Bankruptcy lawyer in Bahrain

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Seeking the assistance of a Bankruptcy lawyer in Bahrain at the first signs of financial distress is not merely a formal step; rather, it is a strategic decision that may determine whether the company moves toward reorganization or an orderly liquidation in accordance with Bahraini law.

In the contemporary economic environment, bankruptcy in Bahrain is no longer a concept that necessarily signifies the end of commercial activity. Rather, in many cases, it has become a legal tool for managing financial distress, protecting assets, and reorganizing the relationship between the company and its creditors within an orderly judicial framework.

Accordingly, what is the purpose of bankruptcy, how are the procedures carried out, who regulates the relationship between the creditor and the debtor, what are the conditions for declaring bankruptcy, and what is the role of a Bankruptcy lawyer in Bahrain? You will find all these details in our article. Let us begin.

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Table of Content

The legal framework for corporate bankruptcy in Bahrain

The Kingdom of Bahrain has witnessed notable development in its legislation relating to bankruptcy and reorganization, with the aim of keeping pace with global economic developments and providing an attractive and stable investment environment.

Law No. (22) of 2018 issuing the Reorganization and Bankruptcy Law marks a qualitative shift in this field, as it focuses on protecting distressed companies and offering sustainable solutions that ensure the continuity of their business.

Objectives of the Reorganization and Bankruptcy Law

In other words, protecting assets, maximizing value, and favoring reorganization whenever possible. The Reorganization and Bankruptcy Law in Bahrain aims to address the debts of distressed persons and companies effectively by achieving several main objectives, namely:

Protection of assets: by preventing the dissipation of bankruptcy estate assets as a result of individual actions taken by some creditors.
Maximization of value: through operating, selling, or managing assets in a way that achieves the best possible return.
Preference for reorganization: where there is genuine economic viability in keeping the business operating.
Regulation of the relationship between the parties: through a clear judicial process that ensures a higher degree of fairness and transparency.

Who is subject to the law?

Are they commercial companies and merchants, and what is excluded? You should know that, in general, the provisions of the Reorganization and Bankruptcy Law apply to:

Commercial companies: all commercial companies in the Kingdom of Bahrain.
Natural person merchants: individuals who carry on commercial activities and whose principal place of business is in Bahrain.

The following categories are excluded from the provisions of this law:

Companies licensed by the Central Bank of Bahrain: these companies are subject to their own special legislation.
Companies established by law: companies whose establishing law stipulates that they are not subject to the provisions of the Reorganization and Bankruptcy Law.

Creditors’ and Debtor’s Rights

The law defines the rights and obligations of both creditors and debtors during bankruptcy and reorganization proceedings, which is why they often turn to a Bankruptcy lawyer in Bahrain. These rights and obligations are as follows:

Debtor’s Rights

The law provides that the debtor has the right to:

The right to request reorganization to avoid liquidation.
Protection from legal enforcement actions by creditors once bankruptcy proceedings begin.
The right to submit a plan for the reorganization of their debts.

Creditors’ Rights

According to Bahraini law, creditors have the following rights:

The right to file a bankruptcy claim against the debtor in specific cases.
The right to claim their debts and participate in the bankruptcy proceedings.
The right to object to the proposed reorganization or liquidation plan.
The right to receive a fair share of the debtor’s assets in the event of liquidation

Conditions for Commencing Bankruptcy Proceedings for a Company

Bahraini courts rely on precise objective criteria when considering an application to commence bankruptcy proceedings. A mere claim that the company is going through a financial crisis is not sufficient; rather, the case file must be supported by data and documents that clarify the nature and extent of the financial distress.

A company’s bankruptcy is not declared, nor are reorganization proceedings initiated, arbitrarily. Instead, this is subject to specific controls and conditions that ensure the protection of the rights of all concerned parties. Among the most important of these conditions are:

That the debtor be among the persons subject to the provisions of the law.
The existence of financial documents capable of examination.
That the statement of claim has satisfied the requirements of Article (13) of the Reorganization and Bankruptcy Law.
That there is an inability to pay debts or a substantial financial imbalance.
Fulfillment of the formal and substantive requirements.
Clarity of the relationship between assets and liabilities.

Therefore, it is essential to consult a Bankruptcy lawyer in Bahrain when making such an important decision.

When is the company (the debtor) entitled to file the application?

The debtor company (or sole trader) is entitled to file an application to commence bankruptcy proceedings (reorganization or liquidation) in two main cases:

Financial distress: If the company has stopped paying its due commercial debts, or is threatened with ceasing payment in the near future.
Inability to meet obligations: If the company’s liabilities exceed its assets, meaning that it is in a state of genuine financial insolvency.

The application must be submitted to the competent court through a Bankruptcy lawyer in Bahrain, accompanied by the necessary documents that clarify the company’s financial position, such as financial statements, a list of debts and creditors, and a statement of assets.

When may a creditor file a bankruptcy claim?

A creditor (or more than one creditor) may file a bankruptcy claim against the debtor company if the following conditions are met:

Debt is due and payable: the creditor must have a due debt against the debtor that has not been paid.
Cessation of payment: the company must have ceased paying its due commercial debts on a regular basis.
Filing an application with the court: the creditor must submit an application to the competent court, proving the debt and the debtor’s cessation of payment.

This claim aims to protect creditors’ rights and ensure that they recover their debts, either through the reorganization of the company’s debts or the liquidation of its assets.

