Approved translation (English)
Approved on 2025-12-11 22:24
Commercial Law
Book First On Commerce in General and on Trade and Commercial Enterprises
Title First General Provisions
Article 1
This law includes, on one hand, the rules related to commercial activities carried out by any person regardless of their legal status, and on the other hand, the provisions applicable to individuals who have taken up commerce as a profession.
Article 2
If there is no provision in this law, the general law provisions apply to commercial matters, provided that their application is only to the extent that they are consistent with the principles specific to commercial law.
Article 3
If there is no legislative provision that can be applied, the judge may be guided by judicial precedents and the requirements of fairness and commercial integrity.
Article 4
When determining the effects of a commercial act, the judge must apply established custom unless it appears that the contracting parties intended to contravene the provisions of the custom or if the custom conflicts with mandatory legislative texts. Special and local customs are preferred over general customs.
Article 5
Commercial exchanges, exhibitions, markets, public warehouses, and other establishments prepared for commerce are subject, as needed, to special laws and regulations.
Title Second On Commercial Activities
Article 6
The acts listed below are considered commercial acts by their very nature, as well as all acts that can be considered similar due to their characteristics and purposes: 1 - Purchasing goods and other tangible and intangible movables for the purpose of selling them at a profit, whether sold in their current state or after processing or transformation. 2 - Purchasing those same movable items for the purpose of renting them, or leasing them for the purpose of re-renting them. 3 - Selling, leasing, or re-leasing the purchased or leased items as described above. 4 - Currency exchange and banking activities. 5 - Supply projects. 6 - Industrial projects, even if associated with agricultural investment, unless the transformation of materials is done by simple manual labor. 7 - Transportation projects by land, air, or water. 8 - Employment and brokerage projects. 9 - Insurance projects with fixed premiums. 10 - Public performance projects. 11 - Publishing projects. 12 - Public warehouse projects. 13 - Mining and petroleum projects. 14 - Real estate development projects. 15 - Projects for purchasing real estate to sell at a profit. 16 - Agency work projects.
Article 7
The following are also considered maritime commercial acts: 1 - Any project for the construction or purchase of ships intended for internal or external navigation for the purpose of commercial exploitation or sale, and any sale of ships purchased in this manner. 2 - All maritime shipments and any operations related to them, such as the purchase or sale of their supplies like ropes, sails, and provisions. 3 - Chartering ships or contracting for transportation on them, and lending or borrowing on a lump sum basis. 4 - All contracts related to maritime commerce, such as agreements and contracts for sailors' wages, their service fees, and their employment on commercial ships.
Article 8
All acts carried out by a merchant for commercial needs are also considered commercial in the eyes of the law. In case of doubt, a merchant's acts are presumed to be for this purpose unless proven otherwise.
Title Third On Merchants
Chapter First On Merchants in General and the Capacity Required for Trading
Article 9
Traders are: First: Individuals whose profession is to engage in commercial activities. Second: Companies whose subject is commercial. As for companies whose subject is civil but have taken the form of joint-stock companies or limited partnerships, they are subject to all the obligations of traders specified in the following second and third chapters and to the provisions of preventive composition and bankruptcy stipulated in the fifth book of this law.
Article 10
Individuals engaged in small trade or simple crafts with low overhead costs, such as itinerant vendors or daily wage sellers, or those conducting small transport operations on land or water, are not subject to the obligations related to commercial books nor to the publication rules required by this law.
Article 11
- Amended A married woman has full capacity to engage in commercial activities.
Article 12
- Amended A married woman, when engaging in trade, may perform any act required by the interest of her commercial enterprise.
Article 13
- Amended A married woman has the right to enter into a general partnership or to be a commissioner in a limited partnership.
Article 14
The rights of a married woman are determined, when necessary, by the provisions of her personal law and her marriage contract.
Article 15
Any separation of the spouses' assets decreed in a foreign country shall not be recognized with respect to third parties in Lebanon unless it is registered in the commercial register relevant to the place where the spouses or one of them conducts business.
Chapter Second On Commercial Books
Article 16
- Amended Every person, whether natural or legal, who has the status of a merchant must keep, either manually or through a secure digital application that meets the specifications set by a decree issued upon the proposal of the Ministers of Justice and Finance, the following documents: - A journal in which financial transactions are recorded day by day at a minimum, or in which the results of those transactions are recorded monthly if the nature of the work prevents daily recording, provided that in this case, all documents that allow for daily auditing are retained. - A ledger for opening accounts and monitoring them. They must also conduct an annual inventory of all elements of their establishment and close all accounts to prepare the balance sheet and the "profit and loss account." The related documents must be organized and preserved for the duration specified in Article 19 of the Commercial Law. - Keeping commercial books through the digital application prescribed in this article becomes mandatory two years from the date of issuance of this law.
Article 17
The mandatory commercial books must be organized according to dates without blanks, spaces, marginal notes, interlineations, or erasures.
Article 18
- Amended Books kept manually must be numbered, stamped, and signed by the president of the court of first instance in the cities where this court convenes.
Article 19
The merchant must preserve the books after their closure for ten years.
Article 20
Books can be accepted in court as evidence in favor of the merchant, provided they are organized according to the rules, and their contents are presented against another merchant, and the dispute is related to a commercial transaction. In all cases, they serve as evidence against the merchant who organized them, and if this merchant refuses to present them, the judge may request the other party to take an oath.
Article 21
The books are not handed over in their entirety to the court except in cases of inheritance, division of the community, partnership, preventive settlement, and bankruptcy. Apart from these cases, the books can always be presented or requested to be presented by the judge's order directly to extract what is related to the dispute.
Chapter Third In the Commercial Register
Article 22
The commercial register enables the public to gather comprehensive information about all commercial enterprises operating in the country. It is also a tool for publication intended to make its entries enforceable against third parties when there is an explicit legal provision to this effect.
Article 23
In each primary court, a register is organized under the careful supervision of the clerk and under the oversight of the president or a judge appointed specifically by the president each year.
Part First On the Registration of the Names of Merchants Who Have Main Stores in Lebanon Regardless of Their Nationality
Article 24
Every merchant must request from the clerk of the court where their main place of business is located to register their name in the commercial register within a month from the date of opening or purchasing the business. The applicant must submit to the clerk a declaration in two copies including their signature, stating the following: 1 - The merchant's name and surname. 2 - The trade name under which they conduct their business and, if applicable, their nickname and assumed name. 3 - Date and place of birth. 4 - Original nationality. If they have acquired another nationality, the method of acquisition and the date must be specified. 5 - If it concerns a married woman subject to a foreign nationality whose personal status law requires explicit permission from her husband to engage in trade, the permission granted to her according to the aforementioned law must be mentioned. 6 - The marital agreement of a merchant subject to a foreign nationality unless the spouses are subject to the legal community property system. 7 - The subject of the trade. 8 - Locations of branches or agencies of the commercial establishment in Lebanon or Syria. 9 - The address or trade name of the establishment. 10 - Names of the authorized representatives, their surnames, dates and places of birth, and nationalities. 11 - Commercial establishments previously operated by the declarant and those currently operated in the jurisdictions of other courts. The clerk then transfers the content of the declaration to the commercial register and delivers one of the copies of the declaration to the applicant after noting at the end that it matches the original.
Article 25
The commercial register must also include: 1 - Any amendment or change related to the matters that the previous article requires to be recorded in the register. 2 - Patents exploited by the merchant and the factory or trade mark they use. 3 - Judgments and decisions appointing a judicial supervisor for the registered merchant or imposing or lifting a guardianship. 4 - Judgments and decisions declaring bankruptcy or confirming, annulling, or invalidating a settlement, declaring the excuse of the bankrupt, or ordering the closure of the bankruptcy due to insufficient assets, or reversing the closure, or restoring civil rights. 5 - The transfer of the commercial establishment. The registration is carried out at the request of the merchant in the cases mentioned in paragraphs 1, 2, and 5 of this article. It is carried out in the cases mentioned in paragraphs 3 and 4 of this article at the request of the clerk of the court that issued the decisions to be registered. The clerk performs the registration directly when the judgment is issued by the court where the commercial register is kept.
Part Second On the Registration of Commercial Companies with a Principal Place of Business in Lebanon, Regardless of Their Nationality
Article 26
- Amended Companies with a main office in Lebanon must be registered in the commercial register relevant to their headquarters area, and the company's legal representative must request registration within the month following its establishment: The applicant for registration shall submit to the court clerk a copy of the deed of establishment and a summary thereof written in two copies, including stamps and his signature, and containing in particular the following data: 1 - The name and surname of each of the partners and shareholders, their nationality, date of birth, and place of birth. 2 - The commercial name or designation of the company. 3 - The purpose of the company. 4 - The places where the company has branches or agencies, whether in Lebanon or abroad. 5 - The names of the partners or other persons authorized to manage the company or sign on its behalf. 6 - The company's capital and the amounts or securities to be provided by the shareholders or limited partners, as well as the value of what is provided to the company, whether in cash or other assets. 7 - The start date of the company and its end date. 8 - The type of company. 9 - The minimum capital of the company if it has a variable capital. 10 - The lease contract of the place where the company will conduct its business, or a document of ownership, or a document indicating its establishment at the residence of its legal representative, or any legal document permitted by the applicable laws justifying the occupation of the company's headquarters. 11 - The identity of the owner or owners of the economic right.
Article 27
- Amended The following must also be mentioned in the commercial register: 1 - Any amendment or change in the matters required to be registered according to the previous article. 2 - The name, surname, date of birth, place of birth, and nationality of each of the company's business managers, board members, and directors appointed for its duration. The registration request is submitted by the company's legal representative at the time registration is required. 3 - The exploited patents and manufacturing stamps (Marque de fabrique) and trade marks used by the company. 4 - The judgments or decisions ordering the dissolution or annulment of the company. 5 - The judgments or decisions declaring the company's bankruptcy or approving the preventive settlement and the resolutions related to them.
Part Third On Traders with a Main Office Abroad and Branches and Agencies in Lebanon Regardless of Their Nationality
Article 28
Date of commencement: 24/12/1942 Every merchant with a main office in a foreign country and branches or an agency in Lebanon, regardless of nationality, must register their name within the month following the opening of the agency or branch at the court office where the agency was established in its area. The declaration must include all the aforementioned data, specifying the location of the main office. Additionally, all modifications mentioned above, along with the previously mentioned judgments and decisions, must be recorded in the commercial register if they were issued in Lebanon or Syria or have acquired enforceability in their courts.
Part Fourth On Foreign Commercial Companies with a Branch or Agency in Lebanon
Article 29
Every foreign commercial company that has a branch or agency in Lebanon must be registered in the commercial register, except for joint-stock companies and partnership companies with shares subject to the provisions of the High Commissioner's Decision No. 96 dated January 30, 1926. Before opening the branch or agency, the person responsible for its management must submit a written declaration in two copies to the court clerk, including their signature and all the aforementioned details, and add their name, surname, date of birth, and place of birth, along with their nationality. All changes related to the subjects that must be registered must be recorded. When replacing the branch manager, the name, surname, date of birth, place of birth, and nationality of the new manager must be registered in the commercial register, along with all the required details.
Part Fifth General Provisions
Article 30
If a merchant dies or ceases to engage in their trade without having transferred their commercial establishment to someone else, or if a company is dissolved, the relevant registration in the commercial register must be deleted. This deletion is carried out directly by a decision issued by the judge assigned to oversee the register.
Article 31
Any entry in the commercial register for which no deadline is specified in the previous articles must be requested within a month starting from the date of the document or action deemed necessary for registration. As for judgments and decisions, their deadlines start from the day they are issued.
Article 32
All registrations and entries in the commercial register are made after a declaration is submitted in accordance with the prescribed forms.
Article 33
The clerk may not refuse to make the requested entries unless the submitted declarations do not include all the stipulated information. The clerk must present to the president or the judge assigned to oversee the commercial register any deficiencies observed in those declarations.
Article 34
- Amended Any person may request a copy of the entries listed in the register for a fee determined by decree. The clerk may, if necessary, issue a certificate of non-existence of entries. The conformity of the copies to the original is certified by the president of the court or the judge assigned to oversee the commercial register.
Article 35
The copies delivered by the clerk may not mention: 1 - Bankruptcy judgments if the bankrupt has been rehabilitated. 2 - Judgments of interdiction or appointment of a judicial supervisor if a decision has been issued lifting the interdiction or supervision.
Article 36
Every merchant and every company required to register must mention the place where they are registered and the number of this registration in their correspondence, invoices, order notes (Notes de commande), tariffs, brochures, and all other printed materials issued by them.
Article 37
- Amended Any merchant or company agent or manager who does not request the mandatory entries within the specified deadlines or does not mention what must be mentioned on correspondence, invoices, and other printed materials issued by their establishment is subject to a fine ranging from fifty to one thousand Lebanese pounds. This fine is imposed by the primary court at the request of the president or the judge assigned to oversee the commercial register after hearing the statements of the concerned party or summoning them according to the rules. The court orders the entry to be made within fifteen days, and if it is not made within this period, the fine imposed in the first instance is doubled. As for clerks who do not comply with this regulation, they are referred to the disciplinary council.
Article 38
- Amended Any incorrect statement submitted in bad faith for registration or entry in the commercial register is punishable by a fine ranging from two hundred and fifty Lebanese pounds to five thousand pounds and imprisonment from one month to six months, or one of these penalties only. This does not preclude the application of the provisions of the aggregation of moral crimes to impose a harsher penalty in accordance with special laws and the Penal Code for crimes arising from the incorrect statement. The criminal court issuing the judgment may order the correction of the statement in the manner it specifies.
Article 39
The penalties mentioned are applied without prejudice to the rule prohibiting the invocation against third parties of facts and entries required to be registered in the commercial register under penalty of nullity.
Title Fourth On Commercial Enterprises
Article 40
- Amended This article was repealed and replaced by Legislative Decree 11/1967 Commercial Establishment Legally, a commercial establishment consists of the trader's premises and the rights connected to it. The commercial establishment includes a set of tangible and intangible elements that vary according to circumstances, particularly customers, clientele, name, logo, lease rights, trademarks, certificates, licenses, drawings, models, industrial tools, commercial furniture, and goods.
Article 41
- Amended This article was repealed and replaced by Legislative Decree 11/1967 Commercial Establishment The rights to exploit the commercial establishment concerning the various elements mentioned in the previous article are determined according to the specific laws related to them or according to the general principles of rights.
Book Second On Commercial Companies
Title First General Provisions
Article 42
- Amended The rules stipulated in the Code of Obligations and Contracts regarding the partnership contract apply to commercial companies, provided that these rules do not explicitly or implicitly contradict the provisions of this law. While preserving the rights of third parties acting in good faith, if the number of partners or shareholders in commercial companies of various types falls below the legally required number for each, the dissolution of the company must be declared by a decision of the remaining partners within three months of the occurrence of the mentioned reason unless rectified. The court, upon the request of any interested party, must declare the dissolution of the company after the expiration of the three-month period granted for rectification.
Article 43
- Amended All commercial companies, except for joint ventures, must be documented by a written contract. However, third parties may, when necessary, prove the existence of the company or any provision related to it by all means. All companies established in Lebanon must have a main office there and are considered of Lebanese nationality despite any contrary provision.
Article 44
The founding documents of all commercial companies - except for joint ventures - must be published by carrying out the transactions outlined below, otherwise, they are void.
Article 45
- Amended All commercial companies - except for joint ventures - enjoy legal personality. Changing the form of the company does not create a new legal personality for it; rather, the legal personality remains, and the new company continues with the same legal personality it had before the transformation. This amendment does not apply to third parties until it is registered in the commercial register and a month has passed since the announcement of this amendment in the official gazette and in a local daily newspaper designated by the judge supervising the commercial register. Persons who acted on behalf of a company under formation before it acquired legal personality are considered personally liable jointly among themselves for the executed acts unless the company assumes these acts after its establishment, in which case those acts are considered ratified by the company from the time they occurred.
Title Second Partnership Companies
Article 46
A general partnership is one that operates under a specific name and is formed between two or more persons who are personally and jointly liable for the company's debts.
Article 47
The founding document may be official or may have a private signature. However, in the latter case, copies of the document must be made equal to the number of partners.
Article 48
Within the month of the company's establishment, a copy or version of the founding document must be deposited with the clerk of the court of first instance in the area of the company's headquarters.
Article 49
Within the same period, the company must also be registered in the commercial register relevant to its headquarters area. This publication must be concise and include all information of interest to third parties, particularly: (1) The name, surname, nationality, residence, and company name of each partner. (2) The form of the company. (3) Its purpose. (4) Its main headquarters and the locations of its branches and agencies. (5) The amount of its capital and the value attributed to the partners' in-kind contributions. (6) The names of the partners and the names of the authorized signatories for the company. (7) The date of establishment and the duration of the company.
Article 50
If any amendments are made to the founding document later, a new version must be deposited with the court clerk. Registration in the commercial register is also required if there are entries of interest to third parties.
Article 51
Failure to deposit the founding document with the court clerk or to register it in the commercial register results in the nullity of the company and makes all partners jointly liable for any harm caused to third parties. Failure to mention a provision of interest to third parties in the company's law deposited with the court clerk or in the summary listed in the commercial register renders this provision unenforceable against those concerned. Similarly, failure to publish amendments made to the company's document renders these amendments unenforceable against third parties.
Article 52
The nullity arising from non-publication does not lapse over time, and all concerned parties have the right to invoke it. However, the partners cannot invoke it against third parties. If the publication procedures are carried out late, those who contracted with the company before the correction have the exclusive right to invoke the nullity that the company was subject to.
Article 53
Every partner in a general partnership is considered as if they are personally engaging in commerce under the company's name, thus each acquires the legal status of a merchant. The bankruptcy of the company leads to the personal bankruptcy of each partner.
Article 54
The company's name consists of the names of all partners or the names of some of them with the addition of the words "and partners." The company's name must always correspond to its current form. Any outsider who knowingly consents to having their name included in the company's name becomes liable for its debts to any person misled by this.
Article 55
Except for assignments explicitly stated in the founding document, a partner may not assign their share in the company's profits to others without the consent of all partners and the completion of publication procedures. However, a partner may transfer to others the rights and benefits related to their share in the company, as this agreement is only effective between the contracting parties.
Article 56
The right to manage the business belongs to all partners unless the company's regulations or a subsequent document stipulates that management is entrusted to one partner, several partners, or another person, even if they are not part of the company.
Article 57
Business managers are dismissed in the manner they were appointed. However, if the dismissal is unjustified, it opens the way for a claim for compensation for damages under the conditions outlined in Article 822 of the Obligations Law. If a new manager is appointed in place of a statutory manager, this replacement must be published.
Article 58
Business managers may perform all necessary actions to regularly operate the company's project unless their authority is limited by the company's regulations.
Article 59
- Amended Managers may not enter into any agreement for their own account with the company or any agreement in which they or one of them has a direct or indirect interest without special authorization from the partners, renewed annually if necessary. This prohibition excludes ordinary contracts involving transactions the company conducts with its clients.
Article 60
Similarly, business managers may not manage a project similar to the company's project except under a license renewed annually.
Article 61
If there are several business managers, each has the right to oppose the operations that others intend to conduct. In such cases, the decision is made by a majority of the mentioned managers' votes, unless the opposition is based on the consideration that the intended action is contrary to the company's regulations. In this case, the court is responsible for assessing the nature of the action.
Article 62
The company is bound by the actions of the business managers whenever they act within the limits of their authority and sign under the company's trade name, even if they use this signature for their personal benefit, unless the third party is in bad faith.
Article 63
Creditors of the company have the right to sue it, but they must first send it a warning requesting payment. They also have the right to sue any partner who was among its partners at the time of contracting. These partners are jointly liable for payment from their personal assets.
Article 64
The general reasons for the dissolution of all companies are: (1) The expiration of the period for which the company was established. (2) The completion of the project intended to be carried out in a customary manner. (3) The disappearance of the project's subject matter itself. In addition to the above, the court may always decide, at the request of some partners, either to dissolve the company for just reasons that the court deems appropriate or to expel a partner for failing to fulfill their obligations towards the company.
Article 65
In addition to the above, general partnerships are subject to the following dissolution reasons: (1) The will of one of the partners if the company is formed for an indefinite period and the withdrawal of this partner does not harm the company's legitimate interests under the circumstances in which it occurs. (2) If an event occurs to one of the partners that deprives them of general capacity. (3) The bankruptcy of one of the partners. However, the remaining partners may unanimously decide to continue the company among themselves, excluding the partner who resigned, lost capacity, or went bankrupt. In such cases, they must carry out the legal publication procedure.
Article 66
If there is no contrary provision in the company's law, a partnership shall continue among the surviving partners if one of its partners dies, unless the deceased leaves a spouse or descendants to whom his rights devolve. However, if the situation is the opposite, the company shall continue with the partner's spouse or descendants, who shall have the status of limited partners.
Article 67
In all cases, the value of the rights of the deceased or outgoing partner shall be determined by a special inventory list, unless the company's law provides for another method of appraisal.
Article 68
The dissolution of the company: Except in cases where the dissolution is in accordance with the provisions of the founding document. - It must be published like the document itself and within the same period. This procedure shall be followed when a partner is expelled and the company continues after the death of one of them.
Article 69
After dissolution, the legal personality of commercial companies remains as if it exists for the period necessary for liquidation and solely for the purpose of liquidation.
Article 70
If the company's law does not provide for the appointment of the liquidator or liquidators and the partners do not agree on their selection, the court in the area where the company's headquarters is located shall appoint them.
Article 71
The result of the selection or the judicial decision appointing the liquidators must be published under their care.
Article 72
When assuming their duties, the liquidators must prepare an inventory list with the company's business managers.
Article 73
The liquidators shall collect the company's debts from third parties or partners, settle its debts, sell its assets, and perform all actions required for liquidation. However, they are not allowed to continue the company's business or transfer the company as a whole without special authorization from the partners.
Article 74
The liquidators must provide the partners with all information about the state of liquidation if requested. However, obstacles should not be created in the way of liquidation due to illegitimate demands.
Article 75
The distribution shall be conducted according to the terms of the company contract, and the provisions of Articles 941 to 949 of the Code of Obligations shall also be observed.
Article 76
In all commercial companies, while preserving the claims that may be brought against the liquidators in their capacity as liquidators: - The claims of the company's creditors against the partners or their heirs or successors in rights shall lapse after five years from the dissolution of the company or the exit of a partner concerning claims directed at this partner. The limitation period begins from the day of completion of publication in all cases where publication is required and from the conclusion of liquidation in claims arising from the liquidation itself. The limitation period may be suspended or interrupted according to the rules of general law.
Title Third On Joint Stock Companies
Article 77
- Amended A joint-stock company is a company whose capital is divided into shares, i.e., negotiable securities. It operates under a trade name and is formed by a number of persons not less than three who subscribe to shares and are only liable for the company's debts to the extent of their contributions.
Article 78
- Amended Every joint-stock company, regardless of its purpose, is subject to the Commercial Law and its customs. One-third of the capital of joint-stock companies whose purpose is to invest in a public interest or a public utility must be nominal shares owned by Lebanese natural persons or by companies whose capital consists of nominal shares or stocks entirely owned by Lebanese persons, and whose system prohibits the transfer of shares or stocks except to Lebanese persons. Any transfer of these shares in violation of the provisions of the previous paragraph shall be absolutely null and void.
Chapter First On the Establishment of Joint Stock Companies
Article 79
- Amended The number of founders must not be less than three, and no person may participate in the establishment of a joint-stock company if they have been declared bankrupt and have not regained their status for at least ten years, or if they have been convicted in Lebanon or abroad less than ten years ago for committing or attempting to commit a felony or misdemeanor subject to penalties for fraud, embezzlement of funds or values, issuing checks without funds in bad faith, or undermining the financial status of the state as per Articles 319 and 320 of the Penal Code, or concealing items obtained through these crimes. The same conditions apply to representatives of legal entities participating in the establishment of the company. The founders are jointly liable for the obligations contracted and expenses incurred for the establishment of the company and have no right to claim them from the subscribers if the company is not established.
Article 80
- Amended Subject to the provisions of laws and regulations that require prior licensing for certain activities, the establishment of joint-stock companies does not require a license. The company's articles of association and any subsequent amendments must be deposited and registered with any notary public in Lebanese territory.
Article 81
- Amended If the invitation is directed to the public for subscription to the company's capital, the founders must publish in the Official Gazette and in two newspapers, one local daily and the other economic, a statement including the name and signature of each of them and their address, specifically containing the company's name, its headquarters, branch locations, purpose, duration, capital amount, share price, advance payment, value of in-kind contributions, interest clause, profit distribution conditions if any, number of board members, their salaries as stipulated in the company's articles, and their powers. The clarifications contained in the statement must also be included in the personal subscription document, share certificate, posted announcements, broadcasts, and brochures, with reference to the newspaper issues in which the statement was published.
Article 82
- Amended Any violation of the provisions of the previous article shall result in a fine ranging from two million to ten million Lebanese pounds, and the court may cancel the concluded subscriptions if necessary.
Article 83
- Amended The capital of the joint-stock company must not be less than thirty million Lebanese pounds and must be fully subscribed.
Article 84
- Amended The minimum price for one share is one thousand Lebanese pounds, and each subscriber must advance at least a quarter of the nominal value of each share they subscribe to.
Article 85
- Amended The founders must deposit the amounts paid by subscribers before the final establishment of the company in one of the operating banks in Lebanon as an open account in the name of the company under establishment, along with a schedule of subscribers and the amount paid by each. These amounts are withdrawn after the establishment of the company with the signature of the person or persons appointed based on the company's articles, after presenting a certified copy of the articles and the minutes of the founding assembly. In case of non-deposit or withdrawal of all or part of the deposited amounts or their disposal before the completion of the company's establishment, violators are fined ten percent of the non-deposited, withdrawn, or disposed amount and may face penalties for breach of trust or other applicable crimes, in addition to civil liability. If the company is not established within six months from the date of signing the articles with the notary public, each subscriber has the right to refer to the urgent matters judge to appoint a temporary manager tasked with withdrawing the amounts and returning them to the subscribers after deducting distribution expenses if necessary. If the founders agree, even before the expiration of the six-month period mentioned in the previous paragraph, not to proceed with the company's establishment and before any subscription by shareholders, they can unanimously decide to withdraw the amounts deposited with the bank, provided they present a duly certified letter with the notary public where the articles were deposited, indicating the cancellation of the company's articles deposited with the notary public, in addition to presenting proof of payment of fees and taxes due on the company's articles if necessary.
Article 86
- Amended The accuracy of the valuation of in-kind contributions is subject to the assessment of an expert or several experts appointed by the president of the court of the area where the company's headquarters is located, based on a decision issued at the request of the founders. Granting special benefits to any person in the company's articles is prohibited.
