 249 — Concealing assets
Intentional concealment, transfer or falsification of assets or destruction of evidence to deny creditor, court or practitioner access shall be punishable under the law.
Article 250 — False books and statements
Intentional forgery, destruction or concealment of books, creation of fictitious liabilities or claims, or false financial statements in proceedings shall be punishable.
Article 251 — Fraudulent preference
Deliberate collusion with creditors or related parties to remove estate assets or confer sham benefits to harm creditors shall be punishable, without automatically criminalising every civilly avoidable preference.
Article 252 — Claims fraud
Creditors or representatives knowingly filing false, materially inflated or forged-document claims shall be punished.
Article 253 — Bribery and collusion
Bribery and corruption laws apply to benefits given to practitioners, experts, court employees or creditor committee members to influence sales, votes or settlements.
Article 254 — Abusive vote purchasing
Fraudulent vote or claim purchase arrangements to control voting shall attract punishment or invalidation where material relationships or benefits were concealed from the court and creditors.
Article 255 — Bankruptcy threats as coercion
Threatening a lawful creditor application is not itself criminal, but extortion, vexatious applications or insolvency procedures used to extract undeserved benefits are punishable under applicable laws.
Article 256 — Vexatious application liability
Courts may reject vexatious applications and order costs and compensation for actual harm upon proof of bad faith.
Article 257 — Criminal referral
Where suspected crime emerges, judges or practitioners shall refer information to the Public Prosecution or competent body without staying civil proceedings unless necessary.
Article 258 — Civil proceeding independence
Criminal investigation alone shall not stop reorganisation or liquidation. Courts shall coordinate evidence preservation and business continuity with investigators.
Article 259 — No imprisonment merely for debt
Debtors shall not be imprisoned merely for inability to pay commercial debt, without prejudice to measures and penalties for fraud, asset concealment or breach of court orders.
Article 260 — Proportionate penalties
Offences and penalties shall be narrowly construed and shall not criminalise lawful commercial risk or honest failure.
Chapter Twenty-Two — State-owned and regulated entities
Article 261 — State-owned companies
State-controlled companies conducting commercial market activities are subject to this Law unless special law provides another path, with regard to the State-Owned Enterprises Governance and Restructuring Law.
Article 262 — Proceedings for state companies
Individual creditors shall not seek liquidation of a state company providing an essential public service before notifying the owner and allowing a short period for a continuity plan, without permanently denying creditor rights.
Article 263 — Public and sovereign assets
Sovereign assets and assets legally dedicated to a public utility that the company cannot dispose of shall not enter the estate. Their status shall be determined before sale or reorganisation.
Article 264 — Public-service continuity
For essential-service debtors, courts shall coordinate with regulators and owners to ensure continuity or transfer during proceedings without granting restructuring immunity.
Article 265 — Banks and insurers
Banks and insurers are exempt from ordinary proceedings where special resolution or liquidation mechanisms exist. Proceedings under this Law require express authority.
Article 266 — Listed companies
The Securities Commission or Iraq Stock Exchange shall be notified upon listed-company commencement, with disclosure and insider-trading prohibitions applied.
Article 267 — Regulated utilities
Electricity, telecommunications, transport, water or other licences shall transfer to buyers only with lawful competent-regulator approval.
Article 268 — Partnerships and concessions
Upon project-company insolvency, partnership and concession law, public-body and lender rights and utility continuity shall be observed. Concessions shall not terminate automatically where operator replacement or restructuring is possible.
Chapter Twenty-Three — Data, transparency and digitalisation
Article 269 — Electronic insolvency platform
The judiciary shall maintain a register and platform supporting applications, notices, claims, voting and publication of decisions and public data.
Article 270 — Proceeding identity
Each proceeding shall receive a unified number linked to commercial, tax, security and related-case records within legal limits.
Article 271 — Electronic notices
Notice to registered email addresses or approved accounts is valid upon proven sending and receipt under rules, with alternatives for creditors unable to use digital means.
Article 272 — Electronic voting
Plans may be voted on electronically with creditor identity and claim value verified and a tamper-resistant record retained.
Article 273 — Government databases
Courts and practitioners may access company, property, vehicle, security, tax and government-account registers under lawful orders and powers to identify assets and liabilities.
