CHAMBERS. Global Practice Guides. Insolvency LAW & PRACTICE: Contributed. AVM Advogados. Contributed by Campos Mello Advogados

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1 CHAMBERS ANGOLA Angola Insolvency Global Practice Guides LAW & PRACTICE: p.<?> p.3 Contributed by Mattos AVM Advogados Filho, Veiga Filho, Marrey Jr. e Quiroga The Law & Practice sections provide easily accessible information on Angola Law & Practice navigating the legal system when conducting business in the jurisdiction. Leading lawyers explain local law and practice at key transactional Contributed by of doing business. stages and for crucial aspects AVM Advogados TRENDS & DEVELOPMENTS: NATIONAL: p.<?> Contributed by Campos Mello Advogados The Trends & Developments sections give an overview of current trends and developments in local legal markets. Leading lawyers analyse particular trends or provide a broader discussion of key developments in the jurisdiction TRENDS & DEVELOPMENTS: NORTH EAST: p.<?> Contributed by Queiroz Cavalcanti Advocacia The Trends & Developments sections give an overview of current trends and developments in local legal markets. Leading lawyers analyse particular trends or provide a broader discussion of key developments in the jurisdiction. DOING BUSINESS IN BRAZIL: p.<?> Chambers & Partners employ a large team of full-time researchers (over 140) in their London office who interview thousands of clients each year. This section is based on these interviews. The advice in this section is based on the views of clients with in-depth international experience.

2 ANGOLA LAW & PRACTICE: p.3 Contributed by AVM Advogados The Law & Practice sections provide easily accessible information on navigating the legal system when conducting business in the jurisdiction. Leading lawyers explain local law and practice at key transactional stages and for crucial aspects of doing business.

3 Law & Practice ANGOLA Law & Practice Contributed by AVM Advogados CONTENTS 1. Market Panorama p Market Dynamics p.5 2. Debt Trading p Limitations on Non-Banks and Foreign Institutions p Debt Trading Practice p Transfer Prohibition p.6 3. Informal and Consensual Restructuring Framework p Consensual Restructuring p New Money p Duties of the Parties p.6 4. Legislative Regime Applicable to Restructuring and Insolvency p General Overview p Restructuring and Solvency Regimes p.7 5. Remedies Available to Unsecured Creditors p Unsecured Creditors p Rights and Remedies p Rights and Remedies for Landlords p Special Procedures for Foreign Unsecured Creditors p.7 6. Secured Creditors: Security and Enforcement p Types of Security p Enforcing Security p Timeline for Enforcing Security p Foreign Secured Creditors p.8 7. Directors Duties and Personal Liability p Duties of Directors in a Distressed Company p.8 8. Solvent Restructuring/Reorganisation and Rescue Procedures p Statutory Mechanisms p Position of Company During Procedure p Position of Creditors During Procedure p Claims of a Dissenting Class of Creditors p Trading Claims of Dissenting Creditors p Re-organising a Corporate Group p Conditions Applied to Use or Sale of Assets p Distressed Disposals p Release of Security and Other Claims p Priority p Determining the Value of Claims p The Agreement Amongst Creditors p Rejecting or Dismissing Claims p Releasing Non-Debtor Parties from Liability p Rights of Set-Off or Netting in a Proceeding p Implications of Failure to Observe Agreed Plan p Mandatory Commencement of Insolvency Proceedings p Obligation to File Within Specific Timeline p Procedural Options p Implications of Not Commencing Insolvency Proceedings p Insolvency Proceedings p Types of Voluntary and Involuntary Insolvency Proceedings p Distressed Disposals p Failure to Observe Agreed Rescue Plan p Priority New Money p Liquidation on a Combined Basis/Under Related Proceedings p Organisation of Creditors p Use or Sale of Assets During Insolvency Proceedings p Transactions That May Be Set Aside p Grounds to Set Aside/Annul Transactions p Look-Back Period p Identity of Claimant p Claims in Insolvency and Restructuring Proceedings p Priorities and Waterfalls p Priority Claims p Priority Over Secured Creditor Claims p Statutory Waterfall of Claims p.12 3

4 ANGOLA Law & Practice 13. Courts and Arbitration p Courts p Specialist Judges p Limitations on Matters that Can be Heard p Arbitration p International Issues and Recognition p Recognition/Relief in Connection with Overseas Proceedings p Protocols in Cross-Border Cases p Foreign Creditors p.12 4

