The issue of reconciliation in the settlement preventing bankruptcy: A comparative Fiqhi Study

Abstract

With the emergence of economic institutions that offer goods, services, jobs, and resources to the state treasury, their protection from bankruptcy became a priority because they may experience financial difficulties in fulfilling their obligations.

One of the most prominent ways of protection is the establishment of the anti-bankruptcy settlement system, which aims to prevent the debtor from declaring bankruptcy and liquidation of its business that may trigger serious consequences to the debtor and society. It also seeks to protect the rights of creditors.

However, the achievement of these objectives through the settlement system has a legitimate obstacle as the settlement is binding to all creditors though it is approved by the majority of them, even if it is rejected by some. It may involve a delay of payment of outstanding debts, make an installment plan, waive part of the fixed debts, or to compensate for the debts with other property owned by the debtor. In this sense it is incompatible with what is established in Islamic jurisprudence of the requirement of mutual consent when disposing people's property by postponing, donating or compensating.

The paper reviews this issue thoroughly by explaining its nature and the procedures of its implementation and then highlighting its features to reach an appropriate Shari’ah-basd ruling according to the regulations that guarantee the debtors’ rights.