Article 87
The experts' report is made available to the subscribers, who may then withdraw from the subscription if the founders' valuation exceeds the actual value determined for the contributed assets and special benefits by twenty percent according to the experts' assessment. The founders may then subscribe themselves or have others subscribe to the shares of the defaulting subscribers.
Article 88
The in-kind shares must be fully paid at the time of the company's establishment.
Article 89
These shares must remain nominal and attached to the stub, bearing a stamp indicating their type and the date of the company's establishment, and they cannot be traded until the general assembly approves the accounts for the company's second year. However, the trading prohibition mentioned does not apply to in-kind shares allocated to shareholders of a merged company whose shares were tradable before that.
Article 90
- Amended Within the month following the experts' report, the founders must hold a founding general assembly of the shareholders and announce its meeting ten days in advance, presenting the experts' report on the valuation of in-kind contributions. Decisions are made according to the quorum and majority rules applicable to this type of assembly, and the owners of in-kind contributions do not participate in the voting even if they are simultaneously subscribers to cash shares or agents for such subscribers. The approval procedure mentioned is not required in all cases where there are no cash shareholders other than the in-kind shareholders.
Article 91
- Amended Completing the aforementioned procedures does not prevent subsequent liability claims that may be filed jointly within five years from the company's establishment date against the founders, in-kind shareholders, initial board members, and experts when it is found that there is a significant overvaluation of the in-kind contributions.
Article 92
In all cases, the founding assembly conducts an investigation based on the supporting documents to determine whether the necessary conditions for the company's establishment have been duly observed.
Article 93
The aforementioned assembly appoints the first board of directors if they have not been appointed according to the company's bylaws and also appoints the first auditors. The company is considered established upon their acceptance. These members and auditors must ensure that the company is legally established and are jointly liable for this.
Article 94
- Amended If a joint-stock company is established illegally, any person with standing and interest may, within five years from the date of the defect, notify the company to complete the neglected transaction. If the company does not proceed with the corrective transaction within a month, any person with standing and interest may request a judgment to annul the company. Shareholders cannot invoke the annulment of the company against third parties. The annulled company is liquidated like an actual company.
Article 95
- Amended If the establishment of the company is illegal, shareholders and third parties have the right to file, in addition to the annulment lawsuit, a lawsuit for joint liability against the founders, the first board members, the first auditors, as well as the in-kind shareholders and experts if the verification transactions were not conducted honestly and faithfully. Establishing liability requires proving the causal link between the defect in establishment and the damage suffered by the plaintiff. The liability lawsuit is filed within the same period specified for the annulment lawsuit.
Article 96
- Amended Persons who, even in good faith, deliver final share certificates of a joint-stock company established illegally to subscribers, as well as those who sell or participate in selling these shares or officially publish their price, are fined between two million and twenty million Lebanese pounds. To declare liability, the defect in establishment must be at least apparent.
Article 97
Any fraudulent act intended to induce people to subscribe or pay money is punishable by fraud penalties.
Article 98
- Amended After the establishment of the company, the board members must conduct the initial transactions related to publication through deposit and registration with the competent commercial registry office, within the month following the establishment, under penalty of a fine determined by the judge supervising the commercial registry, imposed on the company and ranging between five hundred thousand and one million Lebanese pounds. The transactions mentioned in the previous paragraph can be completed electronically as determined by the Minister of Justice, provided that they are exclusively electronic two years after the enactment of this law, and electronic publication on the commercial registry's website is available for public access.
Article 99
Failure to publish results in the same consequences, namely the annulment of the company or the annulment of the omitted clause and the imposition of joint liability on the first board members and the first auditors who must oversee the completion of all transactions.
Article 100
- Amended The company is also subject to a form of continuous publication: The company's bylaws must be posted in its offices. Anyone has the right to request a certified copy for a reasonable fee. The company's name must be mentioned on all its printed, handwritten, and electronic documents, indicating that it is a joint-stock company and specifying its capital amount and the portion that has been paid.
Article 101
- Amended The board members must deposit with the competent commercial registry office annually, within two months from the date of the general assembly's approval of the financial statements, and no later than December 31 of the current year, the following documents: 1 - The auditors' report attached with the individual financial statements for the past year prepared according to applicable accounting standards, especially the balance sheet, income statement, statement of changes in shareholders' equity, and notes on the financial statements. 2 - The auditors' report attached with the consolidated financial statements for the past year prepared according to applicable accounting standards. 3 - The special auditors' report according to the provisions of Article 158 of this law. 4 - The board of directors' report on the company's activities for the past year. 5 - The board of directors' report according to the provisions of Article 158 of this law. 6 - The attendance sheet and minutes of the general assembly meeting approving the financial statements for the past year and the board of directors' report for the past year and the special reports related to operations subject to the provisions of Article 158 of this law when necessary, provided that the mentioned report includes the following information: - The result of the past year. - The accumulated results, especially those requiring any measure under Article 216 of this law. - The names of the board members elected whenever their election is due and any changes thereto. - The appointment of auditors whenever their appointment is due. Copies of the documents mentioned in this article can be obtained from the commercial registry at the applicant's expense. The transactions mentioned in this article can be completed electronically as determined by the Minister of Justice, provided that publication on the commercial registry's website is mandatory and available to the public two years after the enactment of this law.
Article 102
- Amended The judge supervising the commercial registry fines the company one hundred thousand Lebanese pounds annually for each document not properly deposited. For the deposit and registration of the documents stipulated in Article 101 within the deadlines specified in the article, the company is exempt from a clearance certificate issued by the National Social Security Fund.
Chapter Two Documents Issued by Joint Stock Companies and the Judicial System for Holders of Those Documents
Article 103
(Amended by Law 54/1977) Effective Date: 16/06/1977 Joint-stock companies issue shares and may issue bonds, and they may also issue bonds convertible into shares. They are not allowed to issue founders' shares or any bonds that grant the founders the right to receive a share of the company's profits without prior capital contribution. Previous text of the article Effective Date: 24/12/1942 Expiration Date: 16/06/1977 Joint-stock companies issue shares and may issue bonds, and they are not allowed to issue founders' shares or any bonds that grant the founders the right to receive a share of the company's profits without prior capital contribution.
Part First On Shares
Article 104
- Amended Shares are equal parts of the company's capital, indivisible, represented by negotiable documents that are nominal.
Article 105
A share grants its holder certain inherent rights, which are: the right to dividends, the preemptive right to subscribe when the capital is increased, the right to redeem the nominal value of the share, the right to share in the company's assets, the right to vote in the general assembly, and the right to transfer their share.
Article 106
Dividends should only be taken from the net profits resulting from a truthful balance sheet and remaining at disposal after taking the necessary amount to form the legal reserve and the statutory reserve as stipulated in the company's bylaws.
Article 107
- Amended Any distribution of fictitious dividends makes the board members civilly liable to any person harmed by it, and also makes the auditors liable in the same manner as the board members, unless the auditors prove they committed no error in their oversight. Board members and auditors are criminally liable if dividends are distributed without a balance sheet or based on a fraudulent inventory list, balance sheet, or financial statements, and they are punished with the penalty for fraud or any other penalty stipulated by law.
Article 108
- Amended Shareholders who received those dividends are not required to return them unless their bad faith or gross error equivalent to fraud is proven. However, the recovery claim that the company, its creditors, or any of the shareholders can file against them obliges them to return the amount they received without right, along with interest from the day of payment. This claim is barred by statute after five years from the date of distribution.
Article 109
- Amended Amounts distributed under the provision related to fixed interest (Interets fixes) paid to shareholders under any circumstances and included in the company's expenses are not considered fictitious profits. However, this provision is only legal if the following two conditions are met: - The interest rate does not exceed four percent. - The duration of the provision's application is five years at most. This provision must be published by depositing it in the company's register at the commercial registry, otherwise, it is void.
Article 110
- Amended In principle, all shareholders in the same company should have the same rights and share in the same benefits. However, in all cases where the company's bylaws do not explicitly prohibit it, preference shares may be created by a decision from an extraordinary assembly discussed as outlined below. These shares grant their holders priority either in receiving certain dividends or in recovering capital, or in both these advantages together, or any other material benefit.
Article 111
If the general assembly makes a decision that in any way diminishes the rights associated with a class of shares, this decision is not effective unless approved by a special assembly composed of the holders of the shares concerned. This assembly follows the rules related to quorum and voting in extraordinary assemblies.
Article 112
When the capital is increased by creating new shares to be subscribed for in cash, shareholders from all existing categories have the preemptive right to subscribe to the total new shares in proportion to the old shares they own, in a manner that does not allow reduction. The extraordinary assembly that approved the capital increase takes all measures concerning the excess shares after distribution.
Article 113
- Amended However, this assembly may decide that the subscription right is not preserved for the old shareholders, or it is only partially preserved, or it is not in proportion to the shares previously owned. In this case, any allocation of new shares, whether to non-shareholders or to a class of preferred shareholders, is subject to the investigation that applies to in-kind contributions. This investigation covers all shares allocated to non-shareholders. As for shareholders, it only covers what exceeds the specified proportion of the old shares. If this investigation is not conducted, the capital increase is void.
Article 114
Every shareholder is entitled, if sufficient assets remain upon the company's dissolution, to recover the nominal amount of their share while retaining the priority rights granted to priority shares. The surplus is distributed among all shareholders in proportion to the number of shares owned.
Article 115
- Amended The company may redeem its capital by allocating an amount from its profits to a special reserve or for depreciation, both intended for this purpose. The redemption is carried out according to the methods stipulated in the company's bylaws or the methods approved by the general assembly. When redemption occurs, the fallen shares are replaced with shares called enjoyment shares (jouissance), which grant their holders the privileges of traded shares except for the interest specified in the company's bylaws and the nominal amount of the shares upon the company's dissolution.
Article 116
- Amended Every shareholder has the right to attend the various assemblies convened to establish the company and to conduct its business, and in principle, has a number of votes equal to the number of their shares. If the company is informed of the existence of a usufruct right on certain shares, it is obliged to notify the usufructuary of all invitations and matters without exception, including decisions on the distribution of any economic benefits. The usufructuary alone has the right to attend and vote in ordinary general assemblies, while the bare owner has the right to attend and vote in extraordinary general assemblies. The bare owner is considered the person entitled to receive all invitations and documents without exception, including decisions on the distribution of any economic benefits. The usufructuary and the bare owner can agree to deviate from the provisions of the previous paragraph in any manner they see fit, provided a contract is signed between them and notified to the company and published in the commercial register. In the case of joint ownership of shares, all co-owners must choose one person among them or a third person to attend and vote in ordinary and extraordinary general assemblies. If they do not agree on appointing one person, the president of the competent primary court within the jurisdiction of the company's headquarters appoints a representative for the co-owners, based on a request from any of the co-owners, by an expedited decision issued according to urgent procedures and after hearing all co-owners. The appointed representative continues to perform their duties until the annual general assembly convenes to approve the accounts. The president of the court may renew the appointment according to the same procedures.
Article 117
- Amended Fully paid shares that have remained with a single owner for at least two years before each meeting shall have two votes each. Shares are considered, with respect to the aforementioned period, as if they belong to the same owner when acquired through inheritance, donation, or bequest. Extraordinary meetings, with unanimous consent of the shareholders, may decide to cancel the double voting right mentioned above. The provisions of the first and second paragraphs of this article do not apply to companies established after the issuance of this law.
Article 118
- Amended Subject to the restrictions related to in-kind shares, each shareholder may freely transfer their shares to another person, who will replace them in their rights and obligations as a shareholder. However, a provision may be included in the company's bylaws stipulating that priority in purchase is given to shareholders or a group of them or to the company itself, provided this right is exercised according to the timeframe and price determination mechanism stipulated in the company's bylaws. However, this right should not be misused to make the share practically non-transferable or to cause excessive harm to the shareholder. In the event of the existence of a usufructuary and a bare owner for a single share, the bare owner alone is entitled to exercise the right of priority when necessary. The company may only exercise the right of priority for its benefit with its available free reserve funds. A company listed on the financial markets may purchase shares issued by it from its available free reserve funds, provided their value does not exceed a percentage of its total shares determined according to the regulations governing the financial markets law.
Article 119
- Amended The shareholder who has not paid the full price of their share is required to comply with the board of directors' request to pay the remaining price or part of it, according to the mechanism and conditions stipulated in the decision calling for payment. All those who held the share before them remain jointly liable for the unpaid amount for only two years from the date of transfer. Any provision in the company's bylaws or any decision contrary to the provisions of this article is considered absolutely null and void.
Article 120
- Amended The previous shareholder who was forced to pay the remaining or part of the price of the share they transferred replaces the company in rights and in claims against all those who held the share after them. In all cases, the previous shareholder has the right to recourse against the shareholder who held the share after them.
Article 121
- Amended If the demanded value of the share price is not paid, the company has the right, after warning the delinquent shareholder, to sell the share and charge them with the expenses and losses resulting from the sale. If the sale price of the share is less than the demanded amount, the shareholder remains obligated to pay the difference, jointly and severally with the shareholders who held the share before them. All those who held the share before them remain jointly liable for the unpaid amount for only two years from the date of transfer. In the event of the existence of a usufructuary and a bare owner for a single share, the bare owner is obligated to pay in accordance with articles 119, 120, and 121 of this law, unless there is an opposing agreement between them duly notified to the company's board of directors, in accordance with the provisions of article 116 of this law.
Article 121
Repeated 1 Added to the first part of the second chapter of the third section of the second book of the Commercial Law are articles from 121 Repeated 1 to 121 Repeated 12 pursuant to Law 126 dated 29/3/2019. Without prejudice to the provisions of Law No. 308 dated 3/4/2001 concerning the issuance and trading of bank shares, any joint-stock company may create nominal preferential shares that enjoy certain privileges, rights, or material benefits and benefit from all the rights stipulated in article 105 of this law, except for the right to participate in discussions and voting in general assemblies, the right to hold membership in the board of directors, and the right to share in the company's assets. The company's management must inform the holders of preferential shares of the information and documents prepared to inform other shareholders.
Article 121
Repeated 10 The company has the right to purchase preferential shares provided that: 1 - This right and the basis and conditions for its exercise, especially the timing and price of purchase, are stipulated in an explicit clause in the company's bylaws or in a decision of the extraordinary general assembly that previously decided to issue the shares to be purchased. 2 - This purchase is made after the full payment of all due and unpaid priority profit shares related to any issuance of preferential shares made by the company unless the decision to issue the preferential shares states otherwise.
Article 121
Repeated 11 Upon the dissolution and liquidation of the company, the nominal value of the preferential shares and the full unpaid priority profit share related to those shares are paid before any payment of the value of ordinary shares. Contrary to the provisions of article 121 Repeated 1, the proceeds from the liquidation may be paid to the preferential shares if the company's bylaws or the extraordinary general assembly that created the preferential shares decided on their right to benefit from the mentioned proceeds. In the absence of benefiting from the liquidation proceeds and contrary to any other provision, the issuance premium paid by them upon subscription to the mentioned shares is automatically due to the holders of these shares.
Article 121
Repeated 12 Preferential shares can be converted into ordinary shares by a decision of the extraordinary general assembly issued based on a special report from the auditors, according to the conditions, bases, and deadlines provided in the company's bylaws or as decided by the extraordinary general assembly that created the preferential shares.
Article 121
Repeated 2 1 - Without prejudice to the application of the provisions of article 207 of this law, preferential shares are created either at the establishment of the company or at any increase in its capital. 2 - The provisions of article 8 of the third part of the second chapter of the third section of the second book and articles 112 and 113 of this law are not considered when creating preferential shares. 3 - Contrary to what is stated in paragraph (2) of this article, the company may grant a preemptive right to its shareholders to subscribe to the issued preferential shares, provided the conditions for exercising this right are specified in the company's bylaws or by a decision of the extraordinary general assembly of shareholders that creates the preferential shares.
Article 121
Repeated 3 It is prohibited for preferential shares to represent more than thirty percent (30%) of the nominal shares representing the company's capital at the date of issuance of these shares.
Article 121
Repeated4 The company's bylaws or the decision of the extraordinary general assembly that decides to issue preferred shares shall determine the privileges, priorities, rights, or other material benefits enjoyed by these shares, particularly the priority profit share due to them and whether this profit is cumulative or non-cumulative cumulatif ou non cumulatif. In the event that the company has profits for a certain fiscal year, it is obligated to distribute the priority profit share due to the preferred shares. If it is found that the company does not have profits or that its profits are insufficient to pay the full or part of the priority profit share due to the preferred shares, the available profits are distributed to the holders of the preferred shares in proportion to the shares they own, and the collection of the balance of the priority profit, if cumulative, is carried over to the next fiscal year and, if necessary, to subsequent fiscal years. The distribution of the priority profit share is not made until after deducting the amounts distributed in accordance with the provision related to the specified interests stipulated in Article 109 of this law. The remaining balance is subject to the decision of the ordinary general assembly, provided that this distribution does not conflict with the company's bylaws and the decision of the extraordinary general assembly that created the preferred shares. The issuance of new preferred shares cannot affect any of the rights of the preferred shares or the priority shares stipulated in Article 110 of this law or the convertible bonds issued prior to the issuance of the new preferred shares, except after obtaining the approval of the special assembly composed of the holders of these shares or bonds.
Article 121
Repeated5 Contrary to the provisions of Article 121 Repeated, holders of preferred shares acquire a voting right equal to that of other shareholders in proportion to the shares they own in the company's capital in the following cases: 1 - If a cumulative or non-cumulative priority profit share due to the preferred shares is determined and not fully or partially paid, as the case may be, for one fiscal year despite the availability of profits for the company for that year. This right remains in effect until the end of the fiscal year in which the full priority profit share due is paid. 2 - If the company fails to secure the benefits, priorities, or rights determined for the preferred shares. This right remains in effect as long as the beneficiaries are not provided with the determined benefits, priorities, or rights. 3 - In general assemblies related to changing the company's purpose or form, liberating capital increase in kind, dissolving it before the term, or in merger, amalgamation, or division operations in which it is a party.
Article 121
Repeated6 Notwithstanding any contrary provision, a special assembly of preferred shareholders is formed for each issuance, called, convened, and makes its decisions in the manner of the bondholders' assembly in accordance with Articles 137, 138, and 139 of this law. The special assembly of preferred shareholders may issue one or more advisory opinions on matters presented to the company's shareholders' general assemblies or on any subject that the preferred shareholders deem in their interest to express an opinion on. The special assembly of preferred shareholders communicates this opinion to the company to inform the general assembly and include it in the minutes of the latter. This special assembly may also appoint a representative for the preferred shareholders to attend the general assemblies of shareholders, and this representative, when necessary, has the right to express the opinion of the assembly he represents before the vote, in which he is not entitled to participate. This opinion is recorded in the minutes of the company's general assembly.
Article 121
Repeated7 The chairman and members of the board of directors, general managers, and assistant general managers appointed in accordance with the provisions of Article 153 of this law, as well as their spouses and minor children, are prohibited from owning preferred shares or having any type of rights on these shares directly or indirectly or under the guise of a third natural or legal person or in any form.
Article 121
Repeated8 In the event of an increase in the company's capital by creating new shares subscribed for in cash, holders of preferred shares do not have the right of preference to subscribe to the new shares in accordance with the provisions of Article 112 of this law. However, the company may grant a right of preference to holders of preferred shares to subscribe to the newly issued shares and determine the conditions for exercising this right in the bylaws or by a decision of the extraordinary general assembly of shareholders, and in this case, the provisions of the second paragraph of Article 113 of this law do not apply. If the company increases its capital by incorporating reserves of any kind or retained earnings or distributing new free ordinary shares or increasing the nominal value of the share, holders of preferred shares do not benefit from this distribution or increase unless otherwise provided in the company's bylaws or in the decisions issued by the extraordinary general assembly that created the preferred shares.
Article 121
Repeated9 The company is prohibited from redeeming its capital from the date of issuance of the preferred shares and throughout the existence of such shares, in accordance with Article 115 of this law. In the event of a capital reduction for reasons not resulting from losses, the company must purchase and cancel the preferred shares before any purchase of ordinary shares or reduction of their nominal value, without prejudice to the application of the provisions of Articles 208 and 209 of this law, provided that the full priority profit shares due and to be due until the date of payment are paid. In this case, the value of the preferred shares is determined on a date prior to or concurrent with the purchase by agreement between the company and the special assembly of preferred shareholders. In case of disagreement, the actual value of the share as of the date of the capital reduction decision is determined by one or more certified accountants appointed by agreement between the parties. If this agreement is not possible, the expert or experts are appointed by the president of the commercial court within whose jurisdiction the company's headquarters is located.
Part Second On Bonds
Article 122
- Amended The company may issue negotiable and indivisible bonds with a single nominal value given to subscribers in exchange for the amounts they have advanced. However, bonds may not be issued until the capital subscribed by the shareholders has been fully paid. Members of the board of directors and managers who issue or allow the issuance of bonds contrary to the provisions of the previous paragraph shall be fined from one thousand to ten thousand Lebanese pounds, and these bonds shall be void.
Article 123
The holder of the mentioned bonds is entitled to receive a specified interest paid at fixed intervals and to recover their principal from the company's assets. (Patrimoine social.)
Article 124
- Amended While retaining the rules applicable to real estate credit companies, bonds may not be issued for an amount exceeding twice the company's existing capital according to the financial position audited by the auditors and approved by the general assembly, provided that the date does not exceed six months from the date of bond issuance.
Article 125
Even if the company's law provides for the issuance of bonds, they may not be issued without the approval of the general assembly.
Article 126
- Amended Before publishing any pre-issuance announcement, the company's board members must publish in the official gazette, an economic newspaper, and a local daily newspaper a statement containing their signatures and addresses, particularly including the date of the general assembly's decision authorizing the issuance, the number of bonds to be issued, their value, interest rate, repayment schedule and conditions, guarantees, the number of previously issued bonds with their guarantees, the amount of capital, the value of in-kind contributions, the existence of a fixed interest clause, and the results of the latest approved balance sheet, otherwise they will be subject to a fine from one thousand to five thousand Lebanese pounds.
Article 127
- Amended The subscription document, bond certificate, announcements, broadcasts, and publications must include the clarifications stated in that statement, with reference to the newspaper issues in which it was published.
Article 128
Subscribers to purchase bonds may cancel their subscription if the aforementioned procedures are not followed.
Article 129
- Amended Every bond issuance must be recorded in the commercial register by the board of directors. If they fail to do so, they will be subject to a fine from five hundred to two thousand five hundred Lebanese pounds.
Article 130
If the price of the bonds is not fully paid initially and calls to pay the remaining price are not effective, the company has the right to resort to selling on the stock exchange.
Article 131
Mortgage bonds may be issued, but their issuance must comply with the provisions of the High Commissioner's decision No. 77 L.R dated May 26, 1933.
Article 132
- Amended Lottery bonds must be authorized by a government license based on a proposal from the Minister of Economy and Trade.
Article 133
Bonds may be issued with a redemption bonus payable upon bond maturity.
Article 134
The repayment of bond value is conducted according to the conditions set at issuance, and the company may not advance or delay the schedule.
Article 135
Notwithstanding any contrary provision, bondholders form a single body that constitutes itself upon each issuance, and its decisions made by majority vote are binding on all.
Article 136
After the subscription is concluded, the issuing company holds a general assembly of bondholders to approve the regulations of their body and appoint their representatives.
Article 137
Whenever it is evident that holding a bondholders' meeting is beneficial, it is convened either at the request of their representatives or a group of bondholders representing 1/20 of the bond value, or at the request of the joint-stock company.
Article 138
- Amended The assembly is convened by two consecutive announcements in the official gazette, an economic newspaper, and a local daily newspaper, with an interval of eight days between them, and they include the topics listed on the agenda, and no other topics may be discussed.
Article 139
The rules for quorum and voting are specified in Articles 193 and 195 for general assemblies of shareholders.
Article 140
Representatives of the bondholders' body have the right to take all precautionary measures to safeguard their rights.
Article 141
Measures intended to extend repayment terms, reduce the interest rate, principal of the debt, or its collateral, and generally any measures that compromise bondholders' rights may only be taken by their general assembly meeting the quorum conditions specified in the first paragraph of Article 193 with a two-thirds majority of the bondholders present or represented.
Article 142
Representatives of bondholders have the right to attend general assemblies of shareholders after receiving the same notices sent to shareholders. However, they do not have the right to vote in discussions.
Article 143
If a company continues to pay interest or dividends on shares, bonds, or other financial documents whose value is paid by drawing lots, the company may not reclaim the amounts mentioned upon presenting the bond for repayment. Any provision contrary to this rule is disregarded.
Part Third On Bonds Convertible into Shares (Added by Legislative Decree No. 54/77)
Article 143
* This section related to convertible bonds into shares was added pursuant to Article 9 of Legislative Decree 54/1977
Chapter Third On the Examination of the Actions of Joint Stock Companies
Part First On the Members of the Board of Directors
Article 144
- Amended The joint-stock company is managed by a Board of Directors composed of at least three members and at most twelve members, while retaining any special laws that may apply to certain joint-stock companies. The number of Lebanese members on the Board of Directors must not be less than one-third. The Board of Directors must appoint one of its members as the chairman. The chairman of the Board of Directors does not need a work permit if he is a non-Lebanese non-resident in Lebanon.
Article 145
- Amended Members of the Board of Directors receive their fees either by setting an annual amount for them, or by setting a fixed amount for each meeting they attend, or by allocating a proportional rate of the net profits, or by a method that combines these different benefits. However, the profits from which the proportional rate allocated to the members of the Board of Directors is taken must originally include only the net returns of the investment that is the subject of the company. Accordingly, the income from the securities portfolio may not be included except exceptionally and based on a special decision issued by the General Assembly and renewed annually.
Article 146
- Amended The ordinary General Assembly elects the members of the Board of Directors, but the first members may be appointed in the company's bylaws. In the event of the existence of a usufructuary and a bare owner for a single share, the bare owner alone is authorized to be a member of the Board of Directors, except in the case of a contrary agreement between the bare owner and the usufructuary, according to what is stipulated in Article 116 of this law. In the case of co-owners of a single share, the provisions of Article 116 of this law also apply, and therefore only one person representing the co-owners is eligible for membership on the Board of Directors. In the period between two annual assemblies, if the number of active members decreases due to death, resignation, or other reasons to less than half the minimum number specified in the bylaws or less than three, the remaining members must call the General Assembly within two months at most to fill the vacant positions.
Article 147
- Amended The ordinary General Assembly elects the members of the Board of Directors from among the shareholders or non-shareholders.
Article 148
- Amended No one may be chosen as a member of the Board of Directors if they have been declared bankrupt and have not regained their status for at least ten years, or if they have been convicted in Lebanon or abroad less than ten years ago for committing or attempting to commit a felony or misdemeanor. The same conditions apply to representatives of legal entities on the Board of Directors.