5 Law & Practice ANGOLA Contributed by AVM Advogados Authors: Antonio Vicente Marques, Alice Bermejo Silva AVM Advogados was founded by António Vicente Marques in The firm originally began assisting clients as a full-service law firm operating through its various offices in Africa, the Americas and Europe with an integrated team of more than 85 lawyers. AVM s structure has solidified and expanded over the last decade and the law firm today has become one of the most modern and internationally respected law offices operating in Angola, Portugal, Mozambique and Brazil, with the opening of further offices in other jurisdictions currently under way. The firm provides strategic advice within the framework of company restructuring and in insolvency matters, ensuring a global and permanent assistance. Lawyers are actively involved in executing procedures and methods, covering the preparation and follow-up of the execution of insolvency plans for companies, negotiations with creditors, including legal assistance to insolvency administrators. Additional expertise includes the restructuring of liabilities and protecting the rights of privileged creditors. Authors António Vicente Marques is the founding partner of AVM. Set up in 2003, it is one of the most solid and respected law firms in the country today with approximately 90 lawyers, based in Luanda and Cabinda in Angola as well as Lisbon and Oporto in Portugal and Maputo in Mozambique. It delivers a full range of corporate and business services to international and national clients. AVM has a diversified practice and range of expertise which permits its lawyers to respond effectively to challenging assignments in many different industries and markets. Admitted to the Angolan Bar Association in 2003, António is fluent in Portuguese, English, French and Spanish. Alice Bermejo Silva holds a law degree from the University of Lisbon, 2010, and a Master in Law and Business, She was admitted to the Portuguese Bar Association in 2013 and in 2014 she was the Portuguese participant on the European Lawyers Programme held in Edinburgh over three months. Currently, she is the Portuguese national representative and a member of the European Lawyers Association. Alice is fluent in Portuguese, English, Spanish and French. 1. Market Panorama 1.1 Market Dynamics The market dynamics in Angola are as follows: After a few years of great economic growth, Angola is nowadays facing some financial and monetary issues. As a country whose economy is mainly based on volatile goods oil and diamonds its economy is subject to considerable instability. No official numbers were provided but it is believed that in early 2015 about 40 public companies were insolvent. There is no centralised database providing the volume or statistical elements regarding the number of restructurings and insolvencies in the private sector. Preceded by the independence war which started in 1961, Angola became independent from Portugal in After that, a civil war erupted in the country lasting until Since then, and after 40 years of war, Angola s economy has generally been growing, especially as a result of oil exploration and its escalating price. However, due to the current oil crisis and consequent lack of foreign currency, many companies and individuals are facing several financial difficulties, notably due to the rampant inflation. As regards recent economic cycles and legislative environment, experience has shown that the liquidity problems in Angola started almost simultaneously with the falling of oil prices as its economy is mostly based on such a volatile good. Also, the constant legislative amendments by the government on different business areas have introduced various new requirements to be met, and some companies and individuals simply cannot afford to adapt. Another issue to be noted, specifically for foreign companies operating in Angola, is the repatriation of profit as from time to time there is not enough foreign currency in the country to repatriate it. The Angolan Government is very keen on producing new (or amending old) legislation and trying to adapt it to the economic and social reality. As previously mentioned, new regulations on some business sectors have been released which stipulate new requirements to be complied with. In addition, due to the oil crisis the government is running short of money and is thus attempting to resort to increasing tax revenues. Consequently, it has a great influence on the market dynamics. 5

6 ANGOLA Law & Practice 2. Debt Trading 2.1 Limitations on Non-Banks and Foreign Institutions Presently, there is no specific regulation regarding limitations on the holding of loans or bonds by non-banks or other foreign institutions. Notwithstanding, and depending on the type of financing envisaged, such entities may require a specific authorisation to hold loans or provide financing to a company organised under Angola s jurisdiction. 