1. Contents for Proposed Enterprise Rehabilitation and Liquidation Law 2 The World Bank Global Initiative on Insolvency and Creditor/Debtor Regimes Charles G. Case II U.S. Bankruptcy Judge (retired) 10 November2013 Kuwait City, Kuwait K UWAIT : S TRENGTHENING K UWAIT ’ S I NSOLVENCY AND C REDITOR /D EBTOR R EGIMES P UBLIC W ORKSHOP

2. Objectives of the Law Introduce option of rehabilitation:  Strong relationship between rehabilitation and availability of credit  Court supervised financial rehabilitation of viable enterprises Improve procedures for the liquidation:  If enterprise is non-viable, procedures increase value and shorten the time involved. 10 November 20133

3. Proposed features of new law (1) Creditor Democracy  Provide that decisions by the majority of participating creditors can modify the rights of non-participating creditors  Empower creditors –Notification –Information –Voting  Extend the moratorium on enforcement to all creditors, including secured creditors 10 November 20134

4. Allow for the approval of a plan over dissenting class of secured creditors  Must receive at least liquidation amount  Periodic cash payments equal to claim with market terms  Court must make this determination 10 November 20135 Proposed features of new law (2)

5.  Empowering a professional administrator  Equal treatment of similarly situated creditors  If rehabilitation not feasible, a more efficient, transparent and market driven liquidation process – Increased payments to creditors – A shorter period of time 10 November 20136 Proposed features of new law (3)

6.  Reduce time required – streamlining procedures – removing unnecessary procedural barriers  Repeal most Law on Commerce articles that address insolvency and replace them with an integrated law. 10 November 20137 Proposed features of new law (4)

7. Revise to be more consistent with Kuwaiti law  Shorter articles  Divide provisions between the law and executive rules  Reference to other applicable laws  Consistent definitions 10 November 20138 Accepted Comments

8.  Retain certain provisions of existing law that are consistent with international best practices  Special provisions for certain debtors –Small debtors –Deceased debtors 10 November 20139 Accepted Comments

9.  Retain current provisions relating to insolvency crimes.  Provide more detail on numerous proposed procedures.  Specify when failure to abide by a time limitation results in forfeiture of rights.  Revise the provisions dealing with the personal liability and other regulatory aspects of the administrator. 10 November 201310 Accepted Comments

10. Inclusion of various existing provisions of Kuwaiti law that may not be necessary in a modern law but do not detract substantially from the law’s efficacy. 10 November 201311 Comments Accepted

11.  Punitive provisions  Limit to fraudulent debtors –restriction of right of movement, –surveillance, –loss of certain civil rights –barring from participation in business activities  Priority for tax claims 10 November 201312 Comments Not Accepted (1)

12.  Access to procedure v. discharge of criminal fines and unpaid taxes  The position of creditor monitor of the administrator –Not needed in light of creditor committees –Have only one administrator without extra monitors or managers 10 November 201313 Comments Not Accepted (2)

13.  Modification of an enterprise’s debts  Rehabilitation –Prior debts permanently modified by approved plan of rehabilitation  Liquidation –No need for discharge for legal entity  Discharge for Trader who is a natural person  Rehabilitation (same as an enterprise)  Discharge of debts in liquidation –Honest and cooperative –Maximum of six months –Exclude debts for fraudulent conduct and marital obligations 10 November 201314 Policy Issues (1)

14.  How to reduce the stigma of insolvency?  Repeal of punitive treatment of honest debtors including  Surveillance –Removal of civil rights –Requirement to obtain permission to engage in new commercial activities 10 November 201315 Policy Issues (2)

15.  How to build capacity to adjudicate complex commercial issues?  A new specialized commercial court  Build the capacity –Specific terms of at least 5 years –Specialized judicial education –Judicial mentors from other jurisdictions with developed commercial law systems and courts –A new path to becoming a commercial judge  Use the capacity –Expansion of judicial discretion and authority to decide economic issues in a transparent and open manner 10 November 201316 Policy Issues (3)

16.  Whether to include Banks and Insurance Companies within the Scope of this Law?  Our strong recommendation: Do not include them.  Need for effective alternative administrative procedures to resolve insolvent banks and insurance companies  Responsibilities of current regulators, CBK and MoCI 10 November 201317 Policy Issues (4)