The Galita fashion chain, which until recently operated 30 branches and currently employs about 80 people, applied yesterday (Wednesday) to the Nazareth District Court for a stay of proceedings order, after accumulating debts in the amount of NIS 26 million. Of this amount, the debt to the banking system amounts to NIS 8.4 million and a debt of NIS 13 million to suppliers and service providers.
The request submitted by the chain through Adv. Hovav Bitton and Adv. Zakaria Qassem from Hovav Bitton’s office was submitted in accordance with Amendment 4 to the Insolvency Law, which was created especially in March 2021 for businesses that encountered difficulties following the corona.
Amendment 4 to the law allows a company that has run into difficulties following the Corona plague to obtain a stay of proceedings order (an order that does not allow the network’s creditors to open legal proceedings against it) for a period of up to four months in order to reach an agreement with its creditors. It should be emphasized that according to the amendment, the company does not have a trustee who takes over, but the company continues to be managed by its current management and appointed an arrangement manager, who is an inspector who assists in formulating an arrangement with the creditors.
As part of the application for a stay of proceedings order, the chain states that it has been operating in the field of fashion for over 25 years. Until recently it had 30 branches across the country and now 13. There are branches that are franchised, and have nothing to do with the application submitted.
The chain claims that with the outbreak of the Corona crisis, it began to take on streamlining processes, including closing inefficient branches and / or in light of the changes and changes that the fashion world experienced as a result of the Corona crisis. At the same time, it has boosted its online sales. The chain estimates that the brand has about 200,000 active customers.
Adv. Hovav BittonPhoto: Uriel Cohen
The network claims that it is currently under severe cash flow distress. It was claimed that the outbreak of the corona epidemic had a direct impact on its revenue streams for two main reasons: we were dealing with a company whose main income was from selling evening dresses ‘dresses for events’. Also, the many closures imposed forced the company to close branches, respectively, this led to a sharp decline in the company’s revenues. Its obligations to all its creditors, and therefore the procedure is filed. “
Adv. Hovav Bitton, the network’s attorney, responded: “The company succeeded in the last waves of the corona and adapted its activities to the economic reality created by the corona plague, but was decided in the face of the omicron crisis which led to a sharp decline in activity and lack of government assistance.” .
Meanwhile, data from the insolvency commissioner show that there has been an increase in the number of applications submitted by companies in difficulty and by individuals for the opening of insolvency proceedings. In January-February 2021, 135 companies submitted applications for an order to open proceedings (a procedure in which a company enters into insolvency proceedings or for the purpose of rehabilitation or for the purpose of liquidation), compared with 224 companies that submitted such applications in January-February 2022.
In the individual segment, 3,299 applications were submitted in January-February 2021, since in January-February 2022, 3,613 such applications have already been submitted. It is interesting to find from the data that there has also been an increase in applications submitted by creditors to initiate insolvency proceedings against debtors. For example, in January-February 2021, 73 applications were filed by creditors against debtors to open bankruptcy proceedings, compared with 96 applications in January-February 2022. It can also be seen from the data that there has also been an increase in individuals’ applications to open insolvency cases in the enforcement system. Today, a debtor can initiate insolvency proceedings either in execution or in court depending on the amount of the debt. In January-February 2021, 835 applications were submitted by individuals to the Hotzlaf compared to 996 in January-February 2022.
Advocate Sigal Yaakovi, who is in charge of insolvency proceedings in Israel, responded that “since this is a short period, it may be a random figure. The Commissioner for Insolvency and Economic Rehabilitation Proceedings will continue to monitor the data and analyze the reasons for the increase in the volume of cases. “The director of the Enforcement and Collection Authority, Adv. Uri Wallerstein, added:” “Among other things, in light of government responses to grants and legislation”