2.2 Debt Trading Practice The use of customary documentation for documenting secondary market trading (eg LMA forms or other bespoke or local forms of transfer documentation) does not apply in Angola. For the customary legal mechanics the Angolan Civil Code allows the following ways of transferring debts: Subjective novation when the prior debtor is substituted by a new debtor before the creditor, resulting in a new debt. However, the will to replace the old debt by a new debt must be explicitly expressed through a negotiating statement; Subrogation if the debt is paid by a third party it can be subrogated by the debtor until fulfilment, if the will to use subrogation is explicitly expressed; Single transfer of debts this can be made through: (a) an agreement between the new and the former debtor, ratified by the creditor; or (b) an agreement between the new debtor and the creditor, with or without the former debtor s consent; and Assignment of contractual position any party may assign to a third party its contractual position, provided that the other party agrees to the assignment. The associated benefits of guarantees and security can be transferred with the debt under the debt-transfer mechanics that apply in the jurisdiction by means of: Subjective novation - except if expressly reserved, once the original obligation has been extinguished by novation, so too will the guarantees that ensured its compliance be extinct, even when arising by operation of law. If the guarantee refers to a third party, its express reservation will also be required; Subrogation the subrogated party acquires all the powers of the creditor; Single transfer of debts the credit guarantees are to remain in the same terms, except those proved by third parties or by the former debtor if they were not consented to on the transfer of debt; and Assignment of contractual position the other party may object to the assignee through the defences arising from the contract, but not to those related to the assignor, except if reserved. The question of whether local law limits the ability of participants to trade debt on the basis of an inequality of information (i.e. insider trading regulation) and the use of so-called Big-Boy Letters is answered by the terms of the very recently approved Securities Code, which forbids the exploitation of insider trading, classifying as a crime the abuse of inside information. Private offers designed for certain types of investors are allowed, but certain requirements may be applicable. 2.3 Transfer Prohibition The inclusion in loan agreements of a clause preventing the transfer of debt without consent (short of a default or an event of default) will mostly depend on the type of transfer. Please see Informal and Consensual Restructuring Framework 3.1 Consensual Restructuring A debtor may enter into any payment agreement with its creditors under the principle of private autonomy. There are no specific rules regarding such matters. In Angola, informal/consensual restructuring frameworks such as the IN- SOL Principles are not observed to any material extent by any participants in the market. 3.2 New Money There is no specific regulation regarding the matter of according super-priority to new money outside of statutory and formal processes. 3.3 Duties of the Parties There is no specific regulation regarding any principles of applicable law that impose any duty upon a creditor in respect of any other creditor, third party or company, other than those of good faith. 4. Legislative Regime Applicable to Restructuring and Insolvency 4.1 General Overview In Angolan legislation, specific rules regarding insolvency can be found in the Civil Procedure Code (Decree-Law No 44129, of 28 December 1961) and can be divided in two set of rules: one for commercial debts (Articles 1135 to 1312) and one for individual debts (Articles 1313 to 1325). 6

7 Law & Practice ANGOLA 4.2 Restructuring and Solvency Regimes With regard to banks and other credit institutions, the Financial Institutions Law prescribes certain special restructuring measures, instigated by the supervisory body. If such measures prove not to be successful, and until the enactment of a new law regarding the intervention and extrajudicial liquidation of financial institutions, the supervisory body can withdraw the authorisation for the exercise of the financial activity and ask the General Prosecutor s Office to file for its insolvency. As regards the court procedure, it will apply the previously mentioned general rules provided in the Civil Procedure Code. In respect of insurance companies or undertakings, the insurance contract law provides that, in the case of insolvency of any part, its rights and obligations will be transferred to the insolvent estate. Regarding the proceedings, if there are no special provisions in place, the aforementioned general rules prescribed by the Civil Procedure Code will apply. For other entities operating in financial markets, such as investment firms or entities engaged in payment systems and securities settlement, the recently approved Securities Code, which pertains to the participants, states that neither the liquidation process, the adoption of reorganisation measures nor the insolvency declaration has any retroactive effects on the rights and obligations resulting from the participation of a firm or entity in the system. Furthermore, guarantees of obligations arising from the operation of a settlement system are not affected by such procedures. In this case, the eventual balance remaining after the compliance with collateral obligations will revert to the insolvent estate or to