Judicial principles and studies
Actual Insolvency, Economic Activity, Successive Losses and the Financial Estate
A brief summary of how the insolvency law applies to natural and legal persons who conducted economic activity, the test for actual insolvency, the insolvency agent’s role and the preliminary procedures. It also notes the procedural nature of the period in Article 7(b).
Updated: 10 September 2026
Prepared and reviewed by: Ashraf Al-Khawaja
Subject
The insolvency law applies to persons—natural and legal—who carry out economic activity, and continued operation at the time of filing is not required. Economic activity is defined as conduct aimed at making a profit or gain; past exercise of such activity suffices even if it has ceased.
Summary
Actual insolvency is established when the debtor ceases or is unable to pay debts as they fall due, a situation that covers companies halted by successive losses. The law’s objective is to reorganize the debtor’s financial position and enable a return to the market through a restructuring plan or liquidation. The preliminary phase begins upon the court’s declaration of insolvency and includes inventorying the financial estate, analyzing causes of insolvency, and appointing an insolvency agent to prepare a comprehensive report assessing the viability of the business and proposing a reorganization plan. Article 7(b) provides a two‑month period from the date of cessation of payments to file an insolvency application; this period is procedural and its breach does not carry a legal penalty. This content is a general educational summary, not a judicial text or legal advice.
Practical significance
This is a general educational summary based on the points published in the official source. It does not replace the original material or a review by Ashraf Al-Khawaja before relying on it for any action.
Sources and references
Verify the official text and latest amendments before relying on this material professionally.