Article 274 — Bank accounts
Courts may request account and balance information lawfully as necessary for proceedings, preserving confidentiality and withholding data from public access.
Article 275 — Statistics
The Judicial Council and Ministry of Justice shall publish annual proceeding counts, durations, reorganisation, liquidation, recovery and closure rates without personal business-data disclosure.
Article 276 — Performance measurement
Effectiveness shall be measured by decision time, procedural cost, viable business rescue rates, recovery value and simplified-route use, rather than bankruptcy counts alone.
Article 277 — Data protection
Insolvency data processing shall observe purpose, necessity, security and restricted-access principles. Judicial transparency shall not cause unnecessary personal-data publication.
Article 278 — Archiving
Files shall be retained as necessary for plan implementation, review and legal research. Published judgments shall remove legally protected data.
Chapter Twenty-Four — Transitional and final provisions
Article 279 — Existing proceedings
Earlier bankruptcies and preventive compositions shall continue under former law. On an interested person's request, courts may transfer them to this Law where practical, more efficient and not prejudicial to acquired rights.
Article 280 — New applications
All post-effective-date applications follow this Law even for earlier debts. Avoidance provisions shall not apply to earlier transactions definitively lawful when made except as the Constitution permits.
Article 281 — Repeal of old Book Five
Book Five of Commercial Law No. (149) of 1970 on bankruptcy and preventive composition, Articles (566–791), is repealed from this Law's effective date.
Article 282 — Amendment of the 1984 Commercial Law reference
The reference in Article (331/First) of Commercial Law No. (30) of 1984 terminates upon this Law's entry into force, with new insolvency rules replacing the excepted Book.
Article 283 — Company law coordination
Company-law and other references to bankruptcy and judicial liquidation shall refer to corresponding procedures under this Law pending consequential amendments.
Article 284 — Practitioner register
The Ministry of Justice and Judicial Council shall complete practitioner registration and licensing within nine months. Initially, court-listed experts meeting published temporary conditions may be appointed.
Article 285 — Judicial training
The Supreme Judicial Council shall establish mandatory specialist judge and judicial assistant training in finance, accounting, reorganisation, security and cross-border insolvency.
Article 286 — Register and platform
The electronic platform shall be established within twelve months of entry into force. Until ready, paper filing or available judicial systems may be used without interrupting rights.
Article 287 — Simplified procedures
Within six months, the government shall issue small-enterprise thresholds and simplified application, plan and liquidation forms with regard to UNCITRAL small-enterprise recommendations.
Article 288 — Cross-border insolvency
Within six months, the Judicial Council shall issue foreign-court communication and coordination rules. UNCITRAL guides may serve as procedural references where consistent with law.
Article 289 — Existing priorities
Within one year, the government shall review tax, labour and civil debt preferences for consistency with priorities and avoidance of conflicting privileges.
Article 290 — Security-register connectivity
Justice, trade and competent bodies shall link insolvency, movable and immovable security and commercial registers to verify priorities.
Article 291 — Regulations and instructions
The Council of Ministers, Ministry of Justice, Judicial Council and competent bodies shall each issue implementing regulations and instructions within their remit within one hundred and eighty days unless otherwise specified.
Article 292 — Review after four years
After four years, the government and Judicial Council shall review implementation through duration, rescue and recovery rates, system costs, small enterprises and international cooperation, reporting to the Council of Representatives.
Article 293 — Earlier offences preserved
Repeal of former bankruptcy offences does not extinguish liability for conduct criminal when committed if still criminal under current law, subject to the law more favourable to the accused.
Article 294 — Entry into force
This Law takes effect one hundred and eighty days after Official Gazette publication. Digital and transitional provisions commence on their specified dates.
Statement of reasons
This Law is enacted to end the transitional preservation of bankruptcy and preventive composition under Commercial Law No. (149) of 1970 by Commercial Law No. (30) of 1984 pending insolvency legislation; establish a modern balance between viable business rescue and orderly liquidation of unviable businesses; protect credit, security and workers; regulate new financing, avoidable transactions, priorities, reorganisation, small enterprises, corporate groups and cross-border insolvency; and give honest traders an economic fresh start while combating fraud and asset concealment.