the restructuring balance. Regarding the proceedings, where there are no special provisions that are applicable, the aforementioned general rules prescribed by the Civil Procedure Code will apply. For the mining sector, it has been determined that the mining rights holders do not lose title by virtue of the insolvency declaration. Such title can be awarded to the competitors creditors who offer the best price and who comply with the legal and regulatory requirements. Notwithstanding, the law grants the Estate a pre-emption right to acquire the mining title on equal terms for price and conditions as the creditors. Regarding the proceedings, where there are no special provisions in place, the aforementioned general rules prescribed by the Civil Procedure Code will apply. 5. Remedies Available to Unsecured Creditors 5.1 Unsecured Creditors During any restructuring process in Angola s jurisdiction, unsecured trade creditors are generally kept whole. 5.2 Rights and Remedies In accordance with the general rules of insolvency provided by the Civil Procedure Code, unsecured trade creditors can initiate the process of insolvency, can challenge any indicated or claimed credit, and can appeal against the decision to declare the insolvency, amongst other things. 5.3 Rights and Remedies for Landlords In general, landlords have the rights and remedies prescribed by the Civil Code, in terms of the defence of their property. Notwithstanding, the Civil Procedure Code determines that if the lease agreement is not terminated by the insolvency administrator any rentals due will be paid by the latter. In any event, any default can be included in the insolvent estate s debts. 5.4 Special Procedures for Foreign Unsecured Creditors In the case of foreign unsecured creditors, the general rules prescribed by the Civil Procedure Code apply, as there are no special provisions in place. 6. Secured Creditors: Security and Enforcement 6.1 Types of Security The Angolan legislation, specifically the Civil Code, prescribes seven special types of security: provision of security (Articles 623 to 626); guarantee ( fiança ) (Articles 627 to 655); income assignments (Articles 656 to 665); pledge (Articles 666 to 685); mortgage (Articles 686 to 732); credit privileges - moveable and immoveable (Articles 733 to 753); and right of retention (Articles 754 to 761). With regard to moveable property, the most common security used is the guarantee ( fiança ) and the pledge. Regarding real estate, the most commonly used is the mortgage. Lastly, in respect of shares, the most commonly used security is the pledge. 6.2 Enforcing Security In a restructuring and insolvency context, a secured creditor has priority over unsecured creditors at the time of payment 7

8 ANGOLA Law & Practice of debts. Outside this scenario, the secured creditor has no special rights in comparison to the unsecured creditor. 6.3 Timeline for Enforcing Security There is no specific legislation regarding the enforcement of security of creditors over the payment of debts, nor in respect of procedures for enforcing cash-collateral or share security; the general rules prescribed by the Civil Code and Civil Procedure Code will apply. 6.4 Foreign Secured Creditors There is no specific legislation in respect of any special procedures or impediments that may apply to foreign secured creditors. The general rules prescribed by the Civil Code and Civil Procedure Code will apply. 7. Directors Duties and Personal Liability 7.1 Duties of Directors in a Distressed Company There are no specific duties for directors to perform when the company is in distress (and not yet insolvent). In such situation, Directors will continue to be required to act diligently in the best interest of the company in the customary manner of a scrupulous manager, and without prejudice to the rights of shareholders and employees. A company s managers and directors can be considered liable to creditors when the company s assets become insufficient for the satisfaction of their credits, due to culpable breach of any legal or contractual provisions of creditors protection. In the case of insolvency, the creditors rights in relation to company s directors can be exercised during the company s insolvency procedure by the insolvency administrator. Therefore, the directors are required to act with a general duty of care and they can be responsible before all creditors. As to whether directors can be personally liable for the company s pre-insolvency obligations or for otherwise deepening the insolvency of the company, one must attend to the three types of insolvency classification provided by Angolan legislation. The first one is classified as fortuitous (Article 1275 of the Civil Procedure Code), where the debtor has no responsibility, having acted with honesty and with care in the day-to-day operations of the business, and where the insolvency situation has arisen due to unexpected circumstances that are out of the debtor s control. The second type is classified as culpable (Article 