Knowledgeable Farmer: Advantages of the New Insolvency Law for the Agricultural Sector

The new insolvency law that came into effect last September has significantly changed the behavior of debtors. One of the changed conditions may be particularly significant for the agricultural sector

(Illustration: ShutterStock)

Tractor in the field (Photo: ShutterStock)

The following scenario is painfully familiar to many business owners in the Gaza Strip, and especially to farmers in it: warming up in the Strip, escalating, military operation, or just a terrible "routine" of Molotov cocktails - and the economy is collapsing financially.
Such an economic collapse took place in 2008 in the agricultural business of pepper growing in the Gaza envelope. Following the situation, the four business partners sought to reach a debt settlement with their creditors and avoid bankruptcy proceedings. Under the Bankruptcy Ordinance, under the agreement of 75% of the obligee and 50% of all creditors, a settlement can be reached, provided that the amount repaid to the creditors, according to the settlement, is at least 30% of the entire debt.

The economy collapsed, followed by the settlement

Practical meaning of the law words for the debtor: If at least half of the creditors holding together 75% or more of their debts agree to a debt settlement with at least 30% of the debts, the arrangement will be approved by the court and it can avoid bankruptcy proceedings in its entirety.

The four southern partners whose debts reached NIS 100 million, managed to reach a total of NIS 30 million and believed they were embarking on a new path. Unfortunately, the blows have not stopped beating them. A firm cliff operation, the collapse of the euro currency and more brought them about eight years later to a situation that failed to meet their commitments and did not return even a percentage or two of the sum agreed upon, and the arrangement collapsed.
At this point, two of the partners have already passed away, and the remaining two have applied for a new settlement for NIS 8 million. Despite the support of 50% of creditors holding 75% of oblivion, their application was rejected, as the requested amount did not meet the required minimum. There was only one option now - bankruptcy.

Rocket hit by greenhouse in space, July 2014 (Photo: Eli Sharon)

Hit the greenhouse in the spaces last night during a ceasefire. July 2014 (Photo: Eli Sharon, Walla system! NEWS)

When a farmer goes bankrupt

Bankruptcy in such a case, as in many insolvencies involving farmers, may prove to be a devastating solution - for both the debtor and the creditors. The farmer, unlike other workers in the economy, has no place to work except the farm he has set up with both hands. When it is taken away from it as part of the realization of the assets that are in the bankruptcy proceeding, it will be left to nothing. Realizing the assets will not benefit the creditors either, since agricultural real estate is of no value unless operated.

In the case of creditors, in this case the agreement of the owners of farms in the moshavim was also in accordance with which the farm is not part of the estate of a deceased. In any other case, when a debtor dies, his estate is not disclosed to his heirs but is exercised for the benefit of the creditors.

Thus, the farms of the two deceased partners - which were the main assets that could be exercised - automatically shifted to the possession of the spouses, as they are not part of the estate. Since spouses do not have to, farms could not be realized.

Cancellation of minimum conditions

The new insolvency law, which went into effect last September, shredded the cards and repealed the bankruptcy ordinance. According to the new law, a settlement with creditors still requires 50% of creditors holding 75% of the obligee, but instead of a minimum of 30% of the debt, the law requires only one thing: the amount proposed for the settlement exceeds the amount that would be received as a result of the bankruptcy procedure, including It is the realization of debtor assets.
The partners have gone to court again, equipped with an economic opinion showing that bankruptcy will at most result in repayment of about NIS 2-3 million, and that too will only happen in years. In light of the new law, the court accepted their request, the arrangement was approved and the debtors started again, hoping for greater success this time.

Adv. And accountant Gabriel Habibian specializes in insolvency, liquidations and taxes.
Phone: 077-2314412
The article is courtesy of Zap Legal

The information presented in the article does not constitute or replace legal advice and does not constitute a recommendation for taking proceedings or avoiding proceedings. Anyone who relies on the information contained in the article does so at his own risk