area of reorganization of the debtor so that it can emerge from financial distress in a more viable state. Today, a healthy insolvency system provides predictability to debtors and creditors in case of financial distress while balancing liquidation and reorganization.

**While it is important to note that insolvency is, emphatically, not simply a mechanism for secured creditor enforcement (indeed, in most economies, unsecured trade credit is, by far, more likely to be the lifeblood of commerce), it is important that an insolvency regime recognizes and supports continuation of pre-insolvency rights of creditors in relation to their collateral** . While political and social considerations will always be a factor, the ability to unwind secured transactions in an insolvency proceeding should be minimized. This is particularly important in relation to secured creditors.  It is important that their collateral is a reliable source of collection, even in the case of insolvency. At the same time, secured creditors need incentives to support reorganization of viable companies. To the extent possible within the context of allowing debtor rehabilitation and maximization of return on assets, the insolvency regime should maintain claims based on commercial bargains, including secured transactions, and should avoid assigning priority to claims that are not.

# _1.2.Methodology_

_World Bank Principles for Effective Insolvency and Creditors’ Rights Systems_

**The analysis in this chapter considers MENA countries’ insolvency systems in the context of the World Bank Principles’ articulated best practice standards** _._ The World Bank Principles for Effective Insolvency and Creditors‟ Rights Systems (“World Bank Principles”) were developed in 2001 and revised in 2005 and are the global standards for insolvency and debtor-creditor systems. Partner organizations, international experts, and the international community were all consulted, so that the World Bank Principles represent an international consensus on best practices in insolvency and creditor rights. The World Bank uses them for, _inter alia_ , benchmarking the effectiveness of countries‟ insolvency and creditors‟ rights system. In addition, they offer guidance to policymakers who want to establish a functional system for healthy debtor-creditor relations. The UNCITRAL Legislative Guide on Insolvency Law provides further supporting details for implementation and design of systems.

_Sources of information, gaps_

**Several sources were consulted in the preparation of this chapter** _._ The information contained in this report consists largely of information gathered from a May 2009 survey, coauthored by the World Bank, together with the Hawkamah Institute, the OECD and INSOL International, with the significant assistance of international expert, Neil Cooper. Field research was also conducted by the author of this report in Jordan, Saudi Arabia, Morocco, Egypt and the UAE between 2008 and 2010. Other written information that was available on individual countries is cited herein where used.

# _1.3.Scope of chapter_

**This chapter covers non-bank, non-household, commercial insolvency** _._ The focus is on the way that MENA countries address companies who are in financial distress, those who cannot pay their debts. There is a discussion of features of legal infrastructure that may prevent insolvency filings, and the

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