1276 of the Civil Procedure Code) and is deemed a crime when the insolvency arises from the debtor s negligence, recklessness or prodigality, or when it has consumed a substantial part of its assets in gambling or when failing to comply with legal provisions established for correctness of the bookkeeping and commercial transactions. Lastly, the third type is classified as fraudulent (Article 1277 of the Civil Procedure Code) and is also deemed a crime when the insolvency arises from the debtor s bad faith to prejudice some creditors in favour of others, or simulated acts, or wilful omission of assets, amongst others. In the latter two instances, if the insolvency is classified as culpable (Article 1276 of the Civil Procedure Code) or fraudulent (Article 1277 of the Civil Procedure Code) the director can be held responsible for the insolvency situation. Also, if the insolvency of a limited liability company is classified as culpable or fraudulent, the company s directors can be indicted for that crime. Where there is a duty or responsibility owed to creditors, they can pursue directly their claim against the directors or do so within the context of an insolvency procedure, as previously described. 8. Solvent Restructuring/Reorganisation and Rescue Procedures 8.1 Statutory Mechanisms In the Angolan legislation, specifically in the Civil Procedure Code, there is a preliminary preventive step which begins with the presentation of the debtor before the court to request that the creditors convene. This preliminary step comprises two ways to restructure a company: (i) through an agreement between the debtor and its creditors, entitled concordata, with the aim of restructuring the company, either through reducing or restructuring the debt; or (ii) if the concordata is not approved, through an agreement reached between creditors in order to restructure the company, through the creation of a new company, in the form of a limited company, where the new shares are the proportional representation of each creditor s claim, in order to continue the debtor s business. To commence these proceedings either a shareholders meeting or a resolution of the management body making the decision is required. Unless otherwise provided in the bylaws, no unanimity is required. The dissident minority may then challenge the eventual insolvency declaration. This preliminary preventive step can only be started through the voluntary presentation of the debtor before the court, requesting the convening of its creditors, in order to reach an agreement. As regards any limits imposed on the proposed agreement, in accordance with the Civil Procedure Code, Article 1153, the celebration of a concordata when there is a total forgiveness of the debts, not referring to the structure and calendar of the payment, with percentage values depending on 8

9 Law & Practice ANGOLA the debtor s will, or with uneven clauses between creditors, is forbidden. In addition, the creditors can decide to include a specific clause in the concordata a better fortune clause. This clause obliges the debtor, as soon as its economic situation improves, to pay pro rata to the creditors who approved the concordata who have preference, without prejudice to new creditors. A company can apply to this proceedings t when it is unable to fulfil its obligations, before effectively ceasing the due payments, or in the ten days following that point. In Angola, a company enters into insolvency procedures on the basis of its inability to fulfil its obligations and must file the necessary documentation to prove it. Thus, as previously mentioned, a concordata is created in order to restructure the company, for the purpose of keeping it in business by reducing or restructuring each debt; however, the agreement between creditors to create a new company is available only if the concordata is inexistent or is not approved. It aims to create a new limited liability company whose shareholders are the creditors who subscribed the creditor s agreement. This company is created to continue the debtor s business and the assets of this new company are composed of the debtor s assets. Both of these procedures are initiated and supervised by the court. As referred to above, this preliminary preventive step is started through the voluntary presentation of the debtor before the court, requesting its creditors to be convened. The judge will then appoint an insolvency administrator (and, eventually, one or more creditors to assist them) and will convene a creditors meeting in order to verify their claims. They will subsequently discuss and vote for a concordata proposal. Then, if the concordata is non-existent or is not approved, the creditors will vote for an agreement between the creditors to create a new company to continue the debtor s business. As for the timelines, it should be noted that the insolvency procedure (which includes this this preliminary step) is deemed urgent by law. This means that some special expedite provisions are applicable. It should also