Article 149
- Amended The term of office for members of the Board of Directors appointed according to the company's bylaws is a maximum of five years, while those appointed by a decision of the shareholders' assembly have a term of office of a maximum of three years, and their election can be renewed. The company's bylaws may include special provisions for the partial renewal of the Board of Directors.
Article 150
Members of the Board of Directors are subject to dismissal without cause. Any contrary provision is not considered.
Article 151
If the General Assembly of shareholders decides on dismissal and the issue of dismissal was not included in its agenda, this decision will not be implemented unless confirmed by a new General Assembly whose agenda includes this issue. This second assembly is convened by the auditors within two months from the date of the first assembly, and one of them presides over it.
Article 152
- Amended Any change in the composition of the Board of Directors must be published by depositing the minutes with the relevant commercial register under the care of the Board of Directors members. The notification by which the company is informed of the resignation of a Board of Directors member is also recorded in the same commercial register. In both cases, the publication or registration is done without the need to present any other document of any kind, whether official or unofficial.
Article 153
- Amended The management of the company is entrusted to the Chairman of the Board of Directors, the General Manager, elected by the Board of Directors from among the natural persons who make up the board. The company's bylaws may include the possibility of separating the chairmanship of the Board of Directors from the management of the company. The Board of Directors appoints, from among the natural persons, a General Manager from the shareholders or non-shareholders. It is up to the Chairman of the Board of Directors, the General Manager, or exclusively the General Manager in case of separation of the positions, to propose to the board the appointment of one or more Assistant General Managers. The Board of Directors appoints the Assistant General Manager or Assistant General Managers from outside the Board of Directors and from among the shareholders or non-shareholders, provided they are natural persons. The Assistant General Manager performs his function under the personal responsibility of the authority that proposed his appointment. When the chairman is temporarily unable to perform his functions, he may delegate all or part of them to one of the Board of Directors members, provided that this delegation is always for a specified period. If the chairman is permanently unable to perform his functions, the Board of Directors may consider him resigned and elect another. Members of the Board of Directors may hold administrative positions in the company for a salary determined by the Board of Directors, but they do not benefit from the provisions of the Labor Law unless they have been employees of the company for at least two years when they assume office.
Article 154
- Amended No one may hold the chairmanship of the Board of Directors in more than six companies in Lebanon, nor may anyone be a General Manager or Assistant General Manager in more than three companies headquartered in Lebanon. A natural person may not be a member of more than eight Boards of Directors of companies headquartered in Lebanon. Holding the chairmanship and membership in Boards of Directors related to different insurance companies with a single trade name is considered as one chairmanship or membership. In case of violation of the provisions of this article, any interested party may warn the violator and the company to comply with it. If the violator does not correct his situation within two months after receiving the warning, he is considered resigned by law after this period, and any interested party may, in case of continued violation, request a ruling to annul the decisions made in the Board of Directors in the presence of the violator. The violator or the company may not invoke the annulment of these decisions against third parties. In all cases, the violator must return what he received in wages and bonuses to the company since the violation occurred.
Article 155
- Amended The chairman of the board and the general manager are not considered traders except in relation to the following matters: The competent court may rule against them or any of them by stripping the rights that the law associates with bankruptcy if the company goes bankrupt and its bankruptcy is due to fraud or significant errors in the management of the company's affairs. If the functions of the chairman have been transferred, in whole or in part, to one of the persons mentioned in Article 153, the person to whom the chairman's functions have been transferred bears, in proportion to the functions transferred to him, the responsibilities specified in this article instead of the chairman of the board.
Article 156
- Amended For the council's decisions to be legal, at least half of the members must attend the session or be represented in it, and a member may only represent one other member. The company's bylaws may, within the framework of calculating the majority and quorum in council meetings, consider members who participate in board meetings via remote audio-visual communication technology or other technical means, whose conditions are determined by a decision issued by the Minister of Justice, as present in the meeting, provided that the identity of the connected member is verified and the safety, continuity, and reliability of the connection and the actual participation of the connected member in the discussions are ensured. The company's bylaws must specify the mechanism to be adopted in this context, and the bylaws may prohibit the issuance of certain decisions by a board of directors in which members participate remotely via the aforementioned communication technology. The use of any of these technologies is prohibited when preparing and approving the annual accounts, annual financial statements, and reports for the past year mentioned in Article 101. The content of the remote communication must be recorded in all board meetings, so that the recordings are considered an integral part of the meeting minutes and are kept with them. Related text: Determining the conditions for shareholder members to participate in board meetings in joint-stock companies via remote audio-visual communication technology or other technical means.
Article 157
- Amended The board of directors has broad powers to implement the resolutions of the general assembly and to carry out all actions required for the normal course of the project, which are not considered daily actions. These powers are limited only by what is stipulated in the law or the company's bylaws. The board of directors may delegate some of its powers to the chairman of the board, the general manager in the absence of a general manager, or to the general manager, for a short and specified period, provided that this delegation is subject to publication in the commercial register. The chairman of the board, the general manager, has all the powers to represent the company to third parties, implement the board's resolutions, and manage the company's daily affairs as outlined in the bylaws or custom, under the supervision and control of the board of directors. In the event of appointing a general manager according to the provisions of Article 153 of this law, the chairman of the board has the authority of general supervision over the company's operations, without interfering in daily operations. He presides over the board of directors and gives general directives to the general manager, which are not binding on the latter. In this case, the general manager has all the powers to represent the company to third parties, implement the board's resolutions, and manage the company's daily affairs as outlined in the bylaws or custom, under the supervision and control of the board of directors.
Article 158
- Amended 1 - Members and the chairman of the board of directors, the assistant general manager, and any shareholder who directly or indirectly owns voting rights of five percent (5%) in the company's capital are subject to prior authorization from the board of directors for any contract, agreement, or commitment intended to be made with the company, whether the mentioned contract, agreement, or commitment is conducted directly or indirectly or under the guise of a third person. None of the aforementioned individuals has the right to participate in voting on the decision to grant or refuse the authorization related to them, and their votes are not counted in the quorum or voting when discussing the mentioned authorization. Excluded from this obligation and the authorization provisions are contracts, agreements, and commitments whose subject is ordinary operations between the company and its customers. 2 - Prior authorization from the board of directors is required for any agreement between the company and another company if any of the persons mentioned in the first paragraph of this article: A - Is a partner who directly or indirectly owns voting rights exceeding five percent (5%) in the capital of that company. B - Or is a general partner or managing partner in that company, regardless of their share percentage in its capital if it is a partnership or limited partnership. C - Or is a manager of that company or a member of its board of directors. This person is not entitled to participate in voting on the decision to grant or refuse the authorization related to that company, and their vote is not counted in the quorum or voting when discussing the authorization. 3 - The person who meets any of the conditions mentioned in the above paragraphs must immediately inform the board of directors in writing and in detail. 4 - The board of directors must: A - Consider the authorizations for the contracts, agreements, and commitments mentioned in the first and second paragraphs of this article within a reasonable period and before the general assembly convenes. If the authorizations are approved, a special report on them is presented to the first general assembly, ordinary or extraordinary, for ratification. The persons mentioned in the first paragraph of this article are not entitled to participate in voting on the ratification decision, and their shares are not counted in the quorum. B - Inform the auditors of the contracts, agreements, and commitments that have been authorized within fifteen days of the authorization decision. The auditors present their special report related to the contracts, agreements, and commitments mentioned in the first and second paragraphs of this article to the general assembly, expressing their opinion on the impact of those contracts, agreements, and commitments on the financial statements and the accompanying notes, for voting according to the procedures. 5 - Subject to the provisions of laws and regulations specific to banks and financial markets, it is prohibited for any of the members and chairman of the board of directors, the general manager, the assistant general manager, the auditors, and any shareholder who directly or indirectly owns voting rights exceeding five percent (5%) in its capital to obtain from the company, by any means, a loan, facilities, guarantee, or any security against third parties. In all cases, the authorization is not considered effective until ratified by the general assembly.
Article 159
- Amended The chairman and members of the board of directors, the general manager, and the assistant general manager are not allowed to participate in the management of a company similar in its subject or activity to their company unless they obtain prior authorization from the ordinary general assembly, and this authorization is renewed every year.
Article 160
- Amended The president, board members, general manager, and assistant general manager shall not have any interest in any company, association, syndicate, or other group that engages in operations intended to influence the prices of the stock exchange related to the securities issued by the company, regardless of their type.
Article 161
- Amended At the end of the first six months of the fiscal year, the board members must prepare the interim financial statements for that period. They must also organize the financial statements referred to in Article 101 of this law at the end of the year.
Article 162
- Amended The financial statements must be clear. Any change from year to year in the method of their preparation or presentation must be disclosed in the notes accompanying the audited financial statements.
Article 163
- Amended In addition to the financial statements referred to in Article 101 of this law, the board of directors must organize a report on the company's status and activities during the ended year to present to the shareholders fifteen days before the date of the general assembly meeting. The board of directors' report must clearly and accurately include the following topics: - The company's status and activities during the ended year. - The results of these activities. - The progress made and the challenges faced. - The expected development of the company's status. - Indication of expected risks. - Significant operations that occurred between the end of the year and the date of the general assembly meeting.
Article 164
- Amended The board of directors invites the shareholders to hold general assemblies.
Article 165
- Amended The board of directors must establish a reserve by deducting ten percent of the net profits after deducting previous losses until the reserve amount equals one-third of the company's capital.
Article 166
- Amended The board members and the general manager are liable even to third parties for all acts of fraud and any violation of the law and the company's bylaws. The lawsuit that the injured party is entitled to file is an individual lawsuit and cannot be stopped by a vote of the general assembly that exonerates the board members and the general manager.
Article 167
- Amended The persons mentioned in Article 166 are also liable to the shareholders for their administrative errors. In general, the board members and the general manager are not liable for their administrative errors to third parties. However, in the event of the company's bankruptcy and a shortfall in assets, the court may, at the request of the bankruptcy trustee, the public prosecutor, or on its own initiative, decide that the company's debts are borne by the board members and/or the general manager or any other person entrusted with managing or supervising the company's affairs, including the auditors. The court determines the amounts for which they are liable and whether they are jointly liable. To avoid this liability, they must prove that they managed and supervised the company's affairs with the care of a diligent and effective professional. If the board of directors separates the roles of the chairman and the general manager, the chairman is only liable in case of a violation of the law or the company's bylaws.
Article 168
- Amended The right to file a lawsuit against the chairman and board members and the general manager based on the first paragraph of the previous article belongs to the company. If the company neglects this right, any shareholder may sue on its behalf to the extent of their interest in the company.
Article 169
In order to grant exoneration, it must always be preceded by the presentation of the company's accounts and the auditors' report. Such exoneration only covers matters that the general assembly was able to know.
Article 170
- Amended Liability may be either individual, pertaining to one board member or the general manager, or joint among all of them. In this case, they are all jointly liable for compensation unless a group of them objected to the decision taken against them and recorded their objection in the minutes. The final distribution of liability among those responsible is according to each one's share in the committed error.
Article 171
- Amended The liability lawsuit, whether filed by a shareholder or a third party, is barred after five years from the date of the general assembly meeting where the members rendered an account of their management.
Part Second Auditors
Article 172
- Amended The constituent assembly, followed by the ordinary assemblies, shall appoint one or several auditors, and they may not continue in their position for more than one year. However, their appointment can be renewed for a maximum of five consecutive years.
Article 173
- Amended A shareholder or a group of shareholders representing at least ten percent (10%) of the company's capital may request the president of the primary chamber, within whose jurisdiction the company's headquarters is located, to appoint an additional auditor. This auditor is to be chosen from the court's accounting experts and shall have the same authority, with fees not exceeding those set for auditors appointed according to Article 172.
Article 174
- Amended The auditors shall audit the financial statements stipulated in Article 101 of this amended law, prepared by the board of directors, to express their opinion on their accuracy. Their report must include references to instances of non-compliance by the company with its regulations and applicable laws and regulations. The board of directors and the general manager must provide the auditors with all necessary information, documents, papers, instruments, and accounting records to complete the audit procedures and tasks at any time during the year. The board of directors must provide the auditors with the financial statements stipulated in Article 101 of this law at least sixty days before the general assembly convenes.
Article 175
- Amended The auditors shall submit their report on the financial statements to the general assembly for approval. If they do not submit this report, the decision of the general assembly to approve the statements shall be void.
Article 176
- Amended The auditors must call the general assembly whenever the board of directors fails to do so in the cases specified by law or the company's regulations. They also have the right to call it whenever they deem it beneficial. Moreover, they must call the general assembly if requested by a group of shareholders representing one-fifth of the company's capital.
Article 177
- Amended Auditors may not have any direct or indirect interest with a group aiming to influence the prices of any category of the company's securities. Furthermore, auditors may not have interests outside the scope of their mandate, especially through consultancy contracts of any kind, (with the company or with a shareholder, a legal entity, or a shareholder or group of shareholders owning ten percent or more of the company's capital).
Article 178
- Amended Auditors shall be liable either individually or jointly, even to third parties, whenever they commit an error in auditing, with the statute of limitations being five years.
Part Third General Shareholders' Meetings
Article 213
The provisions related to the rights of third parties in the event of capital reduction apply to any decision involving merger or consolidation.
Article 179
The general shareholders' assemblies are the founding assembly, ordinary assemblies, and extraordinary assemblies.
Article 180
The right to convene ordinary and extraordinary assemblies primarily belongs to the board members. As for the founding assembly, the right to convene it belongs to the founders. The commissioners-auditors may present themselves in place of the board members in the cases mentioned above.
Article 181
- Amended Shareholders who cannot attend the assembly may appoint a representative on their behalf, provided these representatives are themselves shareholders, unless the bylaws allow for these representatives to be non-shareholders, except for the legal representatives of those lacking capacity. The company's bylaws may, within the framework of calculating the majority and quorum in general assembly meetings of shareholders, consider shareholders who participate in meetings via remote audio-visual communication technology or other technical means, whose conditions are determined by a decision issued by the Minister of Justice, as present at the meeting, provided that the identity of the connected member is verified, and the safety, continuity, and reliability of the connection and the actual participation of the connected member in the discussions are ensured, with the company's bylaws specifying the mechanism to be adopted in this context. The content of the remote communication must be recorded in all general assembly sessions, so that the recordings are considered an integral part of the assembly's minutes and are kept with it.
Article 182
- Amended An attendance sheet is organized, listing the names of the attending shareholders, representatives, and participants via remote communication means, if any, the number of shares each owns, and the number of votes associated with these shares. This sheet is placed at the company's headquarters and may be reviewed by anyone who proves they are a shareholder.
Article 183
- Amended An office is established consisting of at least a president and a secretary. The office members must be personally present.
Article 184
The assembly may not discuss matters not listed on the agenda, except for unexpected and urgent matters that arise during the meeting.
Article 185
Every shareholder, regardless of the type of shares they own, has the right to participate in voting even if they only hold a temporary certificate.
Article 186
- Amended Subject to the provisions regarding registered shares noted in Article 117, each shareholder has a number of votes equivalent to the shares they own or represent without limitation unless the company's bylaws explicitly state otherwise, in which case the limitation must be uniform for all shares regardless of their category.
Article 187
- Amended A shareholder may not vote for themselves or for those they represent when the matter involves a benefit to be granted to them or a dispute between them and the company if the assembly makes a decision regarding this dispute.
Article 188
The representatives of bondholders attending the assembly do not have the right to vote in the discussions.
Article 189
If a single shareholder requests a secret ballot, it becomes mandatory for all matters of a personal nature, such as the dismissal of board members or holding them accountable.
Article 190
- Amended If the attending shareholders find their information on the matters presented for discussion insufficient, the meeting is postponed for at least eight days and no more than fifteen days, provided that a quarter of the assembly members request this postponement.
Article 191
The office members must draft the session minutes and sign them with their signatures.
Article 192
- Amended Decisions made according to the procedures and observing the quorum and majority conditions specific to each general assembly, without fraud or abuse of power, are binding on all shareholders, including those absent and dissenting.
Article 193
- Amended The discussions of the founding assembly are not legal unless the number of shareholders composing it represents at least two-thirds of the company's capital. If this quorum is not met, a new assembly can be convened based on an invitation published in the official gazette, an economic newspaper, and a local daily newspaper twice, one week apart. The invitation mentions the agenda of the previous assembly and the results it yielded, and the discussions of this second assembly are legal if the number of shareholders composing it represents at least half of the company's capital. If this quorum is still not met, a third assembly can be convened, which then only requires representing at least one-third of the company's capital.
Article 194
- Amended Regarding the investigation of in-kind contributions, the quorum must be calculated based on the number of shares subscribed or owned by shareholders, regardless of the in-kind contributors.
Article 195
- Amended In the assemblies mentioned in Articles 193 and 194, decisions are made by a two-thirds majority of the votes of the attending or represented shareholders. In-kind contributors do not participate in decision-making regarding the investigation of these contributions.
Article 196
The ordinary assembly is held annually after the end of the fiscal year to decide on the accounts of the board members, distribute profit shares, appoint new commissioners for auditing, and appoint board members upon the expiration of their mandate. It can also be held during the fiscal year in the event of unforeseen circumstances, provided its purpose is not to amend the company's bylaws.
Article 197
- Amended All shareholders and bondholders have the right to review at the company's headquarters or through a specific electronic means adopted by the company: - The documents specified in items 1 to 5 of Article 101 of this law. - The list of shareholders. Interested parties may take or request copies of all the aforementioned documents at their own expense. The company is not entitled to charge for delivering these copies except for the fees determined by a tariff decided by the Minister of National Economy.
Article 198
- Amended The ordinary general assembly must consist of shareholders representing at least one-third of the company's capital. If this quorum is not met, a second assembly is convened, and its discussions are legal regardless of the portion of the company's capital it represents.
Article 199
- Amended In all cases where there is no contrary provision, decisions in ordinary general assemblies are made by an absolute majority of the votes of the shares of the shareholders present, represented, or participating remotely, who properly constitute the assembly.
Article 200
Extraordinary assemblies discuss the amendments intended to be introduced to the company's bylaws.
Article 201
- Amended Extraordinary assemblies, while observing the provisions of Article 80 and the following rules, may amend the bylaws in all its provisions provided that they do not change the nationality of the company, increase the obligations of the shareholders, or affect the rights of others.
Article 202
- Amended Regarding decisions to change the company's purpose or form, the legal quorum must always represent at least three-quarters of the company's capital.
Article 203
Regarding other permissible amendments, the legal quorum in the three consecutive assemblies convened in the manner of the founding assembly must represent two-thirds of the capital in the first assembly, half in the second, and one-third in the third.
Article 204
- Amended Decisions in extraordinary general assemblies are made by a two-thirds majority of the votes of the shares of the shareholders present, represented, and participating remotely.
Article 205
- Amended The company's capital cannot be increased unless the full value of the previous capital has been paid in accordance with Article 119 of this law, under penalty of nullity of the capital increase. In the event of a usufructuary and a bare owner on a single share, the bare owner has the right to subscribe to the capital increase, unless the usufructuary and the bare owner have agreed otherwise before the decision to increase the company's capital and have informed the company of their agreement in accordance with the provisions of Article 116 of this law.
Article 206
- Amended The legal rules related to the establishment of joint-stock companies must be observed concerning the newly issued shares. The same penalties related to the nullification of the capital increase, fines, and the responsibility of the chairman and members of the board of directors, the general manager or general managers in office at the time, and the shareholders who did not obtain proper approval for their contributions, as well as the auditors and experts, apply.
Article 207
If new shares are subscribed by people other than the old shareholders despite the preferential right given to them, and the company has a reserve fund, the mentioned shares are issued at a price higher than their nominal value, with the price increase corresponding to the participation in the reserve fund.
Article 208
A capital reduction cannot be decided except while preserving the rights of others. Therefore, the decision of the general assembly to reduce cannot be executed unless it is published in the official gazette and creditors do not object within a period of three months. If an objection occurs, the capital reduction is postponed until the court decides whether this reduction harms or does not harm the rights of others.
Article 209
Members of the board of directors are responsible for any illegal reduction of capital carried out by the company purchasing its own shares and paying for them with money taken from the capital or the legal reserve.
Article 214
- Amended Based on the legal rules related to the formal conditions that must be observed in the discussions of general assemblies, any decision contrary to these conditions is void whenever it is proven that this violation actually corrupted the resulting outcome. Anyone with standing and interest has the right to invoke this nullity before the competent authority. The nullity is removed by correcting the discussions or by the passage of one year from the day the assembly was held for shareholders and from the publication of the decision in the commercial register for non-shareholders.
Article 215
Those who fraudulently create or attempt to create an incorrect majority in a general assembly of shareholders or bondholders, especially those who present themselves as owners of securities belonging to people who cannot vote or induce others to promise them special benefits to vote in a certain way or abstain from voting, or use power purchased with money or any unlawful means, are subject to fraud penalties while retaining the right to compensation for damages. Subordinate interveners are punished with the same penalties.
Chapter Fourth On the Dissolution of Joint Stock Companies
Article 216
- Amended Joint-stock companies are dissolved upon the expiration of their designated term or upon the completion of the project for which they were formed, or if it becomes impossible to complete it. They are also dissolved by the will of the partners expressed in a general meeting under the conditions outlined in Articles 202 and 204, as well as in all special cases stipulated in the statute. If the company loses three-quarters of its capital, the board members must convene an extraordinary general meeting to decide whether the situation requires dissolving the company before its term, reducing the capital, or taking other appropriate measures.
Article 217
- Amended In any case, if the board members neglect to convene the meeting or if it cannot be formed due to lack of quorum, or if the meeting refuses to dissolve the company, each shareholder retains the right to resort to the competent court to take appropriate measures or dissolve the company.
Article 218
The decision taken, whatever it may be, must be published.
Article 219
Liquidation is primarily conducted according to the rules stipulated for partnerships.
Article 220
- Amended If the liquidators are not appointed in the company's statute, they are appointed by the ordinary general meeting unless the intention is to dissolve the company before its term, in which case they are appointed by the extraordinary general meeting at the same time. If the general meeting does not appoint the liquidators, their appointment is then referred to the competent court upon the request of any interested party.
Article 221
The auditors, joined by the expert appointed by the court, remain in their positions and then oversee the liquidation.
Article 222
- Amended The liquidators receive the accounts of the administrative actions taken by the board members and the general manager from the approval of the last budget by the general meeting to the commencement of the liquidation, and they either approve them or present the issues that appear to them to the competent court.
Article 223
- Amended If the liquidation period exceeds one year, the liquidators must prepare and publish the annual budget.
Article 224
- Amended After the completion of the liquidation activities, the liquidators prepare the final budget, in which they determine each shareholder's share in the distribution of the company's assets.
Article 225
- Amended The auditors prepare a report on the accounts submitted by the liquidators, which is then approved by the ordinary general meeting, deciding to discharge the liquidators or objecting to the accounts, in which case the dispute is referred to the competent court.
Title Fourth On Limited Partnerships
Article 226
A partnership en commandite that operates under a trade name includes two categories of partners: The first category is the general partners who alone have the right to conduct its administrative affairs and are personally and jointly liable for the company's debts. The second category is the limited partners who contribute capital and are only liable to the extent of their contribution.
Article 227
Partnerships en commandite are of two types: - Simple partnership en commandite, - Joint-stock partnership en commandite.
Article 228
A partnership en commandite is declared to the Republic under a trade name that includes only the names of the general partners. If there is only one general partner, the words "and partners" may be added to his name. If a limited partner allows his name to be included in the company's name, he becomes a general partner towards any third party acting in good faith.
Article 229
The general partners, whether all of them manage the company's affairs or one or several of them manage on behalf of all, are subject to the same legal system that applies to members of a general partnership.
Article 230
A limited partner is not allowed to intervene in the management of the company's affairs towards third parties, even if his intervention is based on a power of attorney. If this prohibition is violated, he becomes jointly liable with the general partners for obligations arising from his administrative actions, and the liability imposed on him may be limited to the results of the actions he intervened in or may extend to all the company's debts in proportion to the number and seriousness of those actions. However, monitoring the work of the managers, providing opinions and advice to them, and authorizing them to perform actions beyond their authority are not considered acts of intervention.
Article 231
A simple partnership en commandite is subject to the rules established for the formation and dissolution of general partnerships, even concerning the limited partners.
Article 232
In joint-stock partnerships en commandite, the capital is divided into shares, and the limited partner is subject to the legal system applicable to shareholders in joint-stock companies.
Article 233
Joint-stock partnerships en commandite, regardless of their subject, are subject to commercial law and its customs.
Article 234
The legal rules applicable to joint-stock companies apply to the formation and operation of joint-stock partnerships en commandite.
Article 235
All obligations imposed by law on the board members of a joint-stock company apply to the managers of a joint-stock partnership en commandite.
Article 236
- Amended (Decree-Law No. 304 issued on December 24, 1942, and its amendments) The number of supervisory commissioners must be at least three, including the accountant appointed by the court president by decision. They cannot be chosen from the general partners. They meet as a board whenever required by the supervision and investigations they must conduct. The term of the supervisory board is determined in the company's bylaws, provided that the first board is appointed for only one year.
Article 237
All decisions of the general assemblies, except those related to the approval of administrative actions, imply the personal consent of the general partners according to the rules specified in the company's bylaws.
Title Fifth On Companies with Variable Capital (Cooperative Companies)
Article 238
Every company may include in its bylaws a provision stating that its capital is subject to change, in which case it shall be subject to the provisions of the following articles in addition to the general rules applicable to it according to its specific form. This provision must be published.
Article 239
When a company has capital that is subject to change, its capital may be increased either by accepting new partners or by new amounts paid by the partners, and it may be decreased by the partners reclaiming all or part of what they have contributed. The increase and decrease of capital are carried out with complete freedom and are exempt from publication procedures unless the company's bylaws state otherwise.
Article 240
Article 240 of the Commercial Law has been repealed.
Article 241
The company's bylaws shall specify an amount below which the capital may not decrease due to the withdrawal of some partners or their exit. This amount may not be less than one-fifth of the company's capital, and this provision of the company's bylaws is subject to publication procedures.
Article 242
A provision may be included in the company's bylaws allowing the general assembly to decide, by the specified majority for amending the company's bylaws, to expel one or several partners without depriving them of their acquired rights in the relevant reserve fund.
Article 243
A partner who leaves the company, either by their own will or based on a decision of the general assembly, remains liable for three years to the partners and third parties for all obligations that existed at the time of their departure.
Article 244
If the company takes the form of a joint-stock company, the shares must remain nominal even after their full price has been paid. The company's bylaws may grant the general assembly or the board of directors the right to object to the transfer of these shares. However, it is required that this right is not misused.