Explanatory memorandum
1. From bankruptcy to insolvency
Historically, bankruptcy in the old system concerns traders and payment cessation. The proposal uses insolvency as a broader economic condition while retaining bankruptcy as the familiar term for a particular legal outcome. What matters is intervention before complete payment cessation becomes irreversible.
2. Why debtor in possession?
Company management knows customers, staff and operations better than an external practitioner. Automatic removal can destroy business value. Management therefore remains during rescue attempts under supervision and disclosure, losing control upon fraud, mismanagement or loss of trust.
3. An enforcement stay is not debt forgiveness
The stay brings creditors into one process and prevents an asset race during plan preparation. It is temporary, reversible and protective of collateral value. Without a viable plan, it does not continue merely to postpone payment.
4. New financing
Rescuing a company without liquidity is impossible. Because new lenders enter at high risk, the law grants carefully calibrated priority with protection for existing creditors. Priority preserves value rather than rewards shareholders.
5. Confirmation over class rejection
A small class can obstruct a plan yielding everyone more than liquidation. Courts may therefore confirm despite rejection if value, non-discrimination and priority tests are met. This prevents holdout pressure while protecting dissenting creditors.
6. Small enterprises
Traditional proceedings may consume small-business assets in fees. The proposal simplifies requirements and permits rapid honest-trader discharge, drawing on UNCITRAL's 2021 recommendations specifically designed for this group.
7. Bankruptcy is not a crime
Business failure alone does not justify imprisonment. Fraud, asset concealment, record forgery, bribery and fictitious claims are crimes. This distinction is essential so viable business owners do not fear early rescue applications.
8. Cross-border insolvency
Foreign assets, creditors or subsidiaries make old territorial approaches less effective. UNCITRAL principles permit recognition and cooperation while preserving public policy and local creditor rights, without placing foreign courts above Iraqi justice.
Reorganisation and rescue
Early viability assessment is central. Individual enforcement stops upon commencement, but management must provide a cash budget, reports and a plan. Plans may extend or reduce debts, convert some into shares, sell assets, admit investors or restructure contracts, provided impaired classes receive at least the lawful alternative value.
Plans do not entitle shareholders to retain companies where economic value is exhausted and senior creditors remain unsatisfied. Existing shareholders may, however, inject fresh capital on fair, market-tested terms where this is the best rescue option.
Liquidation and priorities
When rescue is unviable, speed and value become the focus. Practitioners first test sale of the business or a unit as a going concern, then sell individual assets if preferable. Security rights attach to proceeds by rank, while reasonable proceeding expenses and priority worker rights precede unsecured debts within reasonable limits.
Government receives no general preference over all creditors. Tax and other priorities must be express and limited, because broad preferences reduce creditor recovery and raise pre-insolvency credit costs.
Small enterprises and a fresh start
The simplified route offers rapid reorganisation and liquidation with standard forms and less practitioner involvement where assets or disputes are uncomplicated. It also addresses small creditors' non-participation so silence alone does not defeat viable plans.
For individual traders, post-proceeding commercial debt discharge depends on good faith, excluding fraud, crime and other statutorily non-dischargeable obligations. The aim is to return productive entrepreneurs to the formal economy.
Cross-border insolvency and corporate groups
The proposal coordinates group-company proceedings without erasing separate personality or commingling creditors' funds. Group plans and combined business sales may increase value. Full substantive consolidation is limited to rare cases such as inseparable commingling or fraud.
Internationally, foreign representatives may seek Iraqi recognition and Iraqi courts may communicate with foreign courts and coordinate stays, assets and distributions. Public-policy exceptions remain but are narrowly interpreted to preserve cooperation's value.
Management and workers approaching insolvency
Directors' duties begin before bankruptcy judgment. When distress becomes serious, they must obtain current information, assess rescue and prevent distributions and dealings increasing creditor losses. They are not punished merely for reasonable rescue attempts that later fail; good-faith professional judgement is protected.
Employment contracts do not automatically lapse, and wages for subsequent work are proceeding expenses. Workforce reductions follow notice, compensation and consultation rights, and purchasers clarify workers' status and earlier entitlements.