be noted that this procedure is subject to some mandatory phases and there is a specific timeline for each phase, which varies according to the procedure s development. Notwithstanding, this whole procedure may take two to four months. Regarding the calculation and recognition of the creditor s claim the general rules prescribed by the Angolan Civil Procedure Code must be observed. Under the same, any creditor who has not been indicated by the debtor may file an application to claim its credit indicating its origin and nature. It is the responsibility of the insolvency administrator, during the creditors meeting, to present a report stating their opinion regarding the credits claimed and the creditor s ranking. Voting for credits will then take place; creditors who hold credits totally unchallenged by the administrator have the right to vote excluding its own credit. Unchallenged credits and those obtaining more favourable votes are deemed recognised. The definitive creditors meeting in which the concordata or creditors agreement is decided will then be held. According to the Civil Procedure Code, when the concordata has been agreed and approved, it is binding on all the unsecured creditors, in accordance with Article These same rules apply to the agreement between creditors to create a new company, in accordance with Article Following the creditors meeting in which the concordata has been approved, the Prosecutor s Office is to proceed with the temporary registration of the concordata in the competent registry office. This registration will either become definitive or will be cancelled, depending on whether the judge s decision is to approve the concordata or not. Both a concordata and an agreement between creditors to create a new company can be challenged. According to Article 1156, a concordata can be challenged, both by those creditors who did not accept this form of agreement and by the Prosecutor s Office. It can be challenged on any grounds, notably the non-existence of any credit which has influenced the voting of the concordata or any fact that can prove the existence of a fraudulent insolvency. This same rule applies to the agreement between creditors to create a new company which can also be challenged by the debtor. If the concordata is approved by the judge, the insolvency procedure will be suspended and its execution may then be supervised by any creditors appointed for that purpose. If there is no concordata or creditors agreement to start a new company, or any of these proposals are rejected by the court, the debtor s insolvency is immediately declared. 8.2 Position of Company During Procedure Whether or not the formal restructuring procedure described in 8.1 will provide the company with a moratorium or stay on claims against it, will depend on what was agreed in the concordata, but there is no specific rule regarding this matter. If the concordata is approved, the debtor can continue with its business. Alternatively, if the creditors agreement is approved, the debtor s business will be continued by the new company created by the creditors. 8.3 Position of Creditors During Procedure During the aforementioned restructuring procedures a distinction is made between secured and unsecured creditors. 9

10 ANGOLA Law & Practice The judge may select one or more creditors to assist the insolvency administrator but these creditors have no privileges or remuneration. Creditors or their representatives and the insolvency administrator can freely examine the debtor s business books and require information on the state of the business. Also, the insolvency administrator may examine the bookkeeping of any creditors, for the parts relating to the transactions with the debtor. 8.4 Claims of a Dissenting Class of Creditors There is no specific rule regarding the modification of any claims made by dissenting creditors without their consent. 8.5 Trading Claims of Dissenting Creditors There is no specific rule in respect of trading claims in this procedure. 8.6 Re-organising a Corporate Group There is no specific rule pertaining to the use of this procedure to restructure and reorganise a corporate group on a combined basis to maximise administrative efficiency. 8.7 Conditions Applied to Use or Sale of Assets There is no specific rule regarding the application of conditions either to the use of or sale of assets during this process. 8.8 Distressed Disposals During the previously explained proceedings the selling of assets is not provided. No specific rule exists regarding the acquisition of good title, free and clear of claims, by a purchaser in a sale executed pursuant to such a restructuring proceeding. There is no specific rule regarding the practice of creditors credit bidding for the assets and acting as a stalking horse in this type of sale procedure. No specific rule exists regarding the possibility to conduct pre-pack sales as part of such a restructuring proceeding. 