Article 245
Regardless of the form of the company, it is not dissolved by the withdrawal of a partner, their bankruptcy, incapacity, loss of general capacity, or death, but remains in effect among the remaining partners.
Article 246
This law applies to agricultural cooperative companies unless the provisions of their specific law contradict it.
Title Sixth On Partnership Companies
Article 247
Partnership companies are distinguished from other commercial companies by the fact that their existence is confined to the contracting parties and they are not intended for disclosure to third parties.
Article 248
The agreements made between the concerned parties freely determine the mutual rights and obligations between the partners and the sharing of profits and losses among them, while maintaining the application of the general principles related to the company contract.
Article 249
The existence of the aforementioned agreements can be proven by all means of evidence acceptable in commercial matters.
Article 250
Partnership companies are not subject to the publication procedures imposed on other commercial companies.
Article 251
A partnership company is not considered a legal entity.
Article 252
There is no legal relationship for third parties except with the partner with whom they contracted. However, a partnership company that presents itself to third parties as such may be treated as an actual company in relation to them.
Article 253
The company may not issue shares or bonds that are transferable or negotiable for the benefit of the partners.
Title Seventh On Limited Liability Companies (added by Legislative Decree 35/67
Article 253
* Added Chapter Seven: Limited Liability Companies (Article 1 to Article 35) pursuant to Legislative Decree 35/1967
Title Eighth On Certain Financial Crimes
Article 253
Repeated 1 An eighth chapter is added to the second book of the Commercial Law as follows: On certain financial crimes
Article 253
Repeated 1: Shall be punished by imprisonment from three months to three years and a fine ranging from twenty-five to one hundred times the official minimum wage, or by one of these penalties, the chairman and members of the board of directors, managers, and authorized signatories who intentionally harm the company in bad faith: A- By using the company's funds or credit capabilities in a way that harms its interests for personal purposes. B- By working for the benefit of another company, institution, or individual in which any of them has a direct or indirect interest.
Article 253
Repeated 2 Shall be punished by imprisonment from three months to three years and a fine ranging from twenty-five to fifty times the official minimum wage, or by one of these penalties, the chairman and members of the board of directors, managers, and authorized signatories who intentionally, with the aim of concealing the true situation of the company, organize and publish false financial statements. Auditors who intentionally conceal these violations in their reports shall be punished with the same penalty.
Article 253
Repeated 3
Article 253
Repeated 3: The three-year statute of limitations for prosecution of the crimes stipulated in the previous articles runs from the date of their occurrence if they are apparent, and from the date of their discovery if they have been concealed.
Book Third On Commercial Contracts in General and on Certain Commercial Contracts in Particular
Title First General Provisions
Article 254
The proof of commercial contracts is not primarily subject to the exclusive rules set for civil contracts. It is permissible, while retaining exceptions resulting from specific legal provisions, to prove the aforementioned contracts by all means of proof that the judge deems necessary to accept according to custom or circumstance.
Article 255
In a commercial context, it is permissible to prove the date of private manuscripts concerning third parties by all means of proof. The date of negotiable instruments and the date of their endorsement are considered valid until proven otherwise.
Article 256
Debtors together under a commercial obligation are considered jointly liable for this obligation, and this presumption applies to guarantors of the commercial debt.
Article 257
The legal interest rate in a commercial context is set at nine percent.
Article 258
The proof of a fair price and the prevailing price relies on stock exchange prices and quotations unless there is an opposing agreement.
Article 259
No commercial obligation intended for performing an act or service is considered contracted gratuitously. If the parties do not specify a fee, commission, or brokerage, the known fee in the profession is due.
Article 260
In a commercial context, the court is not entitled to grant extensions for payment except in exceptional circumstances. The party that requested the court to annul the contract cannot subsequently request its execution. However, the party that requested execution is entitled to change it to a request for annulment. Fulfilling obligations after filing an annulment lawsuit is not acceptable.
Article 261
Failure to execute one of the obligations in contracts with successive obligations entitles the party who fulfilled their obligations to request the annulment of the contract concerning all unfulfilled obligations. This does not prevent their right to claim compensation for damages.
Article 262
In a commercial context, the right to file lawsuits lapses after ten years unless a shorter period is specified. If a decision containing a judgment is issued, the lawsuit resulting from the adjudicated case lapses in all cases after ten years.
Article 263
Sales, loans, transport contracts, insurance contracts, and all contracts not governed by specific rules under this law are subject to the Law of Obligations and customs. The specific rules related to public transport projects also apply to transport contracts. Stock exchange operations, whether on securities or goods, are subject to the specific rules of the different types of contracts they adopt or evolve into, and to the specific regulations of commercial exchanges. Contracts related to maritime trade are subject to specific rules stipulated by the Maritime Trade Law.
Title Second On Commercial Pledge
Article 264
The commercial mortgage subject to the rules specified below is the one by which the commercial debt is secured.
Article 265
Except for the following restrictions, the mortgage is proven by all means of evidence that the court deems necessary to accept. The mortgage of a registered bond is established by a transfer transaction for security purposes, recorded in the registers of the place that issued the bond and on the bond itself. As for the promissory note, the mortgage is established on it by an endorsement that includes the phrase "value given as security" or another phrase with the same meaning. As for ordinary debts owed to a specific person, establishing a mortgage on them requires in all cases a written contract with a valid date, notified to the debtor whose debt is mortgaged.
Article 266
The mortgage contract does not produce an effect as a mortgage if the mortgaged item remains in the possession of the debtor, appearing to others as if it is still part of his free assets, enabling him to gain new credit for borrowing. Instead, the mortgaged item must be delivered to the creditor and remain in his possession or in the possession of a third party who keeps it on his behalf. It is sufficient for the transfer of possession to be considered complete if the keys to the premises containing the mortgaged goods or items are delivered locked, provided that this premises does not bear a sign with the debtor's name, or if a document corresponding to those items is delivered in accordance with commercial custom.
Article 267
The mortgagee must deliver to the debtor, upon request, a receipt document specifying the nature, type, quantity, weight, and all distinguishing marks of the items delivered as collateral.
Article 268
If the mortgage is on fungible items or securities, the mortgage contract remains valid even if these items or securities are replaced with others of the same type. If these items or securities are non-fungible, the debtor also has the right to retrieve and replace them with the creditor's consent, provided that the original mortgage contract stipulated this right.
Article 269
The creditor must exercise on behalf of the debtor all rights attached to the items or securities delivered to him as collateral. If what was received are financial credit securities granting the right of choice, the debtor who wishes to exercise his right of choice must provide the necessary funds to the creditor at least two days before the specified deadline for the choice.
Article 270
If the item given as security is securities not fully paid for, the debtor, if called upon to pay, must provide the money to the creditor at least two days before maturity, otherwise, the mortgagee may proceed to sell the securities.
Article 271
In the event of non-payment at maturity, the creditor has the right - after eight days from a simple notification sent to the debtor and to the third party providing the mortgaged funds if any - to refer to the head of the enforcement department to arrange for the sale of the mortgaged items by public auction, and the creditor collects his debt from the price with preference. Any clause in the mortgage contract that allows the creditor to take ownership of the mortgaged item or dispose of it without the aforementioned procedures is considered void.
Title Third On Commercial Agency, Mediation, and Brokerage
Chapter First On Commercial Agency
Article 272
The agency is considered commercial when it involves commercial transactions. In particular, this contract is called a brokerage contract and is subject to the provisions of the following chapter when the agent must act in his own name or under a trade name on behalf of the principal. When the agent must act in the name of his principal, his rights and obligations are subject to the provisions of the eighth book of the second section of the Code of Obligations.
Article 273
In a commercial context, the agent is entitled to remuneration in all cases unless there is a contrary provision. If this remuneration is not determined by agreement, it is set according to the professional tariff or according to custom or circumstance.
Article 274
A commercial agency, even if it contains an absolute mandate, does not permit non-commercial acts except by explicit provision.
Article 275
An agent who has received instructions only regarding part of the work is considered to have free rein in the remaining part.
Article 276
The agent must pay interest on the funds belonging to the principal from the day he was obliged to deliver or deposit them according to the principal's order.
Article 277
When the contract simultaneously includes the characteristics of an agency and the essential elements of an employment contract, as usually occurs in contracts established between a merchant and his sworn agents, local representative, answering representative, agent, and branch or agency manager, the rules of the employment contract apply to the merchant's relations with his agent, and the rules of agency apply concerning third parties.
Article 278
Commercial representatives are sometimes considered as employees and sometimes as ordinary agents depending on whether the contract indicates their connection or independence in work. However, they are entitled in any case, upon termination of the contract, even if this termination is not due to arbitrary reasons, to benefit from the notice period established by custom, provided that commercial representation is their sole profession. If the commercial representative is an agent for multiple commercial houses and has offices, staff, management, and general expenses that allow him to be considered a true project owner for commercial representation, he himself becomes a merchant.
Chapter Second On Mediation
Article 279
The broker is the one who undertakes to contract in his own name but on behalf of his principal for the sale, purchase, and other commercial transactions in exchange for a commission or financial consideration. The rules of agency apply to the brokerage contract, taking into account the provisions outlined in this chapter.
Article 280
The broker who contracts in his own name acquires the rights arising from the contract and is directly obligated towards the persons he contracted with as if the work concerned him personally. These persons have the right to raise all defenses arising from their personal relationship with him, and they do not have the right to sue the principal directly. As for the relations between the principal and the broker or his creditor, the rules of agency apply.
Article 281
The broker must personally execute the orders given to him unless he is authorized by agreement or custom to appoint a third party, or if there are circumstances that necessitate such delegation. In these cases, the principal has the right to sue directly the person appointed by the broker on his behalf.
Article 282
The broker does not have the right to appoint himself as a party against his principal except with his consent.
Article 283
If the broker lends or advances to a third party without the principal's consent, he bears the risks of his actions.
Article 284
Except in the case of unauthorized advances, the broker is not responsible for non-fulfillment or non-performance of other obligations by those he contracted with unless he guaranteed them or the commercial custom in the place where he resides dictates so. The broker who guarantees those he contracts with is entitled to a special commission called a trust commission, which is determined, in the absence of an agreement, according to the custom of the place where the broker contracted.
Article 285
Subject to the provisions of the previous article, the commission is due upon the conclusion of the transaction, even if the third party does not fulfill the obligations he undertook, unless the failure to do so is due to an error committed by the broker. The commission is also due if the completion of the transaction is prevented by a reason attributable to the principal. In transactions that are not completed for other reasons, the broker is only entitled to claim compensation for his efforts as determined by the custom of the place.
Article 286
The commission is calculated on the gross value of the transaction, including additional expenses, unless otherwise agreed.
Article 287
The broker has the right to recover all expenses, advances, and costs incurred for the benefit of the principal, along with their interest. He also has the right to include in the account compensation for storage and transportation expenses, but he cannot claim wages for his employees.
Article 288
Every broker has a lien on the value of the goods sent to him, stored, or deposited, which arises upon their sending, storage, or deposit, to secure all loans, advances, and payments made, whether before receiving the goods or while they are in his possession. However, this lien only exists if the condition stipulated in Article 266 of this law is met. The broker's privileged debt includes the principal amount with interest, commissions, and expenses. If the goods have been sold and delivered on behalf of the principal, the broker has the right to collect his debt from their price before the principal's creditors.
Article 289
The principal who cancels the brokerage or the broker who abandons it without a legitimate reason is liable for compensation for damages.
Article 290
The forwarding broker who undertakes to send or return goods on behalf of his principal for a fee and in his own name is considered a broker but is subject to the provisions applicable to the carrier regarding the transportation of goods.
Chapter Third On Brokerage
Article 291
Brokerage is a contract in which a party called the broker commits to guide the other party to a means of concluding an agreement or to act as an intermediary in contract negotiations, in return for a fee. The rules of agency generally apply to brokerage.
Article 292
If the broker's fee is not determined by agreement or by an official tariff, it is set according to custom or the judge estimates its value based on circumstances. If it appears that the agreed fee is disproportionate to the nature of the case and the efforts it requires, the judge has the right to reduce it to become a fair fee for the service rendered.
Article 293
The broker is entitled to the fee when the information provided or the negotiation conducted leads to the conclusion of the agreement. If the agreement is concluded under a suspensive condition, the fee is not due until the condition is fulfilled. If the reimbursement of expenses incurred by the broker is stipulated, they are due even if the agreement is not concluded.
Article 294
The broker loses all rights to the fee and the reimbursement of expenses incurred if he acts in the interest of the third contracting party in violation of his obligations or if he induces this person to promise him a fee in circumstances contrary to the rules of good faith.
Article 295
The broker is not entitled to mediate for persons known for their insolvency or if he is aware of their incapacity.
Article 296
He must record all transactions concluded through him with their specific terms and conditions, preserve all related documents, and provide an identical copy to any of the contracting parties who request it. In sales concluded according to a model, he must retain the model until the transaction is completed.
Article 297
Intermediation and brokerage transactions in stock exchanges and commodity exchanges are subject, as needed, to special legislation.
Title Fourth On Current Account
Article 298
A current account is formed whenever two persons agree, whose circumstances require them to exchange the delivery of funds, to convert their debts into simple items of lending and borrowing, from which a single account is composed, so that only the final balance upon closing this account becomes a debt due and ready for payment.
Article 299
The scope of the current account depends on the will of the parties; they may make it inclusive of all their transactions or only a specific type thereof. The current account may be open for both parties or for one party only, and in the latter case, one party is not obliged to advance money to the other unless that party has sufficient funds. In no case may this account settle on a positive balance in its favor.
Article 300
The existence of the current account does not negate the right to receive a commission and recover expenses related to the transactions of the current account, which are recorded in the account unless there is an agreement to the contrary.
Article 301
Payment by commercial paper is not considered made except on the condition of receiving its value unless there is an agreement to the contrary. If the value of the paper is not paid on its due date, the recipient has the right, while retaining it as security and exercising the rights attached to it, to record its value in the account of the issuer. In the event of the issuer's bankruptcy, the recipient, despite any contrary agreement, may not record it in the account until the due date has passed and non-payment is proven. If papers are recorded in this manner, the recipient must reduce the amount of their claims in the bankruptcy in proportion to the payments made by the signatories of those papers.
Article 302
Payments necessarily yield interest for the benefit of the issuer against the recipient, calculated at the legal rate if not specified by contract or custom.
Article 303
Debts owed to one of the parties, if entered into the current account, lose their specific characteristics and individual existence, and thus cannot be separately settled, offset, litigated, executed, or individually extinguished by the passage of time. Personal or real securities connected to debts entered into the current account are nullified unless there is an agreement to the contrary between the parties.
Article 304
Neither party is considered a creditor or debtor to the other before the conclusion of the current account, as the suspension of this account alone determines the state of legal relations between them and necessarily results in the total offset of all account items of lending and borrowing, determining the creditor and debtor.
Article 305
The account is suspended and settled at the due dates specified by contract or according to local custom, otherwise at the end of every six months. The remaining balance constitutes a clear and due debt, accruing interest from the day of settlement at the rate specified in the current account if this balance is transferred to a new account, otherwise at the legal rate. Claims related to correcting the account due to error, omission, repetition, or other corrections must be filed within six months.
Article 306
The contract ends at the time specified by agreement, and if no term is agreed upon, the contract ends at the will of one of the parties, and also ends upon the death of one of them, loss of capacity, or bankruptcy.
Title Fifth On Banking Operations
Article 307
The bank that receives a sum of money as a deposit becomes the owner of it and must return it in an equivalent value in one or several installments at the first request of the depositor or according to the terms of deadlines or prior notice specified in the contract. Proof must be established with written documents for all operations related to the deposit or its return. Interest is due, if necessary, starting from the day following each deposit unless it is a holiday, until the day preceding the return of each amount unless there is an agreement to the contrary.
Article 308
If what is deposited in the bank is securities, the ownership of these securities remains with the depositor unless it is proven that the intention is otherwise. This intention is presumed if the depositor has granted the bank in writing, without reservation, the right to dispose of those securities or has acknowledged the bank's right to return securities of the same kind. The rules of agency apply to bank deposits if the bank undertakes the management of the deposited securities in return for a commission.
Article 309
Deposits placed in safe deposit boxes or compartments thereof are subject to the rules of leasing of goods. The bank is responsible for the safety of the rented boxes.
Article 310
In contracts for opening a line of credit, the credit opener is obligated to place some funds at the disposal of the trusted party, who has the right to use them in one or successive installments according to their needs within a specified period. What the trusted party repays or returns during the contract period is added to the amount placed at their disposal unless there is an agreement to the contrary.
Article 311
The credit opener may terminate the contract if the trusted party becomes insolvent or lacks solvency at the time of contracting without the knowledge of the credit opener. If there is a significant deficiency in the collateral, whether real or personal, provided by the trusted party, the credit opener has the right to request additional collateral, reduce the credit amount, or close it as the situation requires.
Article 312
If the collateral provided is a mortgage, the registration of the mortgage taken at the time of the contract secures, from its date, all subsequent advances made based on the credit opening contract.
Article 313
If the bank credit is allocated for the benefit of a third party and the bank confirms this credit to its beneficiary, it cannot thereafter be revoked or modified without their consent, and the bank becomes directly and finally obligated towards them to accept the intended documents and payments. The bank has the right to recover the amounts it paid and the expenses it incurred to fulfill its mandate, along with the agreed interest or legal interest if there is no agreement, starting from the day of payment. It also has the right to collect a commission.
Article 314
Banking operations not mentioned in this section are subject to the provisions of the Obligations Law related to the various contracts arising from the mentioned operations or the contracts under which these operations fall.
Book Fourth On Commercial Instruments and Other Negotiable Instruments
Title First The Bill of Exchange or Drafting the Bond
Chapter First
Article 315
In the creation and form of a bill of exchange: A bill of exchange contains: 1) The mention of the word 'bill of exchange' in the text of the bill itself in the language used in writing this bill. 2) The explicit mandate to pay a certain amount. 3) The name of the person who must pay (the drawee). 4) The statement of the due date. 5) The statement of the place where payment must be made. 6) The name of the person to whom payment must be made or to whose order payment must be made. 7) The statement of the date and place where the bill was created. 8) The signature of the creator of the bill (the drawer).
Article 316
A bill that lacks any of the contents specified in the previous article is not considered a bill of exchange except in the cases specified in the following paragraphs: A bill that does not specify the due date is considered payable upon sight. If there is no specific mention of the place of payment, the place mentioned next to the name of the drawee is considered the place of payment and the place of residence of the drawee at the same time. A bill of exchange that does not mention the place of its creation is considered created in the place mentioned next to the name of the drawer.
Article 317
A bill of exchange may be drawn to the order of the drawer himself and may be drawn on the drawer himself. It can also be drawn for the account of a third person. It may be payable at the residence of a third person, whether in the place where the drawee resides or in another place.
Article 318
The drawer may, in bills payable upon sight or after a certain period from sight, stipulate the payment of interest on the amount, but this condition is considered void in any other bill of exchange. The interest rate must be specified in the bill, otherwise, this condition is considered void. Interest runs from the date of the bill of exchange unless another date is specified.
Article 319
A bill of exchange in which the amount is written both in words and in figures is valid when there is a discrepancy between the two values, according to the amount written in full words. However, a bill in which the value is written multiple times, whether in full words or in figures, is not valid in case of discrepancies except for the lowest amount.
Article 320
If the bill contains signatures of persons not authorized to commit to a bill of exchange, or forged signatures, or signatures of fictitious persons, or signatures that are invalid for any other reason to bind the persons who signed the bill or on whose behalf the bill was signed, this does not affect the validity of the commitment of the other signatories on the bill.
Article 321
Anyone who signs a bill of exchange as an agent for a person without having the authority to represent them is personally liable under this bill and, if he fulfills the payment, he has the same rights that the alleged principal would have obtained. The same applies to an agent who exceeds his authority.
Article 322
The drawer is a guarantor for the acceptance and payment of the bill. He may exempt himself from the guarantee of acceptance, but any clause indicating his exemption from the guarantee of payment is considered void.
Chapter Second On Provisions
Article 323
The provision is made by the drawer or the person who draws the bill on their behalf, and this does not prevent the drawer on behalf of others from remaining personally liable towards the endorsers and the holder of the bill only. The provision exists if the drawee, on the bill's due date, is indebted to the drawer or the person for whom the bill was drawn, with an amount at least equivalent to the value of the bill. The ownership of the provision automatically transfers to the successive holders of the bill.
Article 324
The acceptance of the bill implies the existence of the provision, and this acceptance is proof of it concerning the endorsers. In the case of acceptance or non-acceptance, the drawer alone must, upon denial of the provision's existence, provide evidence that the drawee had the provision on the due date; otherwise, they are liable for its guarantee, even if the protest was made after the expiration of the specified periods.
Chapter Third On Endorsement
Article 325
Every bill of exchange, even if not explicitly drawn "to order," is transferable by endorsement. If the drawer includes the words "not to order" or a similar expression, the bill can only be transferred by ordinary assignment and its effects. The endorsement can be made in favor of the drawee, whether they have accepted the bill or not, or in favor of the drawer or any other liable person, and these persons can re-endorse the bill.
Article 326
The endorsement must be simple and unconditional. Any condition attached to the endorsement is considered null. Partial endorsement is void. An endorsement "to bearer" is considered as a blank endorsement.
Article 327
The endorsement must be written on the bill of exchange or on a paper attached to it (an allonge) and must include the signature of the endorser. It is permissible not to specify the person to whom the endorsement is made or to limit it to the signature of the endorser (blank endorsement). In this latter case, the endorsement is only valid if written on the back of the bill of exchange or on the additional paper.
Article 328
The endorsement transfers all rights arising from the bill of exchange. If the endorsement is blank, the holder of the bill has the right: First - To fill in the blank by placing their name or the name of another person. Second - To re-endorse the bill blank or to another person. Third - To deliver the bill to a third party without filling in the blank and without endorsement.
Article 329
The endorser guarantees acceptance and payment unless otherwise agreed. They can prevent further endorsement, in which case they are not liable for guarantee towards persons to whom the bill is subsequently endorsed.
Article 330
The holder of a bill of exchange is considered its legitimate holder if they prove their right through an uninterrupted series of endorsements, even if the last endorsement is blank. A crossed-out endorsement is considered null in this respect. If a blank endorsement is followed by another endorsement, the signer of this last endorsement is considered the holder of the bill by virtue of the blank endorsement. If the bill of exchange is taken from someone by any incident, the holder who proves their right according to the method outlined in the previous paragraph is not obliged to relinquish the bill unless they acquired it in bad faith or committed a gross error when acquiring it.
Article 331
Persons sued on a bill of exchange cannot raise defenses against the holder based on their personal relationship with the drawer or previous holders unless the holder intentionally acquired the bill to harm the debtor.
Article 332
If the endorsement contains the phrase "value for collection," "for receipt," "by proxy," or other expressions indicating simple agency, the holder of the bill has the right to exercise all rights arising from it but cannot endorse it except by way of agency. In this case, the obligors can only raise defenses against the holder that could be raised against the endorser. The agency contained in the endorsement does not terminate upon the death of the principal or their loss of capacity.
Article 333
If the endorsement contains the phrase "value as security" or "value as pledge" or other expressions indicating security, the holder of the bill has the right to exercise all rights arising from it, but if they endorse the bill, it is considered only as an agency endorsement. The obligors cannot raise defenses against the holder based on their personal relationship with the endorser unless the holder intentionally acquired the bill to harm the debtor.
Article 334
An endorsement made after maturity produces the same effects as an endorsement made before it, but an endorsement made after protest for non-payment or after the expiration of the time set for making the protest only has the effects of an ordinary assignment. An undated endorsement is presumed to have been made before the expiration of the time set for making the protest unless proven otherwise.
Article 335
Orders must not be dated earlier than their actual date; otherwise, this act is considered forgery.
Chapter Fourth On Acceptance
Article 336
Until the date of maturity, the bill of exchange may be presented for acceptance to the drawee at his place of residence, either by the holder of the bill or by any possessor thereof.
Article 337
The drawer has the right to stipulate in any bill of exchange that it be presented for acceptance, with or without a specified period. He may also prohibit the bill from being presented for acceptance unless the bill is payable to a third party or at a place other than where the drawee resides, or if the bill is drawn for a term after sight. Each endorser of the bill has the right to stipulate that it must be presented for acceptance, with or without a specified period, unless the drawer has declared a prohibition on its presentation for acceptance.
Article 338
Bills drawn for a term after sight must be presented for acceptance within one year from their date. However, the drawer may specify a shorter or longer period than this last period. Endorsers may shorten the specified periods.
Article 339
The drawee may request that the bill be presented to him a second time on the day following the first presentation, and the parties concerned cannot invoke the failure to meet this request unless it is mentioned in the protest document. The holder of the bill is not obliged to surrender it to the drawee upon presentation for acceptance.
Article 340
Acceptance is written on the bill of exchange and expressed by the word "Accepted" or another equivalent term and must be signed by the drawee. The mere signature on the back of the bill is considered acceptance. If the bill is payable at a term after sight or must be presented for acceptance within a specified period based on a special provision, the acceptance must be dated on the day it was given, unless the holder of the bill requests it to be dated on the day of presentation. If no date is provided, the holder of the bill may prove this omission by a protest organized within the legal period to preserve his rights of recourse against the endorsers and the drawer.
Article 341
Acceptance is absolute without condition, but the drawee may limit it to a part of the amount. Any other modification to the terms of the bill of exchange made in the acceptance clause is considered a refusal. However, the acceptor is bound by the terms of his acceptance.
Article 342
If the drawer specifies in the bill a place of payment other than the place where the drawee resides without appointing a third person to make the payment, the drawee has the right to appoint such a person upon accepting the bill. If he accepts without this appointment, he is deemed to have committed to payment himself at the place of fulfillment. The drawee, if the bill is payable at his place of residence, has the right to specify in the acceptance clause an address in the same locality for the fulfillment of payment.
Article 343
The drawee's acceptance of the bill obliges him to fulfill payment at the maturity date, and in case of non-payment, the holder of the bill, even if he is the drawer himself, has the right to file a direct lawsuit against the acceptor arising from the bill of exchange, requesting everything that can be claimed in accordance with the provisions of Articles 370 and 371.
Article 344
If the drawee writes the acceptance clause on the bill and then strikes it out before returning it, he is deemed to have refused acceptance, and the striking out is considered to have occurred before the bill was returned unless proven otherwise. However, if the drawee announces his acceptance in writing to the holder of the bill or to any of its signatories, he is bound towards them by the terms of his acceptance.
Chapter Fifth On Custody
Article 345
The payment of the amount of a bill of exchange may be guaranteed in whole or in part by an endorsement. This guarantee is provided by a third party or one of the signatories of the bill.