Legislative alignment
| Framework | Treatment |
|---|---|
| Commercial Law No. (149) of 1970 — Book Five (566–791) | Full repeal and replacement by this Law. |
| Commercial Law No. (30) of 1984 — Article 331/First | The transitional reference to the old Book ends upon the insolvency law's entry into force. |
| Companies Law — POL-40 | Governs solvent voluntary liquidation; this Law governs insolvency, rescue and collective liquidation. |
| Procedural and judicial organisation laws | Remain the general procedural and appeal framework, with special urgency and commercial-jurisdiction rules. |
| Mortgage and security laws | Determine creation, effectiveness and priority of security; insolvency law determines stay, enforcement and distribution effects. |
| Labour, social security and retirement laws | Govern worker rights; insolvency law determines collective claim ranking. |
| Banking and insurance laws | Special financial-institution resolution and liquidation regimes take precedence. |
Financial and Implementation Implications
No large independent bankruptcy authority is required. The law uses existing courts with specialist judges, a practitioner register and digital platform. Costs centre on training, electronic systems, practitioner and expert licensing, and reorganisation of insolvency files and registers.
Reliable economy-wide savings cannot be estimated without current Iraqi data on distress cases, asset values and collection periods. Expected effects arise through reduced business-value erosion, improved creditor recovery, viable-company reorganisation and better credit pricing.
After implementation, the Judicial Council must publish case durations, rescue and liquidation rates and recovery values so effects can be measured and costly or slow procedures amended.
Transition and Implementation
Existing bankruptcies do not automatically transfer, because changing voting and priority rules mid-case may impair settled rights. Courts may transfer on an interested party's request where practical and fair. All new post-effective-date applications follow the modern system.
The law allows six to twelve months for the practitioner register, platform, simplified rules and international cooperation, with interim solutions preventing case disruption. It also requires reviewing debt preferences across laws and linking security and company records with property and asset records.
Sources and references
- Commercial Law No. (30) of 1984 — Government-published textIts final provision temporarily preserved Book Five of Commercial Law No. (149) of 1970, Articles (566–791), pending insolvency legislation.
- Commercial Law No. (149) of 1970 — Book Five: Bankruptcy and Preventive CompositionReference for the existing older system based on payment cessation, bankruptcy declaration, preventive composition, corporate bankruptcy and rehabilitation.
- Supreme Judicial Council — Commercial courts and the judicial role in bankruptcy, 2025A recent judicial source confirming continued commercial bankruptcy rules and collective claims after declaration.
- Supreme Judicial Council — Baghdad Commercial Court jurisdictionA recent Federal Court of Cassation decision in 2026 clarifying the existence and jurisdictional limits of a Court of First Instance specialising in commercial cases.
- World Bank — Iraq business environment and private-sector reform reportRecommended comprehensive insolvency legislation instead of the old bankruptcy Book, access to reorganisation for debtors and creditors, and better rescue and recovery systems.
- UNCITRAL — Legislative Guide on Insolvency LawAn international reference for insolvency objectives, stays, reorganisation, new financing, priorities, avoidance, groups and cross-border insolvency.
- UNCITRAL — Legislative Guide on Insolvency Law for Micro- and Small Enterprises (2021)A reference for simplified, swift, low-cost small-enterprise systems covering reorganisation, liquidation, discharge and creditor protection.
- UNCITRAL — Legislative Recommendations on Insolvency of Micro- and Small EnterprisesDetailed guidance on simplified procedures, fresh starts and preservation of jobs and investment in viable businesses.
- UNCITRAL — Model Law on Cross-Border InsolvencyThe principal reference for foreign-proceeding recognition, judicial cooperation, and main and non-main proceedings.
- UNCITRAL — Model Law on Enterprise Group Insolvency (2019)A reference for corporate-group insolvency coordination, group plans and court-representative cooperation.
- UNCITRAL — Publications on Insolvency LawIncludes guides and models on insolvency, enterprise-group insolvency and cross-border provisions.
- International Monetary Fund — Iraq: 2025 Article IV ConsultationA current reference on structural reforms, the business environment, credit, corporate and banking restructuring and the private sector.
- Iraqi Companies Law No. (21) of 1997, as amended — National Investment CommissionA reference for existing company, liquidation and conversion rules with which the new insolvency system integrates.
Proposed legislation within Ali Zuweid's Political Programme · Prepared by Ali Zuweid