8.9 Release of Security and Other Claims The situation will depend on what was agreed on the concordata but there is no specific rule regarding the release of security and other claims pursuant to such a procedure Priority There is no specific rule regarding the availability of new money to a company pursuant to the restructuring procedure Determining the Value of Claims No specific rule exists regarding the possibility of using the procedure as a forum for determining the value of claims and of those creditors with an economic interest in the company The Agreement Amongst Creditors Please refer to Rejecting or Dismissing Claims During preliminary restructuring proceedings, a company or an office holder may not reject or disclaim contracts in the restructuring procedure Releasing Non-Debtor Parties from Liability There is no specific rule regarding the release of non-debtorparties from liabilities by such a procedure Rights of Set-Off or Netting in a Proceeding There is no specific rule stating that creditors may exercise rights of set-off or netting in a proceeding Implications of Failure to Observe Agreed Plan If a concordata or an agreement between creditors to create a new company is not observed, the creditors can request the declaration of insolvency to be made, pursuant to the requirements of Articles 1164 and 1171 of the Angolan Civil Procedure Code. 9. Mandatory Commencement of Insolvency Proceedings 9.1 Obligation to File Within Specific Timeline When it is unable to fulfil its obligations, the company must start the insolvency procedure before effectively ceasing the payments, or within the ten days following that point. 9.2 Procedural Options As previously mentioned, it is possible to include a preliminary preventive step, where the creditors convene and decide upon a concordata or an agreement between them to create a new company in order to continue the debtor s business. 9.3 Implications of Not Commencing Insolvency Proceedings If the company does not start the insolvency proceedings within the specific timeline referred to in 10.1, the insolvency is assumed to be culpable. 10

11 Law & Practice ANGOLA 10. Insolvency Proceedings 10.1 Types of Voluntary and Involuntary Insolvency Proceedings The aforementioned preliminary preventive step, the concordata and the agreement between creditors to create a new company, is voluntary only the debtor itself can require it. However, if the concordata is not approved or if there is no agreement between the creditors to create a new company, or if any of these is breached, the insolvency will be declared. As regards the insolvency declaration procedure, the classification of being voluntary or involuntary will depend upon who filed the application for insolvency, whether it was the debtor itself or, for example, a creditor. However, once the insolvency is declared there are no major differences in the proceedings. The insolvency declaration procedure is commenced by the filing of an application by the approved person. The declaration of insolvency has to be required with certain grounds, and depending on those grounds, it may be legitimate for one of the following entities to require the insolvency: (i) the debtor itself; (ii) any creditor; or (iii) the Prosecutor s Office. In order to voluntarily commence proceedings, a resolution must be passed by the decision of a shareholders meeting held by the company or by the relevant management body. After the insolvency declaration, and within the deadline stated on the judgment, creditors may claim their credits through an application that can be challenged by other creditors or by the debtor. The insolvency administrator will then provide their opinion regarding each credit and, after a hearing, the judge will give its judgment, ranking each credit. As for the timelines and as already mentioned the insolvency declaration procedure is deemed urgent and for each of its phases there is a specific timeline. There is no specific rule regarding the trading of claims, nor on the question of whether there is a moratorium or a stay on the continuation of legal proceedings, or enforcement action against the company. As a result of the insolvency declaration, the debtor is prohibited from managing its assets; the insolvency administrator will act on its behalf. The bilateral agreements concluded by the debtor can be fulfilled or not, depending whether or not they are deemed to be convenient to the insolvency estate. The counterparty of a non-fulfilled agreement will have the right to require the appropriate compensation for damages to the insolvency estate. Furthermore, some acts and contracts deemed harmful to the insolvent estate can be rendered solvent under the proposal of the administrator or any creditor. There is no specific rule regarding the exercising of rights of set-off or netting or the timing thereof. Concerning the information made available to creditors it is allowed for them to examine the debtor s documents and bookkeeping. Payment to each of the creditors is made according to its credit s ranking and priority, after the liquidation of the debtor