Article 346
The endorsement is written either on the bill of exchange or on an additional paper, or in a separate document indicating the place where the endorsement was given. It is expressed with the words "valid for endorsement" or another similar phrase and is signed by the endorser. The endorsement is considered to have occurred merely by the endorser signing the back of the bill of exchange, unless the signature belongs to the drawee or the drawer. The endorsement must specify the person for whose account it was given. If not specified, it is considered given for the account of the drawer.
Article 347
The endorser is obligated in the manner that the endorsed is obligated. His obligation is considered valid even if the obligation he guaranteed is void for any reason, except for a defect in form. The endorser who pays the value of the bill of exchange acquires the rights arising from it against the endorsed and against those obligated towards the endorsed under the bill of exchange.
Chapter Sixth On Entitlement
Article 348
The bill may be drawn in the following manners: - At sight. - For a term after sight. - For a term starting from a specific date. - For a specific day. Bills of exchange that are due in a manner other than those mentioned above or have successive maturities are void.
Article 349
A bill of exchange at sight is payable upon presentation and must be presented for payment within one year starting from its date. The drawer may shorten this period or stipulate a longer period. Endorsers may also shorten it. The drawer of a "bill at sight" has the right to require that it not be presented for payment before a specific date. In this case, the presentation period starts from this date.
Article 350
The maturity date of a bill drawn for a term after sight is determined either by the date of acceptance or by the date of protest. If there is no protest, acceptance without a date is considered, with respect to the acceptor, as given on the last day of the period specified for presenting the bill for acceptance.
Article 351
The maturity date of a bill drawn for a month or several months after a specific date or after sight falls on the corresponding date in the month in which payment must be made, and if there is no corresponding date, maturity falls on the last day of that month. If the bill is drawn for a month or several months and a half month after a specific date or after sight, the full months must first be calculated. If the maturity date is specified at the beginning of the month or in the middle (e.g., mid-January or mid-February, etc.) or at the end of the month, this expression means the first day, the fifteenth day, and the last day of the month. The expression eight days and fifteen days does not mean a week or two weeks but a period of eight days or fifteen days that actually elapses. The expression "half a month" means fifteen days.
Article 352
If the bill is due on a specific day in a place where the calendar differs from the calendar of the place where the bill was issued, the maturity date is determined according to the calendar in force at the place of payment. If the bill is drawn between two places with different calendars and is due within a period from a specific date, the corresponding day of the bill's issuance date is taken from the calendar of the place of payment, and then the maturity date is determined. The periods related to presenting bills of exchange are calculated according to the rules outlined in the previous paragraph. However, these rules do not apply if there is a provision in the bill of exchange or if its terms indicate that the intention was to follow different rules.
Chapter Seventh On Payment
Article 353
The holder of a bill of exchange payable on a specific day or within a certain period from a specific date or after sight must present the bill for payment on its due date. Presenting the bill to the clearinghouse is considered as presenting it for payment.
Article 354
The drawee, upon paying the value of the bill, has the right to request its delivery after the payment endorsement is placed on it, and the holder of the bill cannot refuse partial payment. In the case of partial payment, the drawee has the right to request a notation on the bill indicating this payment and to receive a receipt. Any amount paid from the principal value of the bill releases the drawer and the endorser from liability. The holder of the bill must file a protest regarding the remaining amount.
Article 355
The holder of a bill of exchange is not obliged to accept its payment before maturity. If the drawee pays before maturity, he bears the risks of his action. Anyone who pays at maturity is legally discharged unless he has committed fraud or gross negligence, and he must verify the validity of the endorsement sequence, not the authenticity of the endorsers' signatures.
Article 356
If a bill of exchange states that it is payable in a currency not in circulation at the place of payment, its value may be paid in the country's currency according to its rate on the due date, and if the debtor delays, the holder of the bill may choose to request payment in the country's currency either at its rate on the due date or at its rate on the payment date. The value of the foreign currency is determined according to the customary practice at the place of payment, provided that the drawer may stipulate that the value is calculated according to a specific rate in the bill. However, the aforementioned rules do not apply when the drawer stipulates that payment must be made in a specific currency (actual payment condition in foreign currency). If the value of the bill is specified in a currency with the same name at the place of issuance and the place of payment, but its value differs in these places, it is assumed that the agreement is on the currency of the place of payment.
Article 357
If a bill of exchange is not presented for payment on the due date, any debtor has the right to deposit the amount in trust at a bank authorized to accept state deposits, and the expenses and risks are borne by the holder of the bill. The debtor is then only obliged to deliver the deposit receipt in exchange for the delivery of the bill of exchange.
Article 358
Objection to payment is not accepted unless the bill of exchange is lost or its holder is bankrupt.
Article 359
If a bill of exchange not accompanied by acceptance is lost, its owner has the right to prove its payment based on a second, third, or fourth copy, etc.
Article 360
If the lost bill is accompanied by acceptance, it cannot be claimed for payment based on a second, third, or fourth copy, etc., except by a court decision and upon providing a guarantee.
Article 361
If the person who lost the bill, whether accepted or not, cannot present the second, third, or fourth copy, etc., he has the right to request payment of the lost bill and obtain this payment by a court decision if he proves ownership in the records and provides a guarantee.
Article 362
If the payment requested based on the previous two articles is refused, the owner of the lost bill has the right to preserve all his rights with a protest document that must be filed the day after the due date of the lost bill. As for the notices stipulated in Article 367, they must be sent to the drawer and the endorsers within the time limits specified in the mentioned article.
Article 363
The owner of the lost bill, in order to obtain the second copy, must refer to the person who directly endorsed the bill to him. This endorser must assist him in his name and with his diligence towards the direct endorsee. And so from endorser to endorser until reaching the owner of the bill, and the expenses are borne by the owner of the lost bill.
Article 364
The obligation of the guarantee stipulated in Articles 360 and 361 lapses after three years if no request or legal action is filed within this period.
Chapter Eighth On the Action for Non-Acceptance and Non-Payment in Protest and in Renewal of Drawing
Part First Grounds for Inadmissibility and Non-fulfillment
Article 365
The holder of the bill may have recourse against the endorsers, the drawer, and all other obligors: Upon maturity if payment has not been made. He may do so even before maturity: First - If acceptance is refused, whether wholly or partially. Second - If the drawee becomes bankrupt, whether he has accepted the bill or not, or if he ceases to pay, even if his cessation is not declared by a judgment, or if his assets are seized and the seizure remains ineffective. Third - If the drawer becomes bankrupt and the bill is not eligible for acceptance. However, the guarantors sued in the cases mentioned in the last two preceding paragraphs may, within three days of the lawsuit being filed, submit a request to the president of the commercial court in their place of residence for a grace period. If this request is found to be legitimate, the decision will specify the date by which the guarantors must pay the commercial bills referred to, without the grace periods granted in this manner exceeding the specified maturity date. This decision is not subject to objection or appeal.
Article 366
The refusal of acceptance or payment must be evidenced by an official document (protest for non-acceptance or non-payment). The "protest for non-acceptance" must be made within the time limits set for presenting the bill for acceptance. If the bill was presented for the first time on the last day of the period, as in the case provided for in the first paragraph of Article 339, the protest may also be made the following day. The protest for non-payment of a bill due on a specific day or within a certain period from a specific date or from the date of sight must be made on one of the two working days following the bill's maturity date. If the bill is payable at sight, the protest must be drawn up according to the conditions set out in the previous paragraph regarding the protest for non-acceptance. The "protest for non-acceptance" dispenses with the need to present the bill for payment and to make a protest for non-payment. If the drawee ceases to pay, whether he has accepted the bill or not, or if his assets are seized and the seizure remains ineffective, the holder of the bill may not take legal action until he has presented the bill to the drawee for payment and made a protest. If the drawee is declared bankrupt, whether he has accepted the bill or not, or if the drawer of a bill not eligible for acceptance is declared bankrupt, it suffices to present the judgment declaring bankruptcy for the holder of the bill to take legal action.
Article 367
The holder of the bill must send a notice of non-acceptance or non-payment to the endorser and the drawer within four working days following the day of protest or the day of presenting the bill if there is a provision allowing for re-presentation without expense. Each endorser must, within two working days following the day the notice reaches him, inform the endorser to whom he transferred the bill of the notice he received, indicating the names and addresses of the persons who sent the previous notices. This process continues until it reaches the drawer. The time limits mentioned above begin from the date of receipt of the previous notice. When a notice is sent to one of the signatories of the bill according to the previous paragraph, the same notice must be sent within the same period to the guarantor. If one of the endorsers does not provide his address or provides it in an unreadable manner, it suffices to send the notice to the preceding endorser. The person required to send the notice may do so in any form, even by simply returning the bill of exchange. He must prove that the notice was sent within the specified period. The period is considered observed if a letter containing the notice is posted within the mentioned period. Anyone who does not send the notice within the specified period does not forfeit his rights, but he may be liable for any damage caused by his negligence, without the compensation exceeding the amount of the bill.
Article 368
If the drawer, endorser, or guarantor writes on the bill, along with his signature, the phrase "return without expense" or "without protest" or any similar phrase, the holder of the bill is exempted from making a protest for non-acceptance or non-payment if he wishes to take legal action. However, this phrase does not exempt the holder of the bill from presenting it within the specified periods or from sending the necessary notices. The burden of proving non-compliance with the periods lies with the person who claims it against the holder of the bill. If this phrase is written by the drawer, its effects apply to all signatories, but if it is written by an endorser or guarantor, its effects apply only to him. If the holder of the bill makes a protest despite the presence of this phrase and the drawer's signature on it, the expenses are borne by him. If the phrase is written by an endorser or guarantor, the protest expenses, if made, can be recovered from all signatories of the bill.
Article 369
All those who draw, accept, endorse, or guarantee a bill of exchange are jointly liable to the holder of the bill. The holder of the bill may sue all of them individually or collectively without being bound by the order of the obligations they undertook. This right is available to anyone who has signed a bill and paid it. A lawsuit filed against one of the obligors does not prevent action against the others, even if they are subsequent in order.
Article 370
The holder of the bill may demand from the person he sues: First - The amount of the unpaid or unaccepted bill of exchange, with interest if stipulated. Second - Legal interest from the date of maturity. Third - The expenses of the protest, the notices sent, and all other expenses. If the lawsuit is filed before maturity, a discount is deducted from the value of the bill, calculated at the official discount rate (i.e., the rate of the bank authorized to accept state deposits) as it is in the place of residence of the holder of the bill on the date of filing the lawsuit.
Article 371
Anyone who pays the amount of the bill may demand from his guarantors: First - The full amount he paid. Second - Interest on this amount calculated at the legal rate from the day he paid it. Third - The expenses he incurred.
Article 372
Any obligor against whom a lawsuit is filed or who is subject to litigation has the right to demand, in exchange for paying the bill, that the bill be delivered to him along with the protest document and an account statement including a mention of the payment. Any endorser who pays a bill of exchange has the right to cancel his endorsement and the endorsements of those who came after him.
Article 373
If a lawsuit is filed following partial acceptance of the bill, the person who pays the part that was not accepted has the right to request that this payment be noted on the bill and to be given a receipt for the amount. Furthermore, the holder of the bill must provide him with a certified copy of it along with the protest document to enable him to take action later.
Article 374
After the expiration of the specified periods: 1 - For presenting the document payable on sight or within a period after sight. 2 - For making a protest due to non-acceptance or non-payment. 3 - For presenting the document for collection if the phrase "return without expense" is present. The rights of the document holder against the endorsers, the drawer, and all other obligors, except the acceptor of the document, are forfeited. However, this forfeiture does not benefit the drawer unless it is proven that funds were available at the time of maturity. In this case, the document holder only retains the right to pursue the person on whom the document was drawn.
Article 375
If the document is not presented for acceptance within the period specified by the drawer, the rights of the document holder to pursue for non-payment or non-acceptance are forfeited within the limits specified in the previous article, unless it is evident from the terms of the agreement that the drawer did not intend to evade the guarantee of acceptance. If a period is imposed for presenting the document in one of the endorsements, only the endorser can invoke it.
Article 376
If an obstacle that cannot be overcome (such as a legal provision in one of the countries or other force majeure circumstances) prevents the presentation of the document or the making of a protest within the specified periods, these periods are extended. The document holder must immediately send a notice of the force majeure to their endorser and indicate this notice on the bill of exchange or the addition after dating and signing it, and the provisions of Article 367 apply to the remainder. After the force majeure ceases, the document holder must present it without delay for acceptance or payment and make a protest if necessary. However, if the force majeure persists for more than thirty days after the maturity date, they have the right to pursue without the need to present the document or make a protest. Regarding documents payable on sight or within a period after sight, the thirty-day period begins from the date the document holder sends notice of the force majeure to their endorser, even if the notice is sent before the expiration of the specified period for presenting the document. Regarding documents payable within a period after sight, the period specified in the document is added to the thirty-day period. Purely personal actions related to the document holder or the person authorized to present the document or make a protest are not considered force majeure.
Part Second On Protest
Article 377
The protest for non-acceptance or non-payment is made by the notary public or one of his assistants, and it must be directed: to the place of residence of the person who was supposed to fulfill the bill or to his last known place of residence, to the place of residence of each of the persons designated in the bill of exchange to fulfill it if necessary, and to the place of residence of the third person who accepted the bill by way of intervention. All this is done with a single document, and notifications are made in accordance with the provisions of Article 353 and the following articles of the Code of Civil Procedure.
Article 378
The protest document includes a literal copy of the bill of exchange, the text of acceptance, endorsements, instructions indicated therein, and the warning to pay the value of the bill. It states whether the person who should fulfill the bill is present or absent, with reasons for refusal to pay and inability or refusal to sign.
Article 379
No action taken by the holder of the bill substitutes for the act of protest except in the case provided for in Article 360 and the following articles related to the loss of the bill.
Article 380
The notary public must keep a true copy of the protests and record their full texts day by day and in chronological order in a special register, otherwise, he shall be liable to pay compensation for damages to the concerned parties.
Part Third On the Renewal of Withdrawal
Article 381
Every person who has the right to judicial review can, unless there is a contrary provision, recover their money by means of a new bill (renewed draft) drawn on one of their guarantors and payable upon presentation at the residence of this guarantor. The new bill includes brokerage fees and the necessary stamp duties in addition to the amounts specified in Articles 370 and 371. If the holder of the bill is the drawer of the new bill, the value of this bill is determined according to the rate for a "sight bill" drawn from the place where the original bill was to be paid to the place where the guarantor resides. If the holder of the new bill is one of the endorsers, its value is determined according to the rate for a "sight bill" from the place where the drawer of the new bill resides to the place where the guarantor resides.
Article 382
Renewed bills cannot be successive, so each endorser is only liable for one renewed bill, as is the drawer.
Chapter Nine On Intervention
Part First General Provisions
Article 383
Article 383 Effective Date: 24/12/1942 The drawer, one of the endorsers, or one of the guarantors has the right to appoint a person for acceptance or payment if necessary. Under the conditions specified below, a person may accept or pay a bill of exchange on behalf of a debtor subject to litigation. The intervening person may be a third party, the drawee himself, or a person obligated under the bill of exchange, excluding the acceptor of the bill. The intervening person must notify the person on whose behalf they intervened within two working days. If this deadline is not met, the intervening person is liable, if necessary, for the damage resulting from their negligence, without exceeding the amount of the bill of exchange as compensation for this damage.
Part Second Acceptance by Intervention
Article 384
Acceptance by way of intervention can occur in any case where a claim before maturity is permissible for the holder of a bill prepared for acceptance. When a person is designated in the bill for acceptance or payment, if necessary, at the place of payment, the holder of the bill has no right to claim before maturity against the person designated or the subsequent signatories of the bill unless the bill has been presented to the designated person and they refused to accept it, and this refusal is evidenced by a protest document. In other cases of intervention, the holder of the bill may refuse acceptance by way of intervention. However, if they accept it, they lose the right to bring a claim before maturity against the person for whose benefit the acceptance was made and against the subsequent signatories of the bill.
Article 385
Acceptance by way of intervention is noted on the bill of exchange and signed by the intervenor, and this person for whose account the acceptance was made is designated. If the person is not designated, the acceptance is considered to be for the benefit of the drawer.
Article 386
The person who accepts the bill by way of intervention is obligated towards the holder of the bill and towards the endorsers following the person for whose benefit the intervention was made, in the same manner as that person is obligated. Despite the acceptance by way of intervention, the person for whose benefit this acceptance was made and their guarantors may request the holder of the bill, upon payment of the amount specified in Article 370, to deliver to them the bill, the protest document, and an account accompanied by a release, if necessary.
Part Third Payment by Way of Intervention
Article 387
Payment by intervention can be made in any case where recourse to the holder of the instrument is permissible, whether at maturity or before. The payment must cover all amounts due from the person on whose behalf the payment is made. This payment must be made at the latest on the day following the last day on which a protest for non-payment can be lodged.
Article 388
If the interveners who accepted the instrument reside at the place of payment, or if the instrument specifies persons residing at this place to make the payment if necessary, the holder of the instrument must present it to all these persons and, if necessary, lodge a protest for non-payment on the day following the last day on which the protest is accepted, which is the final deadline. If the protest is not lodged within this period, the person who designated the person to pay if necessary, and the one who accepted the instrument for his benefit, as well as the endorsers following them, are released from their obligations.
Article 389
The holder of the instrument who refuses payment by intervention loses the right to claim against the persons who are discharged by this payment.
Article 390
Payment by intervention must be evidenced by a release statement placed on the bill of exchange, specifying the person for whose benefit the payment was made. If this person is not specified, the payment is considered to be made for the benefit of the drawer. The bill of exchange and the protest document, if there is a protest, must be delivered to the person who made the payment by intervention.
Article 391
The person who makes payment by intervention acquires the rights arising from the bill of exchange against the person on whose behalf the payment was made and against those liable to him under this bill, but he may not endorse it again. The endorsers following the signatory for whose benefit the payment was made are discharged. If there are multiple interveners for payment, preference is given to the one whose payment is more comprehensive. Anyone who intervenes knowingly contrary to this rule loses the right to claim against those discharged by the more comprehensive payment.
Chapter Tenth On Multiple Copies and Images
Paragraph 1 Multiple Copies
Article 392
The bill can be drawn in multiple identical copies. The numbers of these copies must be specified in the text of the bill itself; otherwise, each will be considered an independent bill. Any holder of a bill that does not state it was drawn as a single copy can request, at their expense, to be delivered multiple copies of it. For this purpose, they must address their immediate endorser, who must assist in the process with their endorser, and so on until reaching the drawer. The endorsers must re-endorse the new copies.
Article 393
Payment made according to one of the copies discharges the obligation, even if not stipulated, and this payment nullifies the effect of the other copies. However, the drawee remains liable for any accepted copy they could not retrieve. The endorser who transferred the copies to different persons and subsequent endorsers are liable for all copies bearing their signatures that have not been returned.
Article 394
Whoever sends one of the copies for acceptance must indicate on the other copies the name of the person who holds this copy, and this person must deliver it to the legitimate holder of another copy. If they refuse to deliver it, the holder of the bill has no right to file a lawsuit unless they prove by protest: First - That the sent copy was not delivered to them upon their request. Second - That acceptance or payment could not be obtained according to another copy.
Paragraph 2 In the Images
Article 395
Anyone holding a bill of exchange has the right to take copies of it. The copy must accurately represent all the entries of the original bill, including endorsements and all annotations made on it, and it must indicate the limit to which it extends. The copy may be endorsed and guaranteed like the original bill and shall have the same effects.
Article 396
The holder of the original bill must be mentioned in the copy, and the holder is obliged to deliver the said bill to the legitimate holder of the copy. If the holder refuses, the holder of the copy has no right to file a lawsuit against its endorser or guarantors unless it is proven by protest that the original bill was not delivered to him upon his request. If the original bill, after the last endorsement made before the copy was issued, contains the following phrase "henceforth, endorsement is only valid on the copy" or any phrase to this effect, any endorsement subsequently made on the original bill shall be void.
Chapter Eleventh On Falsification
Article 397
If there is an alteration in the text of the bill of exchange, the signatories after this alteration shall be bound according to the altered text, and the previous signatories shall be bound according to the original text.
Chapter Twelfth On Prescription
Article 398
All rights of claim arising from the bill of exchange against the acceptor of the bill lapse after three years from the date of maturity. The rights of the holder of the bill to claim against the endorsers and the drawer lapse after one year from the date of the protest made within the legal period or from the date of maturity if the phrase "without expenses" is present. As for the rights of the endorsers to claim against each other and against the drawer, they lapse after six months from the day the endorser paid the amount of the bill or from the day the lawsuit was filed against him.
Article 399
The statute of limitations does not run in the event of a lawsuit except from the day of the last legal pursuit, and the statute of limitations does not apply if a judgment has been issued or the debt has been acknowledged in a separate document. The interruption of the statute of limitations is only effective against the person against whom the action interrupting the statute of limitations was taken. However, the alleged debtors are required, upon request, to prove their discharge by oath, and their heirs or successors in rights are required to swear that they believe in good faith that the debt has been fully paid.
Chapter Thirteen General Provisions
Article 400
A bill of exchange that falls due on a legal holiday cannot be demanded for payment until the first working day following it. Similarly, all transactions related to the bill of exchange, especially its presentation for acceptance and protest, can only be carried out on working days. When the performance of any of these transactions is required within a period that ends on a legal holiday, the period is extended to the first working day following it. However, holidays that fall within the period are included in its calculation.
Article 401
The day that marks the beginning of legal or contractual periods is not included in their calculation.
Article 402
It is neither legally nor judicially permissible to grant a one-day grace period for payment except in the cases stipulated in Articles 365 and 376.
Title Second On the Promissory Note
Article 403
The promissory note contains: 1 - The term "order" or the mention of "promissory note" in the text of the note itself in the language used for writing it. 2 - An unconditional promise to pay a certain amount. 3 - Specification of the maturity date. 4 - Specification of the place where payment must be made. 5 - The name of the person to whom or to whose order payment must be made. 6 - Specification of the date and place where the note was signed. 7 - Signature of the person issuing the note (the signer).
Article 404
A note that lacks one of the elements specified in the previous article is not considered a "promissory note" except in the cases mentioned in the following paragraphs: - A promissory note that does not specify a maturity date is considered payable upon presentation. - If there is no specific designation in the note, the place of issuance of the note is considered the place of payment and the residence of the signer at the same time. - A promissory note that does not specify its place of issuance is considered written in the place indicated next to the signer's name.
Article 405
The provisions related to the bill of exchange concerning the following articles apply to the promissory note as far as they are consistent with its nature: - Endorsement (Article 325 to 335). - Maturity (Article 348 to 352). - Payment (Article 353 to 364). - Recourse for non-payment (Article 365 to 372 and 374 to 376). - Protest (Article 377 and 380). - Drawing limits (Article 381 and 382). - Payment by intervention (Article 387 to 391). - Copies (Article 395 and 396). - Alteration (Article 397). - Statute of limitations (Article 398 and 399). - Holidays, time calculation, and prohibition of time extension (Article 400 to 402).
Article 406
The provisions related to the bill of exchange payable to a third party or at a place other than the domicile of the drawee (Article 317 and Article 342) also apply to the promissory note, as well as the provisions related to interest inclusion (Article 318), discrepancies in the texts concerning the amount due (Article 319), the consequences of signing as specified in Article 320, and the consequences of signing by a person without authorization or exceeding their authority (Article 321).
Article 407
The provisions related to guarantee (Article 345 and Article 347) also apply to the promissory note. In the specific case mentioned in the last paragraph of Article 346, if the person for whom the guarantee was given is not specified, it is considered given for the benefit of the promissory note signer.
Article 408
The signer of the promissory note is obligated like the person who accepts a bill of exchange. Promissory notes payable within a period after sight must be presented to the signer for certification within the time limits specified in Article 338. The period after sight begins from the date of certification placed on the note by the signer's signature. If the signer of the note refuses to place a dated certification, this refusal must be evidenced by a protest document (Article 340). The date of the protest serves as the start of the period after sight.
Title Third On Doubt
Chapter First Establishment and Formulation
Article 409
The check includes: 1 - The mention of the word "check" inserted in the text of the document itself in the language used for its writing. 2 - An unconditional and unrestricted mandate to pay a specific amount. 3 - The name of the person who must make the payment (the drawee). 4 - The designation of the place where the payment must be made. 5 - The designation of the date and place where the check was created. 6 - The signature of the issuer of the check (the drawer).
Article 410
A document lacking one of the components outlined in the previous article is not considered a check except in the cases specified in the following paragraphs: If the document does not specify a particular place for payment next to the name of the drawee, and if several places are mentioned next to the name of the drawee, the check is payable at the place mentioned first. If these clarifications or others are not mentioned, the check is payable at the original establishment of the drawee. A check that does not mention the place of its creation is considered created at the place mentioned next to the name of the drawer.
Article 411
A check can only be drawn on a banker who, at the time of creating the document, has funds placed at the disposal of the drawer based on an explicit or implicit agreement allowing the drawer to dispose of these funds by issuing the check.
Article 412
A check is not subject to the condition of acceptance. If a phrase concerning acceptance is written on the check, it is considered void. However, the drawee may acknowledge the check, resulting in the acknowledgment of the existence of funds on the date of issuing the check.
Article 413
A check may stipulate that it is payable: - To a specific person with or without the declaration "to order". - To a specific person with the phrase "not to order" or a similar expression. - To the bearer of the document. A check drawn in favor of a specific person with the words "or bearer" or a similar expression is considered a bearer check. A check that does not mention the name of the beneficiary is considered a bearer check.
Article 414
A check may be made payable to the order of the drawer himself. A check may also be drawn in favor of a third party. A check cannot be drawn on the drawer himself except when it is drawn between different establishments of the same drawer, provided that this check is not a bearer check.
Article 415
Any interest stipulation included in the check is considered void.
Article 416
A check may be payable at the residence of a third party, whether in the locality where the drawee resides or elsewhere, provided that the third party is a banker.
Article 417
The drawer is a guarantor of payment, and any condition intended to absolve the drawer from this guarantee is considered void.
Chapter Second On the Transfer of Doubt
Article 418
A check specified as payable to a named person with the explicit phrase 'to order' or without it is transferable by endorsement. However, a check specified as payable to a named person with the phrase 'not to order' or a similar phrase is only transferable by ordinary assignment and its effects.
Article 419
Endorsement may be made in favor of the drawer himself or any other liable person, and these parties may re-endorse the check.
Article 420
Endorsement must be unconditional. Any condition attached to the endorsement is considered null. Partial endorsement is void. So is endorsement to the drawee. Endorsement to the bearer is considered as a blank endorsement. Endorsement to the drawee is only valid as a receipt unless the drawee has multiple establishments and the endorsement is in favor of an establishment other than the one on which the check was drawn.
Article 421
The holder of an endorsable check is considered its legitimate bearer if he proves his right through an uninterrupted series of endorsements, even if the last endorsement is in blank. Endorsements that are crossed out are considered null in this regard. If a blank endorsement is followed by another endorsement, the signatory of this endorsement is considered to have acquired the check by blank endorsement.
Article 422
An endorsement placed on a bearer check makes the endorser liable according to the provisions related to judicial recourse rights and does not convert the instrument into a 'to order' check.
Article 423
If a 'to order' check is taken from a person by any incident, the rightful holder of this check, who proves his right as specified in Article 421, is not obliged to relinquish it unless he acquired it in bad faith or committed a gross error in acquiring it.
Article 424
Endorsement after protest or after the expiration of the presentation period only produces the effects of an ordinary assignment. An undated endorsement is considered to have been made before the protest or before the expiration of the period mentioned in the previous paragraph unless evidence to the contrary is provided.
Chapter Third On Offer and Payment
Article 425
A check is payable upon presentation. Any contrary condition is considered void. A check presented for payment before the date specified as the date of issue is payable on the day of presentation.
Article 426
A check issued in Lebanon and payable there must be presented for payment within eight days. A check issued outside Lebanon and payable there must be presented within twenty days if its place of issue is in countries adjacent to Lebanon or Syria, or in Europe, or in countries located on the Mediterranean coast. The period is seventy days if the check is issued from any other country.
Article 427
If a check payable in Lebanon is issued from a country that uses a calendar other than the Gregorian calendar, the date of issue is adjusted to the corresponding day in the Gregorian calendar.
Article 428
- Amended The drawee must pay even after the presentation period has expired. The drawer's objection to the payment of the check is only accepted in the case of its loss or the bankruptcy of its holder. If the drawer objects for other reasons despite this prohibition, the judge of urgent matters must, upon the holder's request, decide to lift this objection even if there is a pending lawsuit on the merits.
Article 429
The effects of the check are not affected by the death of the drawer or the loss of their legal capacity occurring after its issuance.
Article 430
The drawee has the right to request, upon payment of the check, that the holder deliver a receipt, and the holder may not refuse partial payment. If the funds are less than the value of the check, the holder has the right to insist on payment to the extent of the funds. In the case of partial payment, the drawee has the right to request that this payment be noted on the check and that a receipt be delivered to him. Partial payments of the original value of the check discharge the drawer and endorsers. The holder of the check must protest for the remainder.
Article 431
Anyone who pays a check not objected to is legally discharged. The drawee who pays a check that is endorsable is required to verify the validity of the sequence of endorsements but is not required to verify the signatures of the endorsers.
Article 432
If payment of the check is stipulated in a currency not in circulation in Lebanon, the amount may be paid within the presentation period in Lebanese pounds equivalent to its value on the day of payment. If payment is not made upon presentation, the holder has the option to request payment of the check's value in Lebanese currency according to the prevailing rate on the day of presentation or on the day of payment. Lebanese custom must be followed in determining the rate of each foreign currency in which the check is drawn, to determine its value in Lebanese pounds. However, the drawer may stipulate that the value to be paid is calculated at a specific rate in the check. The aforementioned rules do not apply when the drawer stipulates payment in a specific currency (the condition of actual payment in foreign currency).
Chapter Fourth On the Crossed Check
Article 433
The drawer or the holder of the check may cross it, resulting in the consequences outlined in the following article: Crossing is done by drawing two parallel lines on the back of the check, and it can be general or special. It is general if there is no specification or the word "banker" or similar between the lines. It is special if the name of a specific banker is written between the lines. A general crossing can be converted into a special crossing. However, a special crossing cannot be converted into a general crossing. Erasing the crossing or the name of the banker is considered null and void.
Article 434
The drawee may not pay a check with a general crossing except to a customer or a banker. The drawee may not pay a check with a special crossing except to the designated banker. If the banker is the drawee, it may only be paid to a customer. However, the designated banker may use another banker for collection. A banker may only acquire a check with a crossing from a customer or another banker and may not collect it on behalf of other persons. The drawee or banker who violates the preceding provisions shall be liable for damages up to the value of the check.
Article 435
The drawer of the check and its holder may prevent its cash payment by placing the following restrictive phrase on its back "to be credited to the account" or similar. In this case, the check can only result in settlement through entries by the drawee (financial credit to the account, transfer, or set-off), and settlement through entries is considered payment. Erasing the phrase "to be credited to the account" is considered null and void. The drawee who violates the preceding provisions shall be liable for damages up to the value of the check.
Chapter Fifth On the Claim for Non-fulfillment
Article 436
The holder of the bill has the right to sue the endorsers, the drawer, and others liable if the check presented was not paid in due time and if the refusal to pay is proven: 1 - Either by an official document (protest). 2 - Or by a written and dated declaration from the drawee on the check indicating the day of presentation.
Article 437
The protest or similar proof must be made before the end of the period designated for presentation. If the presentation is made only on the last day of the period, the protest or similar proof can be made on the first following business day.
Article 438
The holder of the check can demand from the person against whom the claim is made: 1 - The amount of the check that was not paid. 2 - Interest starting from the day of presentation calculated at the legal rate for checks issued and payable in Lebanon and at a rate of six percent for other checks. 3 - Expenses of the protest or similar proof and expenses of the notices sent and other expenses.
Article 439
The person who paid the check has the right to demand from their guarantors: 1 - The full amount they paid. 2 - Interest on this amount starting from the day it was paid, calculated at the legal rate for checks issued and payable in Lebanon and at a rate of six percent for other checks. 3 - The expenses they incurred.
Article 440
If an obstacle that cannot be overcome (legal provision or other cases of force majeure) prevents the presentation of the check or the making of the protest or similar proof within the designated periods, these periods are extended. The holder of the bill must immediately notify the person who endorsed the bill to them of the existence of force majeure and must indicate this notification on the check or on an additional paper with a signed and dated note. Otherwise, the provisions of Article 367 apply to the remaining transactions. After the cessation of the force majeure, the holder of the check must present it without delay for payment. If necessary, they must make the protest or similar proof. If the force majeure continues for more than fifteen days starting from the date the holder of the bill sent notification to the endorser of the existence of force majeure, even if the notification was sent before the end of the presentation period, the claim can be made without the need to present the bill or make the protest or similar proof. Personal matters purely related to the holder of the check or the person entrusted with presenting it or making the protest or similar proof are not considered force majeure.
Chapter Sixth On the Multiplicity of Copies
Article 441
Article 441 Effective Date: 24/12/1942 Except for bearer checks, it is permissible to issue multiple identical copies for each check issued in one country and payable in another country or a part of the same country located overseas and vice versa, and for each check issued and payable in one part or in different parts located overseas of the same country. If multiple copies of the same check are issued, the number of the copy must be mentioned in the text of the check itself, otherwise, each copy shall be considered as an independent check.
Chapter Seventh On Prescription
Article 442
Date of commencement: 24/12/1942 The right of the holder of the check to file a lawsuit against the endorsers, the drawer, and all other obligors lapses after six months starting from the end of the presentation period. However, the right of the obligors to pay the check in pursuing each other lapses after six months starting from the day the obligor paid the amount of the check or from the day the lawsuit was filed against him. Nevertheless, in the case of lapse or prescription, the right to file a lawsuit remains against the drawer who did not provide the funds or against other obligors who gained an unlawful profit. The right of the holder of the check to file a lawsuit against the drawee lapses after three years starting from the end of the presentation period.
Chapter Eight General and Penal Provisions
Article 443
The presentation of a check or the filing of a protest can only be conducted on a business day. If the last day of the period granted by law for conducting actions related to the check, especially its presentation and the organization of the protest or a similar document, falls on an official holiday, the period is extended to the first business day following its end. However, holidays occurring during the period are included in its calculation.
Article 444
Payment by delivering a check accepted by the creditor is not considered a renewal of the debt contract; rather, the original debt remains with all the guarantees associated with it until the mentioned check is paid.
Article 445
Regardless of the procedures imposed for filing a guarantee lawsuit, the holder of a check on which a protest has been filed has the right, after obtaining permission from the head of the enforcement department, to provisionally seize the movables of the drawer and endorsers without being obliged to provide a guarantee.
Article 446
- Amended Anyone who issues a check without indicating the place of issuance or the date, or who puts an incorrect date, is subject to a fine of six percent of the amount of the check. This fine shall not be less than five Lebanese pounds. The same fine is imposed without review on the first endorser or the personal holder of the check if it lacks the place of issuance or the date, or if it bears a date later than the date of its endorsement or presentation. This fine is also imposed on anyone who pays or receives by way of set-off a check that does not include the place of issuance or the date.
Article 447
- Amended Every banker who has funds and delivers to his creditor blank check forms payable from the bank's treasury is required to mention on each form the name of the person to whom this form was delivered, otherwise, he is subject to a fine of one Lebanese pound for each violation. Every bank must print on the cover of the checkbooks it delivers to its customers the text of Article 666 of the Penal Code, otherwise, it is subject to a fine of ten pounds for each violation.
Article 448
- Amended The crime of drawing a check without funds is punishable under Article 666 of the Penal Code.
Article 449
The drawee who knowingly declares the existence of funds less than the available funds is subject to a fine ranging from twenty-five to five hundred Lebanese pounds.
Article 450
In addition to the above, the following articles of this law apply to the check as long as their provisions do not conflict with the nature of this instrument: From Article 319 to 321, and from 327 to 329, 331, 332, 335, 345 to 347, the second paragraph of Article 353, 359, 361 to 364, 367 to 369, 372, 377, 393, 397, 399, 401, and 402. The protest document stipulated in Article 362 must be organized at the latest on the first business day following the end of the specified period for presenting the check.
Title Fourth On Other Transferable Instruments by Endorsement
Article 451
Every document by which the signer commits to deliver a sum of money or a quantity of fungibles at a specific place and time may be transferred by endorsement if it is explicitly made with the phrase 'to order.' The endorsement shall be subject to the provisions of Article 325 and the following articles concerning the endorsement of bills of exchange unless there are contrary provisions in the law or in the document itself. The debtor cannot invoke reasons for payment other than those arising from the document itself and the reasons he directly holds against the plaintiff, unless the plaintiff is in bad faith. Payment is only compelled upon the delivery of the order document containing the receipt according to the rules.
Article 452
If a bill of exchange, promissory note, or other negotiable instruments are delivered as a means of debt payment, this shall not be considered a renewal of the contract unless the intention of the parties indicates otherwise.
Title Fifth Transferable Value
Article 453
Shares, bonds, income certificates, and other negotiable securities issued in bulk that confer the right to equal monetary values and can be priced in one of the financial markets, may be nominal, bearer, or order-based.
Article 454
If the bond is bearer, its transfer is effected by mere delivery. Any holder of this bond is considered eligible to exercise the rights associated with it, and as long as the debtor has not received a legal objection, payment to the bondholder discharges the debtor's obligation according to the rules. The debtor can only raise defenses against the bondholder based on the invalidity of the bond or arising from the text of the bond itself.
Article 455
If the bond is nominal, the owner's right is established by registering it in their name in the records of the institution that issued the bond. Ownership of this bond arises from this registration.
Article 456
The transfer of a nominal bond is effected by a declaration indicating the transfer, recorded in the registers and signed by the transferor or their authorized representative. The debtor institution has the right, before registering the transfer, to request the declarant to prove their identity and capacity. This transfer grants the new owner whose name is registered a personal and direct right. The debtor institution cannot raise any defenses against them that pertain to previous bondholders.
Article 457
Nominal bonds may include detachable coupons that entitle the holder to collect maturities, distributions, and interest (referred to as mixed bonds).
Article 458
Securities created to order are transferred by endorsement. Their endorsement is subject to the same rules that apply to the endorsement of bills of exchange unless there are contrary provisions arising from laws, regulations, or the nature of the bond itself.
Title Sixth Public Deposit Receipts
Article 458
Repeated 1 Public deposit receipts are nominal instruments that can be traded and are linked to nominal shares (underlying shares) of a Lebanese joint-stock company, issued abroad by a licensed issuer in the country of issuance and listed on organized financial markets.
Article 458
Repeated 2 - While fully retaining the regulatory provisions related to public deposit receipts linked to bank shares, the company must ensure, at its responsibility, when issuing public deposit receipts linked to its shares, that the following conditions are met: 1- A bank or financial institution abroad issues the public deposit receipts after receiving evidence that the underlying shares have been deposited with the Financial Instruments Clearing and Depository Center for Lebanon and the Middle East (Midclear) established by Law No. 139 dated 26/11/1999. 2- Approval of the company's board of directors issuing the underlying shares on the information contained in the subscription prospectus that may be prepared for this issuance. 3- Issuance of public deposit receipts either: A- Based on the provisions of a contract signed between the bank or financial institution intending to issue public deposit receipts and the company issuing the underlying shares in exchange for shares it owns of its own shares or in exchange for shares owned by some shareholders of the company in the issuing company (sponsored DRs). B- In exchange for a letter of no objection from the company issuing the underlying shares in the absence of a contract as referred to in paragraph (A) of this clause (3) (Unsponsored DRs). In this case, Midclear, with any information it may have, also ensures the fulfillment of the conditions of this article when issuing public deposit receipts. 4- The possibility of granting holders of public deposit receipts the right to exchange them for a number of underlying shares provided that this does not conflict with legal or regulatory provisions, especially those that restrict the ownership of underlying shares to Lebanese persons. 5- Keeping the underlying shares in the possession of the Financial Instruments Clearing and Depository Center for Lebanon and the Middle East (Midclear) until the full or partial payment of the value of the public deposit receipts or until they are exchanged for the corresponding underlying shares in full or in part or until the dissolution and liquidation of the company issuing the underlying shares. 6- The possibility of granting the issuer of public deposit receipts the right to attend the general assemblies of the company issuing the underlying shares and the right to participate in voting provided that: A- This right does not conflict with legal or regulatory provisions, especially those that restrict the ownership of underlying shares to Lebanese persons. B- The issuer of public deposit receipts votes in the sessions of the general assemblies according to the instructions of the holders of these receipts, if the contract or issuance system of these receipts allows it and specifies the conditions and manner of exercising voting rights, otherwise, the issuer of public deposit receipts must vote according to what the interest of the company issuing the underlying shares requires. 7- Not exceeding the number of shares represented by public deposit receipts 30% of the number of shares constituting the capital of the company issuing the underlying shares and fully paid for.
Article 458
Repeated 3 Upon the dissolution and liquidation of the company issuing the underlying shares, all rights related to the underlying shares revert to the holders of public deposit receipts, taking into account the provisions of the law enacted by Decree No. 10845 dated 10/9/1968 concerning the acquisition of real property rights in Lebanon by non-Lebanese.
Book Fifth On Preventive Composition and Bankruptcy
Title First On Provisional Settlement
Article 459
Every merchant has the right, before ceasing to pay or within ten days following this cessation, to apply to the primary court convened in the area where their main establishment is located and request it to summon their creditors to propose a preventive settlement.
Article 460
To support this request, the merchant must submit: their mandatory commercial books organized according to the rules for at least three years or from the start of their commercial practice if it is less than three years, a document proving their registration in the commercial register, a detailed and estimated statement of their operations, and a list of all their creditors with the amount of each debt and the creditor's residence. If the matter concerns a company, documents proving its establishment according to the rules must be presented. The merchant must explain the reasons for requesting the settlement, indicate the distribution rate they intend to offer to their creditors, or the reasons preventing them from immediately disclosing their proposals, and specify the real or personal guarantees they offer to their creditors. In any case, the proposed rate must not be less than 50% of the principal of their ordinary debts if the payment term is one year, not less than 75% if the term is eighteen months, and not less than 100% if the term is three years.
Article 461
After hearing the public prosecution, the court must decide in chambers to reject the request: First - if the request did not include the books and documents specified in the previous article. Second - if the merchant has previously been convicted of fraudulent bankruptcy, forgery, theft, breach of trust, fraud, embezzlement in managing public funds, failed to fulfill obligations in a previous preventive settlement, or was previously declared bankrupt without fully paying all creditors or fulfilling the settlement obligations completely. Third - if sufficient guarantees for the proposed distribution rate are not provided. Fourth - if the merchant fled after closing all their establishments or fraudulently embezzled or reduced part of their wealth. In all these cases, if the merchant has ceased to pay their commercial debts, the court will declare their bankruptcy on its own initiative.
Article 462
If the court considers the request legal and worthy of acceptance, it orders, by a non-appealable decision, to summon the creditors to appear before an appointed judge for discussion and deliberation on the preventive settlement proposal. This judge sets the meeting place, date, and time within thirty days at most from the court's decision date and specifies the period for publishing this decision and notifying the creditors. A commissioner, who is not a creditor, is also appointed to oversee the management of the commercial project, verify its assets and liabilities, investigate the debtor's conduct, and then submit a report to the creditors' assembly on this matter. The commissioner must set a deadline for the applicant not exceeding five days to complete the nominal list of creditors when the merchant proves in their request that they cannot immediately provide this complete list. Based on the appointed judge's request, the court's decision is noted with an explanation signed by the judge and the clerk and recorded at the end of the entries in the merchant's books, which are then returned to them.
Article 463
The court's decision is published by the clerk's care through announcements posted on the court's door, then a summary of the decision is included in one of the judicial advertisement newspapers and registered in the commercial register, all within a period specified in the decision itself. If the list of creditors' names is incomplete or if broader publication is deemed necessary, the court may designate other newspapers, even foreign ones, for publishing the announcements. The clerk must notify each creditor by registered letter or telegram, depending on the distance, indicating the debtor's name, the appointed judge's name, the commissioner's name, the decision date summoning the creditors, the meeting place and date, along with a brief statement of the debtor's proposals. The documents proving the publication and notification to the creditors must be included in the file.
Article 464
From the date of filing the request until the decision confirming the settlement acquires the force of res judicata, no creditor holding a document prior to the decision date may initiate or continue enforcement proceedings, acquire any lien on the debtor's assets, or register a mortgage, and any such action is void. The periods related to the statute of limitations and the expiration of claims and rights that were interrupted by the actions mentioned above remain suspended. Ordinary debts without any lien are considered due and their interest ceases only towards the creditors. Amounts due as taxes, even if privileged, are not subject to the effects stipulated in this article.
Article 465
During the preventive settlement proceedings, the debtor remains in charge of managing their assets and continues to perform all ordinary business activities related to their trade under the supervision of the commissioner and the management of the appointed judge. Both individuals have the right to inspect the commercial books at any time.
Article 466
Gifts and other gratuitous acts or guarantees made by the debtor during the preventive settlement proceedings cannot be invoked against the creditors. The same rule applies if the debtor engages in borrowing activities, even if the borrowing is in the form of promissory notes, valid contracts, or arbitration, conducts sales unrelated to their trade, or establishes a mortgage or security without the appointed judge's authorization. The judge may only permit such actions if their benefit is clearly evident.
Article 467
If the debtor violates the provisions of the previous two articles or it is proven that they concealed part of their assets, neglected to mention some creditors, or committed any general fraud, the appointed judge refers the matter to the court's chamber for deliberation, which then declares bankruptcy. This does not preclude the criminal penalties the merchant may face.
Article 468
The commissioner, after reviewing the debtor's books and documents and based on the information gathered, verifies the accuracy of the creditors' and debtors' statements, makes all necessary adjustments, and specifies the amounts owed to or by the debtor. They have the right, if necessary, to request the necessary clarifications from the concerned parties. Then, without delay, they prepare a detailed report on the debtor's commercial situation and conduct, and deposit this report with the court registry at least three days before the scheduled settlement meeting.
Article 469
The appointed judge presides over the creditors' meeting. Every creditor has the right to appoint a special agent on their behalf with a written power of attorney, which can be written without any formalities on the invitation letter or telegram. The debtor or their legal representative must attend in person, and representation by a special agent is only accepted if the debtor is absolutely unable to attend, as verified by the appointed judge. After the supervisor's report is read, the debtor presents their final proposals. If all transactions cannot be completed on the appointed day, their continuation is considered automatically postponed to the nearest working day without the need to inform the creditors again, even those absent. This process continues until the transactions are completed.
Article 470
Each creditor can present the reasons why they believe a particular debt is questionable, or that the debtor is not worthy of the leniency they seek, or that their proposals are not worthy of acceptance. The creditor must provide their response and give all the clarifications requested. A summary of all these matters is recorded in the minutes, and all documents are attached.
Article 471
The provisional settlement must be approved by the majority of creditors who participated in the vote, and this majority must represent at least three-quarters of the unsecured and unprivileged debts. However, creditors with privileges and mortgage securities, whether movable or immovable, may participate in forming this majority, provided they waive their right to use the security given to them. This waiver may be limited to a portion of the debt and its accessories, provided that the waived portion is specified and not less than one-third of the total debt. Participation in the vote without a declaration of partial waiver and subsequent acceptance of the settlement discussed below implies a waiver of the entire debt security. The court, in its confirmation decision, calculates the increase that may occur in the debtor's assets as a result of this vote and acceptance. The effects of waiving a privilege or a mortgage, whether partial or not, are automatically nullified if the settlement is not completed or is annulled.
Article 472
The debts of the debtor's spouse and the debts of their relatives and in-laws up to the fourth degree are not included in the majority calculation mentioned in the previous article. Persons who acquired these debts through assignment or auction within the year preceding the settlement request are also prohibited from voting. Assignment of debts after the decision to call creditors does not grant the right to vote in the settlement contract.
Article 473
The appointed judge must record in the minutes those who accepted the settlement, and all of them must sign the minutes. Those who expressed their acceptance by letter or telegram to the appointed judge or the clerk within five days following the conclusion of the meeting minutes are included in the majority calculation. The clerk records this acceptance in the margin of the minutes and attaches it.
Article 474
Before signing, the appointed judge issues a decision recorded in the minutes, inviting the concerned parties to attend a specific session before the court to confirm the settlement within a period not exceeding twenty days.
Article 475
The supervisor must submit their reasoned requests regarding the possibility of accepting the settlement to the court registry three days before the scheduled confirmation session. In the session, the appointed judge presents a report, and the debtor and creditors have the right to participate in the discussion. The court may invite the supervisor to the deliberation room for clarification after notifying the debtor, creditors, and intervenors.
Article 476
In the confirmation decision, the court has the right to temporarily estimate, based on evidence, the importance and amounts of the declared debts to verify the required majority, while reserving any final judgments that may be issued later.
Article 477
If the court considers that the debtor deserves the benefit of the settlement and that the objections mentioned in the previous articles do not remove the required majority, and that the settlement proposals do not fall below the legal minimum and are legitimate and their execution is guaranteed, it decides to confirm the requested settlement. In the same decision, the court orders the deposit of distribution shares due to the declared debts. If the confirmation of the settlement is refused, the court declares bankruptcy on its own initiative.
Article 478
If there is no contrary agreement included in the settlement contract or another decision made according to the conditions mentioned above and confirmed by the court, the debtor is not entitled to sell or mortgage their properties or establish security rights before fulfilling all their obligations in the settlement contract. In general, they are not entitled to dispose of any part of their assets in a manner not required by the nature of their trade or industry. Any action taken contrary to this prohibition is ineffective against creditors prior to the confirmation of the settlement.
Article 479
The judgments granting or refusing the confirmation of the settlement must be published according to the rules that will be specified below for the bankruptcy declaration judgment.
Article 480
Dissenting creditors have the right to object to the confirmation of the settlement within five days from the date of the final minutes' conclusion, and this objection must contain the reasons and be notified to the debtor and the supervisor. Appeals are only accepted from the debtor themselves or from the objecting creditors. The appeal period is fifteen days. When the settlement confirmation decision becomes final, the supervisor's function is automatically terminated unless there is an explicit provision in the settlement contract assigning them to monitor its execution. The expenses and amounts due to the supervisor are determined by the appointed judge. Any contrary agreement is void.
Article 481
The confirmation of the provisional settlement makes it binding on all creditors. Creditors, even those who voluntarily agreed to the settlement contract, fully retain all their rights against the debtor's partners in the debt, guarantors, and those to whom the debtor has assigned. However, they have the right to intervene in the discussion to present their observations regarding the settlement.
Article 482
The settlement granted to a company benefits the partners personally responsible for the company's debts, unless there is a contrary provision.
Article 483
In any commercial company that has issued bonds exceeding twenty percent of the total debts it owes, the settlement cannot be granted unless the bondholders' assembly approves the proposals by a decision made according to the quorum and majority conditions specified in the joint-stock companies section. The approval of the bondholders' assembly is mandatory regardless of the ratio between the amount of debt arising from the bonds and the total public debt if the settlement contract includes special conditions that do not align with the conditions set at the time of bond issuance concerning the bondholders.
Article 484
Whenever there is a benefit from holding a bondholders' meeting, the previously determined period for calling creditors can be extended to sixty days.
Article 485
Bondholders entitled to a bonus upon redemption are not limited to claiming the issue price but also add the portion of the bonus they are entitled to for the elapsed period.
Article 486
Based on the request of any creditor within three years from the date of publication of the confirmation decision, the court has the right to annul the settlement and declare the debtor bankrupt if it is proven that he committed fraud in determining the debts owed or concealed a significant portion of his assets. No other lawsuit for annulling the settlement is accepted after its confirmation. If the settlement is annulled, the obligations of guarantors who did not participate in the fraud are discharged from the obligations they undertook in the settlement contract, and the mortgages and other securities established in the same deed are automatically nullified.
Article 487
If the debtor does not fulfill all the obligations stipulated in the settlement contract, any creditor has the right, after pursuing the guarantors and invoking the rights granted as security, to request the dissolution of the settlement and the declaration of the debtor's bankruptcy.
Article 488
It may be stipulated in the settlement contract that the merchant's liability is not fully discharged from the portion of his debt reduced by this contract unless he remains insolvent. However, the duration of this condition must be set at five years, and it is required that the value of the debtor's assets exceeds the debts owed by at least twenty-five percent.
Title Second On Bankruptcy
Chapter First On the Commencement of Bankruptcy
Article 489
Without prejudice to the application of the provisions of the previous chapter, any merchant who ceases to pay their commercial debts, and any merchant who maintains financial confidence only by means that are clearly unlawful, is considered bankrupt.
Article 490
Bankruptcy is declared by a judgment from the primary court located in the area of the main commercial establishment. This judgment is enforceable immediately. If several courts simultaneously declare the bankruptcy of the same merchant, there is a need to determine the competent jurisdiction. The aforementioned court is competent to hear all cases that may arise and originate from the rules related to bankruptcy.
Article 491
The case may be brought to court by a declaration from the merchant themselves, and they must make this declaration within twenty days from the date of cessation of payment, otherwise, they risk committing the misdemeanor of negligent bankruptcy. They must also deposit at the same time a detailed balance sheet certified as matching the state of their assets and the debts owed by them.