s assets Distressed Disposals In accordance with Article 1246 of the Angolan Civil Procedure Code, the sale of assets is executed by the insolvency administrator. The purchaser does not acquire a specific good title free of claims as such, but if there are any repercussions or burdens associated with the asset sold, the purchaser may require compensation. It is possible for creditors to present credit bids for the assets in the terms prescribed to the type of sale selected. Secured creditors may benefit from special provisions. There is, however, no specific rule regarding pre-pack sales Failure to Observe Agreed Rescue Plan There is no specific rule regarding the failure of the company or a creditor failing to observe the agreed rescue plan nor is there any ruling on the injection of new money into any procedures, or on it being secured on the company s assets Priority New Money There is no specific rule regarding the injection of new money into any procedures, or on it being secured on the company s assets Liquidation on a Combined Basis/Under Related Proceedings There is no specific rule regarding any insolvency proceedings in a jurisdiction that can be utilised to liquidate a corporate group on a combined basis or under related proceedings for administrative efficiency Organisation of Creditors There is no specific rule regarding the way in which creditors are organised, or the structure and procedures of any committees which may be formed Use or Sale of Assets During Insolvency Proceedings No specific rule exists with regard to any conditions applied to the use of or sale of a company s assets during insolvency proceedings, nor to any court permission that may be required. 11

12 ANGOLA Law & Practice 11. Transactions That May Be Set Aside 11.1 Grounds to Set Aside/Annul Transactions Please see Look-Back Period There is no specific rule regarding any look-back period prior to the onset of the insolvency pursuant to which transactions such as credit and security transactions and asset sales can be challenged Identity of Claimant The insolvency administrator and/or any creditor can bring the action but it is up to the court to decide upon the claim Claims in Insolvency and Restructuring Proceedings Claims may be brought only in the insolvency proceedings and they will run as depending proceedings. 12. Priorities and Waterfalls 12.1 Priority Claims In accordance with the general legislation in the Angolan Civil Code, there are priority claims regarding administration expenses, employee and pension claims, tax claims and others that can be considered as credits where the Angolan State is the holder Priority Over Secured Creditor Claims It will depend on from where such a claim arises Statutory Waterfall of Claims There is no specific rule regarding the statutory waterfall of claims in this jurisdiction, whether it is for a liquidation or an administration. 13. Courts and Arbitration 13.1 Courts In accordance with Angolan legislation, namely, the Organic Law of the Organisation and Function of Courts of Common Jurisdiction (Law No 2/15, of 2 February), the competent AVM Advogados Largo 17 de Setembro N.º 3 3.º Andar - Sala n.º 329 Edifício Pres. Business Ctr. Luanda Angola courts for handling restructuring and insolvency processes are district courts, in a jurisdictional room with specialised commercial competence Specialist Judges There are specialist judges in the district courts who are responsible for restructuring and insolvency cases Limitations on Matters that Can be Heard According to Angolan legislation regarding the organisation and functioning of courts, these specialised courts only decide in the first instance and only on related commercial matters Arbitration Arbitration cannot be utilised in relation to restructuring, liquidation or administration matters. 14. International Issues and Recognition 14.1 Recognition/Relief in Connection with Overseas Proceedings In accordance with Article 1094 of the Civil Procedure Code, for a foreign decision to be accepted in the Angolan legal system it must be reviewed and confirmed by Angolan courts. In order to be confirmed, the foreign decision must be reviewed by the Civil and Administrative Chamber of the Supreme Court and the requirements provided by Article 1096 of the Civil Procedure Code must be met, namely, there must be no doubt about the authenticity of the court decision, it must be a final and irrevocable decision made by the competent court, and all the formalities therein referred must have been respected during the hearing and the trial. These rules are also applicable to arbitral decisions, in accordance with Article 1097 of the Civil Procedure Code Protocols in Cross-Border Cases Angola is not a Contracting State of the New York Arbitration Convention. In the light of this, any process of recognition of a court decision follows the general rules described in Foreign Creditors Foreign creditors are treated equally in proceedings in Angolan jurisdiction. Tel: Fax: luanda@avm-advogados.com Web: 12