Article 492
The case may also be brought to court by a summons request for three days submitted by a creditor or several creditors. In urgent cases, such as if the merchant closes their stores and flees or conceals a significant portion of their assets, creditors have the right to proceed by petition without a summons, and the court will then decide the case in chambers.
Article 493
The court may order the necessary precautionary measures to protect the creditors' rights at the request of the public prosecutor or on its own initiative. The court may also declare bankruptcy on its own initiative if necessary.
Article 494
A merchant who has retired from trade or has died may be declared bankrupt judicially within one year from the date of their retirement from trade or from the date of their death if their cessation of payment preceded the retirement or death. However, the heirs of the deceased merchant may not request their bankruptcy.
Article 495
The judgment declaring bankruptcy must specify the time of cessation of payment. The court may retroactively set the time of cessation of payment to an earlier date by a judgment changing the date or several judgments issued thereafter based on the report of the appointed judge or on its own initiative or at the request of any interested party, especially at the request of creditors, as each of them has the right to proceed separately. This request cannot be accepted after the deadline specified in Article 551, which definitively closes the list of debts after its expiration. After this deadline, the time set for cessation of payment becomes final and cannot be contested with regard to creditors. The time of cessation of payment cannot be set back more than eighteen months before the judgment declaring bankruptcy.
Article 496
The judgment declaring bankruptcy and the judgments changing the date of cessation of payment must be posted within five days by the care of the bankruptcy agents in the hall of the court that issued it and in the nearest stock exchange center, and their summary must also be published within the same period in one of the advertising newspapers. This publication must take place in the location where the bankruptcy was declared and in all places where the bankrupt has commercial establishments. At the same time, these judgments must be recorded in the commercial register and notified to the public prosecutor by the care of the clerk.
Article 497
These judgments are subject to objection and appeal, as are all judgments issued in bankruptcy matters, unless there is a contrary provision in this law. The objection period is uniformly eight days, and the appeal period is fifteen days from the date of the judgments, provided that the periods related to judgments subject to posting and summary publication in newspapers begin from the day these procedures are completed. The appeals submitted by the bankrupts do not have a suspensive effect in any case.
Article 498
If it appears to the court incidentally during a civil, commercial, or criminal trial that the merchant is in an apparent state of bankruptcy, it has the right, even if the bankruptcy has not been declared, to apply the basic bankruptcy provisions as defined in this book.
Chapter Second On the Direct Effects of the Declaration of Bankruptcy
Article 499
The names of traders declared bankrupt and who have not regained their status are listed on a schedule posted on the door of each court and in the main hall of all stock exchanges. A trader's name is not listed if they were deceased at the time of the bankruptcy declaration. In other cases, the bankrupt trader's name is removed six months after their death.
Article 500
Apart from that, the political rights of the bankrupt are revoked. They cannot be a voter or a candidate in political councils or professional bodies, nor can they hold a public office or task.
Article 501
The judgment declaring bankruptcy results in the bankrupt relinquishing the management of all their assets to the bankruptcy trustees from the day of its issuance, including assets that may be acquired during the bankruptcy period. The bankrupt, in particular, cannot sell any of their assets, nor can they make any payments or collections unless the payment is made in good faith for a commercial instrument. They cannot contract or litigate in court except as an intervening party in lawsuits pursued by the bankruptcy trustees. However, they can perform all precautionary acts to preserve their rights.
Article 502
However, this relinquishment does not include rights that pertain solely to the person of the bankrupt or as the head of a family, or rights involving purely moral interests. The intervention of bankruptcy trustees is accepted in the case if it leads to a judgment involving a sum of money. The relinquishment also does not include assets that the law deems non-seizable or profits that the bankrupt may earn through their activity or trade, to the extent deemed appropriate by the appointed judge for the bankrupt's and their family's sustenance.
Article 503
The judgment declaring bankruptcy requires the suspension of individual lawsuits by ordinary creditors or those holding a general privilege, which are limited after this judgment to the bankruptcy trustees, without distinction between commercial and civil debts.
Article 504
The judgment declaring bankruptcy suspends, with regard to the group of creditors only, the accrual of interest on unsecured debts by privilege or mortgage, whether real or personal. Interest on secured debts can only be claimed from the proceeds of the sale of the secured properties.
Article 505
The judgment declaring bankruptcy results in the forfeiture of the term with regard to the bankrupt alone, not their partners in the obligation, even if it is in the interest of their secured creditors. Holders of bonds with a reward upon payment can present them immediately in the bankruptcy as stated in the chapter on preventive composition.
Article 506
If the bankrupt owns real estate or real property rights, the judgment declaring bankruptcy is subject to the publication rules related to real estate mortgages and is registered by the bankruptcy trustees, resulting in a compulsory mortgage for the benefit of the group of creditors from the date of its registration.
Article 507
The following acts are absolutely void with regard to the group of creditors if the debtor performed them after the date of cessation of payments as determined by the court or during the twenty days preceding this date: First - Gratuitous acts and dispositions, except for customary small gifts or the establishment of a trust. Second - Payments made before maturity, regardless of their form. Third - Payment of due monetary debts with something other than cash, bills of exchange, promissory notes, or transfers, and generally any payment by way of consideration. Fourth - Establishment of a consensual or judicial real estate mortgage, movable pledge, or usufruct pledge on the debtor's assets to secure a prior debt. If the payment by way of consideration involves the transfer of real estate, the nullity only affects the creditor who contracted with the bankrupt. It does not affect the rights of those who acquired the property from this creditor in exchange for consideration, provided they acted in good faith.
Article 508
Any other payment of due debts made by the debtor and any act performed for consideration after cessation of payments and before the judgment declaring bankruptcy may be annulled if the persons who received from the debtor or contracted with them were aware of the cessation of payments.
Article 509
The annulment of the aforementioned acts allows, when necessary, for the initiation of a recovery action. If the payment was a bill of exchange or a check, the action can only be brought against the person who issued the bill or check on their behalf. If it was a promissory note, the action can only be brought against the first endorser. In both cases, proof must be provided that the person from whom recovery is sought was aware at the time of issuing the instrument of the debtor's cessation of payments.
Article 510
The registration of a mortgage after the registration of the judgment declaring bankruptcy is void with regard to the group of creditors. Registrations made after the cessation of payments or during the twenty days preceding it are subject to annulment if more than fifteen days have passed between the date of the creation of the security and the date of registration, and if the delay has harmed the creditors.
Article 511
The annulment actions stipulated in Articles 507, 508, and 510 are barred by the statute of limitations eighteen months after the day of the bankruptcy declaration.
Chapter Third Procedures of Bankruptcy Trials
Part First Elements of the Bankruptcy Body
Article 512
The management of the bankrupt's assets is handed over to a paid agent called the bankruptcy trustee. The judgment declaring bankruptcy appoints one or several trustees for the bankruptcy. The number of trustees can be increased to three at any time. Their expenses and salaries are determined by a decision of the appointed judge in accordance with the tariff attached to Legislative Decree No. 79/L dated March 13, 1933. The debtor and creditors have the right to object to the decision on expenses within eight days, and the court decides on the objection in chambers.
Article 513
A monitor or two monitors from the creditors who nominate themselves for this task may be appointed at any time by a decision of the appointed judge.
Article 514
A relative or in-law of the bankrupt up to the fourth degree may not be appointed as a bankruptcy trustee.
Article 515
If it becomes necessary to add or replace one or several bankruptcy trustees, the appointed judge refers the matter to the court, which undertakes the appointment.
Article 516
If several trustees are appointed for the bankruptcy, they may only act jointly. However, the appointed judge has the right to grant one or several trustees special permission to carry out certain administrative tasks individually, and in this case, the authorized trustees are solely responsible.
Article 517
If an objection is raised against some actions of the trustees, the appointed judge decides on it within three days. The decision of the appointed judge is immediately enforceable.
Article 518
The appointed judge has the right, based on complaints submitted to him by the bankrupt or creditors or on his own initiative, to propose the dismissal of one or several trustees. If the appointed judge does not consider these complaints within eight days, they can be referred to the court. The court then hears the report of the appointed judge and the explanations of the trustees in chambers and decides on the dismissal in a public session.
Article 519
Decisions related to the appointment or dismissal of bankruptcy trustees are not subject to any form of review.
Article 520
In its judgment declaring bankruptcy, the court appoints one of its members to be the appointed judge.
Article 521
The appointed judge is specifically tasked with expediting and supervising the bankruptcy proceedings and management. He must submit a report to the court on all disputes arising from the bankruptcy that fall within the court's jurisdiction.
Article 522
The decisions of the appointed judge are immediately filed with the court registry and may be reviewed by the court. They are, in any case, subject to objection by any interested party before the court, which may also review them on its own initiative. The objection is submitted in the form of a simple declaration to the court registry within five days from the date of the decision, and the court must decide on it within eight days with a decision that is not subject to review.
Article 523
The court may at any time replace the appointed bankruptcy judge with another of its members, and neither this decision nor the decision to appoint the appointed judge is subject to review.
Part Second On the Management of the Bankrupt's Assets
Article 524
The court, in its judgment declaring bankruptcy, shall order the sealing of assets and has the right, in any case, to compel the bankrupt to appear and to detain them. In all cases, the bankrupt may not leave their place of residence without the permission of the appointed judge. If the appointed judge sees that the inventory of the bankrupt's assets can be completed in one day, the seals shall not be placed, and the inventory list shall be organized immediately.
Article 525
The court clerk must immediately send a notice to the magistrate judge with the paragraph of the judgment ordering the sealing of assets. The magistrate judge has the right to place the seals even before this judgment is issued, either on their own initiative or at the request of a creditor or several creditors. This right is only available in the case of the debtor's escape or the concealment of all or part of their assets.
Article 526
Seals are placed on the bankrupt's warehouses, offices, safes, files, books, papers, and movable assets. In the case of the bankruptcy of a partnership, it is not sufficient to place seals only on the company's main office; they must also be placed at the residence of each of the partners individually. In all cases, the magistrate judge must immediately send a notice of the sealing to the head of the court.
Article 527
If the seals have not been placed before the appointment of the bankruptcy agents, they must request the magistrate judge to place them.
Article 528
The appointed judge, upon the request of the bankruptcy agents, must order not to place seals on the following items or authorize their extraction: clothing, garments, furniture, and essential belongings for the bankrupt or their family. The delivery of what the appointed judge has permitted shall be carried out according to the statement submitted to them by the bankruptcy agents. The judge may also authorize not placing seals on: 1) Items that are prone to imminent destruction or rapid depreciation in value. 2) Items suitable for the operation of the commercial enterprise if such operation cannot be halted without harm to the creditors. The items mentioned in the previous two paragraphs shall be immediately recorded with their value in an inventory list prepared by the bankruptcy agents in the presence of the magistrate judge, who must sign the report.
Article 529
The sale of items prone to destruction or rapid depreciation in value, or those requiring costly maintenance, shall be conducted by the agents with the authorization of the appointed judge. The operation of the commercial enterprise by the bankruptcy agents may only be permitted by the court based on the report of the appointed judge if public interest or the interest of the creditors necessitates it by necessity.
Article 530
The magistrate judge extracts the commercial books from among the sealed items and delivers them to the bankruptcy agents after marking the last entries, then briefly records the condition of those books in their report. The file of promissory notes due soon or prepared for acceptance, or those requiring precautionary measures, is also extracted by the magistrate judge from among the sealed items and delivered, after describing them, to the bankruptcy agents for collection of their value, then a list of these notes is submitted to the appointed judge. As for other debts, the bankruptcy agents collect them against a receipt from them. As for letters sent to the bankrupt, they are delivered to the agents to open, and the bankrupt, if present, has the right to witness their opening.
Article 531
The bankrupt and their family may take from the bankruptcy assets a food allowance determined by the appointed judge based on the agents' proposal.
Article 532
The agents invite the bankrupt to close the books and stop their accounts in their presence. If the invitation is not met, a warning is sent requiring attendance within a maximum of forty-eight hours. The bankrupt may appoint a representative, provided they present reasons for their absence deemed acceptable by the appointed judge.
Article 533
If the bankrupt does not present the balance sheet, the agents must prepare it without delay based on the bankrupt's books, papers, and the information they obtain, then deposit the balance sheet with the court clerk.
Article 534
The appointed judge may hear the statements of the bankrupt, their clerk, employees, and any other person, whether concerning the preparation of the balance sheet or the reasons and circumstances of the bankruptcy.
Article 535
If a trader is declared bankrupt after their death or dies after being declared bankrupt, their widow, children, and heirs have the right to attend themselves or appoint someone to represent them to act on behalf of the bankrupt in preparing the balance sheet and all bankruptcy proceedings.
Article 536
Within three days from the date of sealing or from the date of the judgment declaring bankruptcy if this measure was taken before its issuance, the agents request the lifting of the seals to begin inventorying the bankrupt's assets in their presence or after inviting them according to the procedures.
Article 537
The agents prepare the inventory list in the presence of the magistrate judge in two original copies as the seals are lifted. This judge signs the list after each completion of work, and one of these copies is deposited with the court clerk within twenty-four hours, while the other remains with the agents. The agents may seek assistance from whomever they wish in preparing the inventory list and appraising the items. A comparison is made for items exempted from sealing or extracted from among the sealed items, and an inventory list is prepared for them, and their value is appraised as previously stated.
Article 538
If bankruptcy is declared after the bankrupt's death and the inventory list has not been prepared before its declaration, it shall be organized immediately according to the formats outlined in the previous article in the presence of the heirs or after inviting them according to the procedures, and the matter proceeds in this manner if the bankrupt dies before the inventory list is initiated.
Article 539
The agents must submit to the appointed judge within fifteen days from the date of assuming their duties a report or a summary account of the apparent state of bankruptcy, its circumstances, fundamental reasons, and the descriptions it appears to have. The appointed judge must promptly refer this report to the public prosecutor with their remarks. If the report is not submitted within the specified period, the judge must inform the public prosecutor, stating the reasons for the delay.
Article 540
Officers of the public prosecutor's office have the right to visit the bankrupt's residence to oversee the preparation of the inventory list, and they may at any time request the deposit of all transactions, books, and papers related to the bankruptcy.
Article 541
After completing the inventory list, the goods, money, promissory notes due to the bankrupt, books, papers, debtor's furniture, and belongings are delivered to the bankruptcy agents, who sign their receipt at the bottom of the inventory list.
Article 542
Agents must, from the moment they assume their duties, perform all necessary actions to preserve the bankrupt's rights against their debtors. They must also request the registration of mortgages on the properties of the bankrupt's debtors if the bankrupt has not requested it. The agents register in the name of the group of creditors and attach to their schedules a certificate proving their appointment. Finally, they must take a compulsory mortgage registration in favor of the group of creditors as previously indicated.
Article 543
The agents continue, under the supervision of the appointed judge, to collect the debts owed to the bankrupt.
Article 544
The appointed judge has the right, after hearing the statements of the bankrupt or after summoning them according to the rules, to authorize the agents to sell movable items and goods. He decides to conduct this sale either amicably or by public auction through the enforcement department. Under the same authorization and after hearing the bankrupt and consulting the supervisors if they exist, the agents have the exceptional right to initiate the sale of real estate, especially properties not required for the operation of the commercial enterprise, according to the procedures specified below for real estate sales after the creditors' union decision.
Article 545
The money resulting from sales and collections is immediately delivered to the bank authorized to accept state deposits after deducting the amounts determined by the appointed judge for expenses and costs. It must be proven to the appointed judge that this deposit occurred within three days from the date of receipt. If the agents delay, they are liable for interest on the amounts not deposited. All amounts deposited by the agents or other amounts deposited by other persons for the bankruptcy account cannot be withdrawn except by a decision from the appointed judge. If there is an objection, the agents must obtain a decision to lift it in advance. The appointed judge may order direct payment from the bank to the bankruptcy creditors according to a distribution schedule organized by the agents and ordered by the appointed judge.
Article 546
The agents have the right, after obtaining permission from the appointed judge and after summoning the bankrupt according to the rules, to settle any dispute related to the group of creditors, even those concerning real estate rights or claims. If the subject of the settlement is of an unspecified value or its value exceeds five hundred Lebanese pounds, the court must approve the settlement. The bankrupt is invited to attend the approval process and has the right to object to it in any case, and their objection is sufficient to prevent the settlement if its subject is real estate. Acts of waiver, withdrawal, and acquiescence can only be carried out by the agents in the same manner.
Part Third On the Determination of Debts Owed by the Bankrupt
Article 547
Since the issuance of the judgment declaring bankruptcy, creditors can submit their bonds to the bankruptcy agents along with a schedule indicating the submitted documents and the amounts claimed. The creditor or their agent signs this schedule and attaches the agent's authorization. The agents are given a receipt for the file of the presented documents, and this file can be sent to them by registered mail with acknowledgment of receipt. After the convening of the settlement assembly, the agents return the documents that were submitted to them and are only responsible for the bonds for one year from the date of this assembly.
Article 548
Creditors whose names are listed in the balance sheet and who did not present their debt instruments within the eight days following the judgment declaring bankruptcy are notified at the end of this period, either by publication in newspapers or by a letter from the agents, that they must submit their bonds along with the detailed schedule to the bankruptcy agents within fifteen days from the date of publication. This period is extended for creditors residing outside Lebanese territories according to the rules stipulated in the notification section of the Code of Civil Procedure.
Article 549
The verification of debts is conducted by the bankruptcy agents with the assistance of the supervisors, if any, while retaining the approval of the appointed judge and in the presence of the bankrupt or after summoning them according to the procedures. If the bankruptcy agents dispute the validity of the entire debt or part of it, they notify the creditor by registered mail. The creditor is given ten days to provide written or oral clarifications.
Article 550
Upon completion of the debt verification and within a maximum of three months from the date of the judgment declaring bankruptcy, the agents deposit with the court clerk a statement of the debts they have verified, mentioning the decision made by the appointed judge based on their proposal regarding each debt. The clerk must inform the creditors without delay of this deposit through publication in newspapers, and additionally send them a letter indicating the amount registered for each of them in the statement. In very exceptional cases, the period specified in the first paragraph can be exceeded by a decision from the appointed judge.
Article 551
Any creditor who has proven their debt or whose name is listed in the balance sheet may, within eight days from the date of the publications mentioned in the previous article, submit to the court clerk demands or objections by annotating the statement themselves or through an agent. The bankrupt is granted the same right. The appointed judge, after the end of this period and based on the agents' proposals, while retaining the demands and objections presented to the court, makes a final decision on the debt statement, and the agents execute his decision by signing the following declaration on the verified debt schedule: "Based on the proof of Mr. ........... or the company ................ accepted as a creditor (ordinary or privileged or mortgaged) in the bankruptcy for the amount of ............".
Article 552
Disputed debts are referred by the clerk to the commercial court to be considered in a session held within thirty days from the publication mentioned in Article 550, and they are decided upon based on the report of the appointed judge. The session date is notified to both parties by registered mail sent by the clerk at least three days before the session.
Article 553
The court has the right to temporarily decide on the necessity of accepting the creditor in the discussions for an amount specified by the decision itself, and this decision is not subject to any form of review.
Article 554
A creditor whose dispute only concerns their right to privilege or mortgage is accepted in the bankruptcy discussions as an ordinary creditor.
Article 555
Creditors who failed to attend or present their debt instruments within the specified periods, whether known or unknown, do not participate in the distribution that will take place, but the door for objections remains open to them until the completion of the money distribution. The expenses of the objection remain their responsibility. Their objection does not stop the execution of the distributions ordered by the appointed judge, but if new distributions are initiated before their objection is resolved, they participate in them for the amount temporarily determined by the court, and this amount is retained until after their objection is resolved. If they are later recognized as creditors, they are not entitled to claim anything from the distributions previously ordered by the appointed judge, but they are entitled to deduct from the undistributed assets the shares due to their debts from the initial distributions.
Article 556
Bonds issued by a commercial company in a legal manner are not subject to the debt verification process.
Chapter Fourth On the Resolution of Bankruptcy Cases
Part First On Simple Settlement
Article 557
The delegated judge must, within three days following the conclusion of the debt schedule or within three days following the court's decision issued pursuant to the provisions of Article 553 if there is a dispute, invite the creditors whose debts have been proven to negotiate a settlement contract. The newspaper publications and invitation letters must include the purpose for which the meeting is held. As for the creditors whose debts have been temporarily accepted, each of them is invited by registered letter within three days following the court's decision regarding them.
Article 558
The assembly is held under the chairmanship of the delegated judge at the place, day, and hour appointed. Creditors whose debts have been definitively or temporarily accepted participate, either personally or through their appointed representatives. The bankrupt is invited to this meeting and must attend in person; they may not send a representative unless for valid reasons approved by the delegated judge.
Article 559
The bankruptcy agents present a report on its status and the transactions and operations conducted, and the statements of the bankrupt must be heard. The report of the bankruptcy agents, containing their signatures, is submitted to the delegated judge, who prepares a record of what was said and decided in the assembly.
Article 560
The creditors in discussion cannot accept a settlement contract after bankruptcy unless the following conditions are met; otherwise, the contract is void. This contract is only concluded by the vote of a number of creditors constituting the majority and holding two-thirds of the amount of debts accepted definitively or temporarily according to the provisions of Part Three of Chapter Three. The debts claimed by those who did not participate in the vote are deducted when calculating the majority of votes and the majority of amounts. The spouse of the bankrupt, their relatives, and in-laws up to the fourth degree, and persons who have transferred to them according to the conditions specified in the chapter on preventive settlement, do not participate in the vote.
Article 561
Creditors holding a mortgage or a lien on movable property are not entitled to vote unless they waive their securities according to the conditions specified in the chapter on preventive settlement.
Article 562
The settlement contract must be signed in the same session; otherwise, it is void. If only the majority of the number of creditors or the majority holding two-thirds of the debts agree to the settlement, the discussion is postponed for eight days without further delay. In this case, creditors who attended the first assembly or were legally represented and signed the minutes of its session are not required to attend the second assembly. The decisions they made and the approvals they supported remain valid unless they come and amend them in the final meeting. The signature of creditors in the assemblies can be replaced by their signature on a voting card attached to the minutes.
Article 563
A settlement cannot be concluded for a bankrupt convicted of fraudulent bankruptcy, and if an investigation is ongoing regarding fraudulent bankruptcy, creditors are invited to decide whether they intend to discuss the settlement upon acquittal, postponing the decision on this matter until after the conclusion of the proceedings. This postponement can only be decided if the majority of the number and the majority of the amount specified above are present. If it is necessary to conduct the discussion on the settlement after the postponement period ends, the rules specified in the previous article apply to the new discussion.
Article 564
If the bankrupt is convicted of simple bankruptcy, the settlement contract is possible. However, creditors can, in the case of initiating proceedings, postpone the discussion until after their conclusion according to the provisions of the previous article.
Article 565
If the matter concerns a commercial company that has issued bonds, the settlement cannot be concluded unless the bondholders' assembly approves it and expresses its opinion on the conditions specified in the chapter on preventive settlement.
Article 566
All creditors who had the right to participate in the settlement contract and those whose rights were subsequently recognized, as well as representatives of the bondholders' group if they exist, may object to the settlement. The objection must be justified and notified to the bankruptcy agent and the bankrupt within eight days following the settlement contract or the bondholders' assembly; otherwise, it is void. It must include their invitation to the first session held by the court. If the bankruptcy has only one agent who opposes the settlement contract, they must request the appointment of a new agent, and this agent must apply the procedures stipulated in this article.
Article 567
The settlement ratification process is conducted before the court based on the request of the preceding party. The court may not decide before the expiration of the eight-day period stipulated in the previous article, and if objections are submitted during the mentioned period, the court decides on the objections and the ratification case in a single judgment. If the objection is accepted, the judgment invalidating the settlement affects all concerned parties.
Article 568
In all cases, before ruling on the ratification issue, the delegated judge prepares a report on the characteristics of the bankruptcy and the possibility of accepting the settlement.
Article 569
If the rules stipulated above are not observed or if reasons related to public interest or the interest of creditors prevent the settlement, the court must then refuse ratification. It may also refuse to ratify the settlement contract if it does not include a provision allowing the court president to appoint one or several commissioners tasked with overseeing the execution and release of the mortgage related to the group of creditors if they have authorized it, and monitoring the conversion of assets into cash.
Article 570
The ratification of the settlement contract makes it binding on all creditors, whether mentioned in the balance sheet or not, and whether their debts are verified or unverified. It is effective even against creditors residing outside Lebanese territories and against those temporarily admitted to the discussions, regardless of the amount that will be allocated to them later by the final judgment. However, the settlement is not effective against privileged and mortgaged creditors if they have not waived them, nor against ordinary creditors if their debt arose during the bankruptcy period.
Article 571
Following the issuance of the ratification judgment and its acquisition of the res judicata status, the effects of bankruptcy are terminated while retaining the loss of political rights stipulated in Article 500. The bankruptcy agents, whose function ends, present their final account to the bankrupt in the presence of the judge, where it is discussed and decided. The agents then hand over to the bankrupt all their assets, books, papers, and items, and they are given a receipt in exchange for their delivery. The delegated judge prepares a record of all this, and their function ends. If a dispute arises, the court decides on it.
Article 572
The settlement contract includes deadlines for the payment of debts in installments over successive periods and generally includes the debtor's release from a large or small part of his debt. However, this release leaves a natural obligation on his part. The settlement may only be concluded on the condition of payment if the debtor becomes solvent according to the conditions specified in the chapter on preventive settlement.
Article 573
The mortgage established for the group of creditors remains as security for the payment of the debt amount specified in the settlement contract.
Article 574
Creditors, in addition, have the right to request a guarantor or several guarantors to ensure the execution of the settlement contract.
Article 575
As long as the amount specified in the settlement contract has not been fully paid, the debtor is not allowed to undertake any unusual transaction not required by the course of business itself, unless there is an agreement to the contrary. The provisions specified in the chapter on preventive settlement must be observed in this regard.
Article 576
No lawsuit to annul the settlement is accepted after ratification unless it is based on fraud discovered after this ratification and was due to the concealment of the bankrupt's assets or exaggeration of the debts claimed from him. Any creditor may file this lawsuit, provided it is filed within five years after the discovery of the fraud. The settlement contract is also annulled if the bankrupt is convicted of fraudulent bankruptcy. The annulment of the settlement contract releases the guarantors who did not participate in the fraud.
Article 577
If, after the ratification of the settlement contract, a pursuit for fraudulent bankruptcy is initiated and a temporary or non-temporary arrest warrant is issued against him, the court may order the precautionary measures it is entitled to take. These measures are automatically canceled upon the issuance of a decision preventing prosecution or a judgment of acquittal or exemption.
Article 578
If the bankrupt does not fulfill the terms of the settlement contract, a lawsuit may be filed against him in court to rescind this contract, attended by the guarantors or they are summoned according to the rules if there are guarantors.
Article 579
When the court is informed of the judgment convicting fraudulent bankruptcy, it appoints a delegated judge and one or several trustees for the bankruptcy. It also makes this appointment in the decision annulling or rescinding the settlement contract. These trustees may proceed with sealing. They must promptly, with the assistance of the settlement judge and based on the old inventory list, review the financial documents and papers, and conduct a supplementary inventory if necessary. They must also prepare an additional balance sheet. They are also required to promptly post and publish in the relevant newspapers, along with a summary of the judgment appointing them, an invitation to new creditors - if any - requesting them to present their debt documents within fifteen days for verification. This verification is conducted in the manner specified in the third part of the third chapter.
Article 580
The verification of the presented debt documents is initiated without delay in accordance with the provisions of the previous article. There is no need for a new verification regarding debts that have already been verified and confirmed, while retaining the right to reject or reduce debts if they have been fully or partially paid at that time.
Article 581
After completing the aforementioned tasks, creditors are invited to express their opinion on retaining or replacing the trustees if a new settlement is not concluded.
Article 582
The actions taken by the bankrupt after the ratification of the settlement contract and before its annulment or rescission are not void unless fraud affecting the creditors' rights has occurred.
Article 583
The creditors prior to the settlement contract regain all their rights concerning the bankrupt alone. As for the group of creditors, they can only enter within the following limits: If they have not received anything from the percentage rate during distribution, they enter with their full debt. If they have received part of that rate, they enter with a part of their original debts equivalent to the part they were promised from the percentage rate and did not receive. The provisions of this article apply in the event of a second bankruptcy that was not preceded by the annulment or rescission of the settlement contract.
Part Second In the Union of Creditors
Article 584
If no settlement is reached, the creditors are necessarily in a state of union. The appointed judge consults them without delay regarding management activities and the matter of retaining or replacing the bankruptcy trustees. Privileged creditors or those holding a mortgage on real or movable property are accepted. A record of the creditors' statements and remarks is organized. Upon the court's review, union trustees are appointed, and the outgoing bankruptcy trustees must present an account to the new trustees in the presence of the appointed judge and after summoning the bankrupt according to the rules.
Article 585
Creditors are consulted on whether it is possible to provide the bankrupt with assistance from the bankruptcy estate. If the majority of present creditors agree, an amount may be given as assistance from the bankruptcy estate. The trustees propose an amount, and the appointed judge determines it by a decision that only the trustees can contest before the court.
Article 586
If a partnership company goes bankrupt, creditors may choose to accept a settlement only with one or several partners. In this case, the total assets of the company remain subject to the creditors' union system. Personal assets belonging to those with whom the settlement was made are exempted. This special contract with them must not include an obligation requiring them to pay any rate except from assets outside the company's assets. The partner with whom a special settlement is made is released from all solidarity.
Article 587
The bankruptcy trustees represent the group of creditors and carry out liquidation activities. However, creditors may authorize them to continue investing the existing assets. The decision to authorize them specifies the duration and extent of this investment, as well as the amounts that may be retained by them to cover expenses and costs. This decision can only be made in the presence of the appointed judge and a majority representing three-quarters of the creditors in number and three-quarters of their debts. The bankrupt and opposing creditors may object to this decision. However, the objection does not require a halt in execution.
Article 588
If the trustees' actions result in obligations exceeding the value of the union's assets, the creditors who authorized those actions are solely personally responsible for what exceeds their share in the mentioned assets, but their liability does not exceed the limits of the authorization they gave and they share it in proportion to their debts.
Article 589
The trustees proceed to collect unpaid debts. They may accept settlements under the same conditions previously followed despite any objections from the bankrupt. As for lump-sum agreements, creditors must discuss them in an assembly convened by the appointed judge at the request of the trustees or any creditor. The court must grant the trustees authorization in this regard.
Article 590
The trustees must proceed with the sale of movable assets of all kinds, including the commercial establishment, under the supervision of the appointed judge and without the need to summon the bankrupt, in accordance with the procedures stipulated for the sale of movables during the preparatory period.
Article 591
If no compulsory sale transaction was initiated before the union, the sale is entrusted exclusively to the trustees, who must commence it within eight days with authorization from the appointed judge and under the care of the enforcement department located at the property site.
Article 592
The trustees prepare the terms book according to which the auction will be conducted, including what Article 744 of the Code of Civil Procedure requires to be mentioned. In addition to the above, the sale is subject to Articles 746 and 747 (first paragraph) and 753 to 761 and 763 to 767 and 778 to 792 of the Code of Civil Procedure, except for provisions that do not conflict with the nature of this transaction. The auction, once conducted, frees the properties from the constraints of privileges and real estate mortgages.
Article 593
The appointed judge calls the united creditors to meet at least once in the first year. Also, in subsequent years if necessary. The trustees must present an account of their management at the meetings.
Article 594
The bankruptcy estate is distributed among all creditors in proportion to the verified debt of each, after deducting the expenses of managing the bankruptcy, the allowances granted to the bankrupt or their family, and the amounts paid to privileged creditors.
Article 595
For this purpose, the trustees submit a monthly statement to the appointed judge about the state of the bankruptcy and the amounts deposited in the bank designated to accept state deposits. The appointed judge then orders the distribution of the money to the creditors as necessary, determines its amount, and ensures that the order is communicated to all creditors.
Article 596
The trustees may not make any payment except against the presentation of the document proving the debt. They note on the document the amount they paid or ordered to be paid. If presenting the document is not possible, the appointed judge may order payment after reviewing the debt investigation report. In all cases, the creditor acknowledges receipt on the margin of the distribution schedule.
Article 597
After the liquidation of the bankruptcy is completed, the appointed judge calls the creditors to a meeting. In this final meeting, the trustees present their account, and the bankrupt is present or summoned according to the rules. The creditors express their opinion on the matter of the bankrupt's excuse, and a record is made for this purpose in which each creditor's statements and remarks are included. After this meeting adjourns, the union is necessarily dissolved.
Article 598
The appointed judge submits to the court the creditors' decision regarding the bankrupt's excuse and a report on the characteristics and circumstances of the bankruptcy. The court then issues its decision on whether the bankrupt is excused or not excused.
Article 599
Those convicted of fraudulent bankruptcy and those sentenced for forgery, theft, fraud, breach of trust, or embezzlement of public funds cannot be considered excused.
Part Third Settlement by Waiver of the Bankrupt's Assets
Article 600
It is permissible to conclude a settlement by a total or partial waiver of the bankrupt's assets. The conditions for this settlement are the same as those stipulated for a simple settlement. However, the lifting of the bankrupt's hand concerning the waived assets does not end with the conclusion of this settlement; rather, these assets are sold under the care of agents appointed in the manner of union agents. The sale and distribution of the money are subject to the same rules applicable in the case of a union. Then, the debtor is given from the proceeds of the sale of the waived assets what exceeds the debts owed by him.
Part Fourth On Closing the Bankruptcy Due to Insufficient Assets
Article 601
If at any time before the ratification of the settlement or the formation of a creditors' union, the course of bankruptcy proceedings is halted due to insufficient assets, the court may, based on the report of the appointed judge or on its own initiative, rule to close the bankruptcy. With this ruling, each creditor regains the right to individual litigation.
Article 602
The bankrupt and any person with rights may at any time request the court to reverse this ruling if they prove the existence of sufficient funds to cover the bankruptcy expenses or if they deliver the sufficient amount to the agents. In all cases, the expenses of the litigation conducted in accordance with the provisions of the previous article must be paid first.
Chapter Fifth On the Special Rights That Can Be Asserted on the Bankruptcy
Part First On Creditors with Debts Owed by Multiple Debtors
Article 603
A creditor holding debt instruments signed, endorsed, or guaranteed in solidarity by the bankrupt and his partners in the obligation, who are also bankrupt, participates in the distribution with all groups of creditors, and his participation is based on the nominal amount of his debt until it is fully paid.
Article 604
Bankruptcies of those obligated under a single obligation cannot demand from each other in court the shares paid unless the total of those shares paid by the mentioned bankruptcies exceeds the total principal of the debt and its accessories. In this case, the excess returns to the obligors who are guaranteed by the rest of their partners in the obligation, taking into account the order of their obligations.
Article 605
If the creditor holds instruments created in solidarity against the bankrupt and other persons and has received part of his debt before the bankruptcy occurs, he only participates with the group of creditors after deducting the part received, and retains, for the remaining debt owed to him, his rights against the partner in the obligation or the guarantor. As for the partner in the obligation or the guarantor who made the partial payment, he participates with the same group of creditors concerning all that he paid on behalf of the bankrupt.
Article 606
Despite the conclusion of the settlement, creditors retain the right to file a lawsuit against the partners of the bankrupt in the obligation to claim all that is owed to them from the debt, and these partners have the right to intervene in the settlement ratification case to present their observations.
Part Second On Recovery and Refusal to Deliver
Article 607
Persons claiming ownership of assets in the possession of the bankrupt may request their recovery, and the bankruptcy trustees may accept recovery requests with the approval of the appointed judge. If there is a dispute, the court shall decide after hearing the statements of the appointed judge.
Article 608
In particular, it is permissible to demand the return of commercial papers and other unpaid securities found in the possession of the bankrupt at the time of the bankruptcy opening if their owner had delivered them to the bankrupt as an agent to collect their value and keep them at his disposal or if their delivery was designated for a specific payment. It is also permissible to request the recovery of cash deposited with the bankrupt if the depositor can prove their identity.
Article 609
It is also permissible to request the recovery of all or part of the goods as long as they are still in existence if they were delivered to the bankrupt as a deposit or for sale on behalf of their owner. It is also permissible to request the recovery of the price of those goods or part of their price if it has not been paid or has not been offset in a current account between the bankrupt and the buyer.
Article 610
The seller may refuse to deliver goods and other movable items sold if they have not been delivered to the bankrupt or sent to him or another person on his behalf.
Article 611
The seller may recover goods sent to the bankrupt to exercise his right to retain them as long as they have not been delivered to the bankrupt's warehouses or a place where he has the appearance of control or to the warehouses of an intermediary tasked by the bankrupt to sell them on his behalf. However, the recovery request is not accepted if the goods have been resold before arrival without deception to another good-faith buyer.
Article 612
If the buyer has received the goods before his bankruptcy, the seller may not invoke a claim for rescission, recovery, or any privilege.
Article 613
In cases where the seller may exercise his right to retain the goods, the bankruptcy trustees, after obtaining authorization from the appointed judge, may insist on the delivery of the goods after paying the agreed price for the goods.
Article 614
If the trustees do not make this decision, the seller may rescind the sale provided he pays the creditors' group the amount received on account. He may obtain compensation for the damage suffered due to the rescission of the sale and may join the ordinary creditors' group for this purpose.
Article 615
- Amended The recovery rights pertaining to the non-bankrupt spouse are determined according to the rules outlined below.
Part Third Holders of Secured Debts by Pledge or Privilege on Movable Property
Article 616
Creditors of the bankrupt who legally hold a mortgage or special privilege on movable property are only listed in the creditors' schedule for reference purposes.
Article 617
The agents may, at any time, after obtaining authorization from the appointed judge, reclaim the pledged items for the benefit of the bankruptcy, after settling the debt.
Article 618
If the agents do not reclaim the pledged item and the creditor sells it for a price exceeding the debt, the agents receive the surplus. If the price is less than the debt, the pledged creditor participates with the group of creditors as an ordinary creditor for the remaining debt.
Article 619
The agents present to the appointed judge a statement of the names of creditors claiming a privilege on movable assets. The judge may authorize the settlement of their debts from the first cash amount received, if necessary. If there is a dispute over the privilege, the court will decide on it.
Part Fourth Holders of Secured Debts by Mortgage or Privilege on Real Estate
Article 620
If the distribution of the price of real estate occurs before the distribution of the price of movables, or if both distributions occur together, then creditors holding a privilege or mortgage who have not fully satisfied their debt from the price of the real estate shall participate proportionally with the remaining amount owed to them alongside ordinary creditors in the distribution of funds allocated to this group of creditors, provided that their debts are verified according to the prescribed forms mentioned previously.
Article 621
If one or more distributions of the money obtained from the price of movables are conducted before the distribution of the price of real estate, then creditors holding a privilege or mortgage with verified debts shall participate in the distribution proportionally with the total amount of their debts, while retaining, if necessary, what they are required to return as will be explained.
Article 622
After the sale of real estate and the final settlement of accounts for creditors with privileges or mortgages according to their ranking, those entitled according to their rank cannot receive the full amount of their debt from the price of the mortgaged real estate unless they deduct what they have received from the group of ordinary creditors. As for the amounts deducted in this manner, they do not remain with the group of creditors with mortgages but are returned to the group of ordinary creditors for whose benefit these amounts are deducted.
Article 623
As for creditors holding a mortgage whose share in the distribution of the price of real estate only partially satisfies their debt, the following procedure applies to them: Their rights in the funds allocated to the group of ordinary creditors are finally determined by the amounts that remain due to them after deducting their share in the distribution of the price of real estate. Any excess amount they received in the previous distribution is deducted from their share in the price of real estate and returned to the group of ordinary debts.
Article 624
Creditors who have no share in the distribution of the price of real estate are considered as ordinary creditors and are subject in this capacity to the effects of settlement and all actions related to the group of ordinary debts.
Part Fifth On the Rights of the Bankrupt's Wife
Article 625
- Amended The assets of the non-bankrupt spouse, both movable and immovable, remain outside the bankruptcy estate.
Article 626
- Amended Included in the bankruptcy estate are the assets of the non-bankrupt spouse that are proven to have been purchased with the bankrupt's money during the five years preceding the declaration of bankruptcy. The aforementioned fact can be proven by all means of evidence acceptable in commercial matters. It is considered sufficient proof to merely establish that the non-bankrupt spouse had no personal resources at the time of acquiring those assets, unless the latter provides evidence to the contrary.
Article 627
- Amended If the non-bankrupt spouse pays debts on behalf of the bankrupt spouse, they may claim their rights like other creditors in the bankruptcy, unless it is proven that those debts were paid from the bankrupt spouse's assets.
Article 628
- Amended If the spouse was a merchant at the time of marriage or had no other specific occupation and then became a merchant within the same year, the real estate they owned at the time of marriage or acquired by inheritance, inter vivos gift, or will shall be subject solely to the compulsory insurance stipulated in paragraph 2 of Article /131/ of the Real Estate Law issued by Decision No. 3339.
Article 629
- Amended The non-bankrupt spouse, whose bankrupt spouse was a merchant at the time of marriage or had no other specific occupation and then became a merchant within the year following the marriage, is not entitled to file any lawsuit against the bankruptcy for the benefits stipulated in the marriage contract. In this case, creditors are not entitled to invoke the benefits granted by the non-bankrupt spouse in the said contract. Gifts granted by the bankrupt spouse to the non-bankrupt spouse during the five years preceding the declaration of bankruptcy are automatically nullified.
Title Third On Summary Trial Procedures
Article 630
If it results from the balance sheet presented by the bankrupt or from subsequent information that the assets of the bankruptcy do not exceed two thousand five hundred Lebanese pounds or it appears that the rate intended to be distributed cannot exceed ten percent, the court may, either on its own initiative or at the request of the creditors, order the bankruptcy proceedings to be conducted according to the procedures called "summary."
Article 631
The aforementioned procedures differ from ordinary procedures by the following features: First - The deadlines for presenting debt documents, objections, appeals, and other deadlines stipulated in articles 497, 512, 548, 566, and 579 of this law are reduced by half. If the deadline is fifteen days, it is reduced to eight days. However, the extension of the deadline stipulated in article 548 for the benefit of creditors residing outside Lebanese territories is not subject to reduction. Second - Seals are not applied. Third - Supervisors are not appointed. Fourth - The appointed judge handles disputes regarding debts, with the right to appeal to the appellate court if necessary. Fifth - The appointed judge has the right to authorize all settlements. Sixth - Only one distribution of funds is conducted. Seventh - The appointed judge resolves disputes related to the account of the bankruptcy agent and their allocations.
Title Fourth On Negligent or Fraudulent Bankruptcy
Article 632
The primary criminal courts consider cases of negligent bankruptcy based on the request of the bankruptcy agents or any creditor or the public prosecution. The perpetrator of this bankruptcy is punished with imprisonment from one month to one year, taking into account the mitigating circumstances of the crime.
Article 633
Any merchant found in one of the following situations is considered a negligent bankrupt: First - If his personal or household expenses are deemed extravagant. Second - If he spends large amounts on pure gambling operations or on stock market speculations or on purchasing goods. Third - If he buys, before ceasing to pay and with the intent to delay his bankruptcy, a quantity of goods to sell them for less than the usual price or engages in the same intent in contracting loans and trading commercial papers or other burdensome means to obtain money. Fourth - If he, after ceasing to pay, makes a payment to one of the creditors that harms the interest of the group.
Article 634
Any merchant found in one of the following situations can be considered a negligent bankrupt: First - If he undertakes obligations for others without compensation that are considered very burdensome given his situation at the time of commitment. Second - If he declares bankruptcy again without having fulfilled the obligations imposed on him by a previous settlement. Third - If he does not act according to the obligations related to the commercial register. Fourth - If he does not submit to the court clerk within twenty days from the date of ceasing to pay the declaration required by this law, or if the mentioned declaration does not include the names of all the general partners. Fifth - If he does not organize books and does not conduct a proper inventory, or if the books and inventory lists are incomplete or contrary to the principles or do not match his actual financial situation, unless there is deception.
Article 635
The expenses of the lawsuit filed by the public prosecution for negligent bankruptcy cannot, under any circumstances, be charged to the group of creditors. In the case of a settlement, the public treasury cannot demand from the bankrupt what it has paid in expenses except after the expiration of the deadlines granted under the mentioned contract.
Article 636
The expenses of lawsuits filed on behalf of the creditors by the bankruptcy agents are borne by the group of creditors if the bankrupt is acquitted and by the public treasury if he is convicted, with the right to recourse against the bankrupt according to the previous article.
Article 637
The agents cannot file a lawsuit for negligent bankruptcy nor take the status of a personal plaintiff on behalf of the group of creditors except after being authorized by a decision taken by the majority of the number of present creditors.
Article 638
The expenses of the criminal lawsuit filed by one of the creditors are paid by the public treasury if the bankrupt is convicted and by the suing creditor if he is acquitted.
Article 639
- Amended Any bankrupt merchant who hides his books or embezzles or conceals part of his assets or is found to have fraudulently claimed to be indebted with a debt not owed, whether in his books, official documents, or private signed obligations and balance sheets, is considered a fraudulent bankrupt and is punished with the penalty specific to fraudulent bankruptcy.
Article 640
Under no circumstances can the expenses of a fraudulent bankruptcy lawsuit be charged to the group of creditors, and if a creditor or several creditors take the status of a personal plaintiff, the expenses in the case of acquittal remain their responsibility.
Article 641
Punished with the penalty of fraudulent bankruptcy: First - Persons proven to have embezzled or concealed for the benefit of the bankrupt all or part of his movable or immovable property, all while retaining the conditions of subsidiary intervention stipulated in the Penal Code. Second - Persons proven to have fraudulently presented fictitious debts in the bankruptcy with the intent to establish them, whether in their name or in the name of fictitious persons. Third - Persons who conducted business under someone else's name or a false name and committed acts considered as fraudulent bankruptcy.
Article 642
The wife of the bankrupt and his ascendants, descendants, and in-laws of the same degree, if they embezzle or transfer or conceal items related to the bankruptcy without colluding with the bankrupt, are punished with the penalty of theft.
Article 643
In the cases stipulated in the previous articles, the primary or appellate court decides on the following matters even if there is an acquittal: First - It must, on its own initiative, order the return of all fraudulently embezzled funds, rights, and shares to the group of creditors. Second - It rules on the compensation requested for damages and determines its amount in the judgment it issues.
Article 644
The bankruptcy agent who commits embezzlement in managing his affairs is subject to the penalty stipulated for the misdemeanor of breach of trust.
Article 645
Any creditor who agrees with the bankrupt or any other person on special benefits in exchange for his vote in the bankruptcy assemblies or concludes a special treaty resulting in a special benefit from the bankrupt's assets is punished with imprisonment from one month to one year and a fine not exceeding two hundred and fifty Lebanese pounds, with the possibility of mitigating circumstances. The imprisonment period can be increased to two years if the creditor is a bankruptcy agent.
Article 646
Moreover, the mentioned treaties are declared void concerning all persons, even the bankrupt. The creditor must return the money and amounts obtained under these treaties to whom they legally belong.
Article 647
All decisions and judgments issued under the provisions of this chapter are posted and published in the formats prescribed for publishing the judgment declaring bankruptcy.
Article 648
The prosecutions conducted for negligent or fraudulent bankruptcy do not require any modification in the ordinary rules related to the management of the bankruptcy.
Article 649
However, the agents are required in this case to hand over to the public prosecution all documents, instruments, papers, and information requested from them.
Article 650
The documents, instruments, and papers handed over by the agents during the investigation are placed for review in the court clerk's office and are reviewed upon the agents' request. They may take special summaries or request official copies, which the clerk sends to them. As for the documents, instruments, and papers not ordered to be deposited with the judiciary, they are handed over after the primary or appellate judgment to the agents against a receipt.
Title Fifth On Rehabilitation
Article 651
After ten years have passed since the declaration of bankruptcy, the bankrupt automatically regains their status without undertaking any procedure if they were not negligent or fraudulent. The restoration of status in this manner cannot affect the functions of the agents if their mission has not ended, nor the rights of the creditors if their debts have not been fully discharged.
Article 652
The status is automatically restored to the bankrupt who has paid all the amounts due, principal and interest, along with expenses. They cannot be required to pay interest for more than five years. For a partner in a partnership that has gone bankrupt to automatically regain their status, they must prove that they have fulfilled the aforementioned conditions for their share of the company's debts, even if they have obtained a private settlement. If one or several creditors have disappeared, are absent, or refuse to accept payment, the amount due to them is deposited in a bank authorized to accept state deposits, and proof of this deposit is considered as a receipt.
Article 653
The restoration of status is permissible for the bankrupt recognized for their integrity: First - If they have fully paid all the installments promised in the settlement contract they obtained. The provision of this paragraph applies to a partner in a partnership declared bankrupt who has obtained a private settlement from the creditors. Second - If the bankrupt proves that the creditors have fully discharged their debts or have unanimously agreed to restore their status.
Article 654
Any request for the restoration of status is submitted to the public prosecutor at the court that issued the bankruptcy judgment. It is accompanied by receipts and supporting documents. This judge refers all documents to the president of the court that declared the bankruptcy and to the public prosecutor in the area where the applicant resides, ensuring they gather all possible information regarding the validity of the presented facts. The mere presentation of receipts and other documents required for the restoration of status does not make their registration mandatory.
Article 655
The court clerk sends a registered letter notifying the request for the restoration of status to each of the creditors whose debts are established on the bankruptcy or recognized in a subsequent judicial decision and who have not received full payment of their debts.
Article 656
Any creditor who has not fully received the rate determined for them in the settlement contract or has not fully discharged their debtor's obligations has the right, within a month from the date of this notification, to object to the restoration of status by submitting a simple petition to the court registry with supporting documents. The objecting creditor can, through a petition submitted to the court and notified to the debtor, intervene in the proceedings for the restoration of status.
Article 657
After the deadline has passed, the results of the investigations required above and the objections submitted by the creditors are referred to the public prosecutor who received the request, and they forward them with their reasoned opinion to the president of the court.
Article 658
The court, when necessary, summons the applicant for the restoration of status and the objectors and hears their statements in a deliberation room. The applicant may be assisted by a lawyer. In the case of full payment of debts, the court suffices with verifying the validity of the presented documents, and if it finds them in accordance with the law, it orders the restoration of status. If the restoration of status is discretionary, the court assesses the circumstances of the case and then issues the judgment in a public session. The judgment can be appealed, whether by the applicant for the restoration of status, the public prosecutor, or the creditors, within a month from the notification sent to them by registered letter. The judgment is also notified to the objecting creditors, who can exercise their right to object before the Court of Appeal. After review, the Court of Appeal decides on the case according to the procedures stipulated above.
Article 659
If the request is rejected, it cannot be reconsidered until after a year has passed. If the request is accepted, the judgment issued by the court of first instance or appeal is recorded in the register of the bankruptcy court or the court in the area where the applicant resides. This judgment is also sent to the public prosecutor who received the request for the restoration of status, and the latter sends it to the public prosecutor in the applicant's place of birth to note it against the bankruptcy declaration in the criminal record. This judgment is also recorded in the commercial register.
Article 660
A request for the restoration of commercial status is not accepted for fraudulent bankrupts or persons convicted of theft, fraud, or breach of trust unless they have obtained criminal rehabilitation.
Article 661
The restoration of status may be granted to the bankrupt after their death.
Title Sixth Special Provisions on Company Bankruptcy
Article 662
Except for the rules outlined in the previous chapters, companies are subject to the following provisions.
Article 663
All commercial companies, except for joint ventures, may obtain a preventive settlement and may also be declared bankrupt. Even if the company is in liquidation, it may be declared bankrupt. This also applies even if the company has been judicially annulled, provided that the company is actually continuing. • Article 664 The request for preventive settlement or the declaration aimed at obtaining a bankruptcy judgment must include the signature of the partner or partners who have the right to sign on behalf of the company if it is a partnership or a limited partnership, and the signature of the manager or board member who performs his duties based on a board decision if it is a joint-stock company. If the company has entered into liquidation, the liquidator must submit this declaration. The request or declaration is filed with the court clerk in the area where the company's headquarters is located.
Article 665
All partners in partnerships and all authorized representatives in limited partnerships must also, each in their respective capacity, make the declaration required by this law within twenty days from the date the company ceases to pay. The court must declare in the same judgment the bankruptcy of the company and the bankruptcy of the general partners, and initially appoint one delegated judge and one bankruptcy trustee, even if the bankruptcies are distinct from each other, and the groups of creditors are of different compositions.
Article 666
The bankruptcy trustee in all companies has the right to compel the partners to fully pay their capital contributions even before the due date specified in the company's bylaws.
Article 667
If the company is fraudulently or negligently bankrupt, a criminal liability lawsuit may be filed against the partners in a partnership, the authorized partners in a limited partnership, and the managers of joint-stock companies or board members who perform managerial functions, if necessary.
Overview Final
Article 668
• Article 668 All previous legislative texts related to the matters stipulated in this law: Lose their legal force once this law becomes enforceable. Nothing has been amended in the laws related to the formation of commercial courts and their trial procedures. This law shall be put into effect six months after its publication in the Official Gazette.