Steps and Procedures for Declaring/Pronouncing a Company’s Bankruptcy in Bahrain

The procedures for declaring a company bankrupt or reorganizing it are subject to a specific legal process to ensure transparency and fairness for all parties. These procedures include sequential steps, starting from interim measures through to the final decision.

Bankruptcy cases in Bahrain are presented within a specialized judicial system of a particular nature, with the assistance of a Bankruptcy lawyer in Bahrain. The Ministry of Justice also explains that there is a Bankruptcy Register that allows access to data related to the case, its parties, and the bankruptcy trustee, pursuant to Minister of Justice Resolution No. (72) of 2018 regarding the Bankruptcy Register.

Interim measures before the commencement of proceedings: when are they requested, and what is their purpose?

Before bankruptcy proceedings are formally commenced, there may be a need to take interim measures aimed at protecting the debtor’s assets and preserving creditors’ rights. These measures are requested in cases where there are concerns that:

The debtor may dissipate assets or dispose of them in a manner that harms the interests of creditors.
The debtor may attempt to conceal financial information or documents that may be necessary for the bankruptcy proceedings.
The company’s financial position may continue to deteriorate, making reorganization more difficult or reducing the value of the assets available for liquidation.

The purposes of these measures are:

To prevent any actions that may lead to the deterioration in value of the company’s assets or their disappearance.
To ensure the availability of all financial information and documents necessary for the bankruptcy proceedings.
To provide a stable environment that enables informed and fair decisions to be made regarding the company’s fate and its debts.

These measures may include the appointment of a temporary judicial custodian, or the imposition of restrictions on the debtor’s dealings with its assets.

The difference between reorganization and liquidation?

The Bankruptcy Law in Bahrain provides two main options for distressed companies: either reorganization or liquidation. Understanding the difference between them is vital to making the right decision.

As a legal practitioner, I can summarize the difference between reorganization and liquidation in the following table:

Criterion	Reorganization	Liquidation
Main objective	Continuity of the company’s business and resolution of its debts	Ending the company’s existence and selling its assets to repay debts
Fate of the company	It continues operating after restructuring	It ceases operations and its records are struck off
Protection of assets	Protecting assets and maximizing their value within the company’s framework	Selling assets to repay debts, and the value may be lower
Focus	Finding sustainable solutions for financial recovery	Ending obligations as quickly as possible

When is reorganization more appropriate than liquidation?

Reorganization is more appropriate than liquidation in the following cases:

When the company has a viable business model and is facing temporary financial difficulties that can be overcome through restructuring its debts or operations.
Reorganization helps preserve jobs and avoid the negative social and economic effects resulting from the closure of the company.
the value of the company’s assets as a going concern is higher than their value upon rapid liquidation and sale as separate parts.
When there is willingness on the part of creditors to cooperate and approve a reorganization plan that ensures recovery of a larger portion of their debts over the long term.

The Bankruptcy and Reorganization Law in the Kingdom of Bahrain has indicated the reorganization of the debtor and the avoidance of its liquidation whenever that is reasonably possible, according to the Legislation and Legal Opinion Commission, Law No. (22) of 2018).

Company liquidation and dissolution under the Commercial Companies Law

Company liquidation and dissolution under the Commercial Companies Law differ from bankruptcy procedures, despite some similarities. Liquidation under the Commercial Companies Law is generally considered a voluntary or compulsory process to orderly terminate the company’s existence.

What is the difference between company liquidation after dissolution and bankruptcy liquidation procedures?

Although both processes lead to the termination of the company’s existence and the sale of its assets, there are fundamental differences between them:

Company liquidation after dissolution (under the Commercial Companies Law):

Reason: Usually by a decision of the partners or the company’s general assembly (voluntary liquidation), or by a court order for non-financial reasons (such as the expiry of the company’s term or the achievement of its purpose).
Financial status: The company may be able to pay all its debts and obligations.
Procedures: A liquidator is appointed to inventory assets and liabilities, collect the company’s receivables, settle its debts, and then distribute the remaining surplus to the partners (how a company is liquidated).
Objective: To terminate the company’s activities and distribute its remaining assets in an orderly manner.

Bankruptcy liquidation procedures (under the Reorganization and Bankruptcy Law):

Reason: Result from the company’s financial distress and inability to meet its obligations toward creditors.
Financial status: The company is insolvent and unable to fully repay its debts.
Procedures: Conducted by a court decision, involving the appointment of a bankruptcy trustee (liquidator) who identifies assets, sells them, and distributes the proceeds to creditors according to the legal priority order.
Objective: To satisfy as much of the creditors’ debts as possible and terminate the company due to its financial insolvency.

The fundamental difference lies in the company’s financial status and the objective of the process. In liquidation after dissolution, the company may or may not be solvent, whereas in bankruptcy liquidation, the company is necessarily insolvent.

How to choose a bankruptcy lawyer in Bahrain in a way that reduces risks

Choosing a specialized and experienced bankruptcy lawyer in Bahrain in insolvency and restructuring cases is a crucial step for companies and individuals facing financial difficulties.

The right lawyer can provide proper legal guidance and help in making sound decisions to reduce risks.

Key considerations when choosing a bankruptcy lawyer in Bahrain

Experience and specialization: Look for a lawyer with extensive experience in bankruptcy and restructuring law in Bahrain. Make sure they understand the complexities of local laws and the challenges companies may face.
Reputation and track record: Check the reputation of the lawyer or law firm and their record in handling similar cases. References or recommendations can be useful.
Handling complex cases: The lawyer should be able to handle complex cases involving multiple creditors, diverse assets, and intertwined legal challenges.
Communication and transparency: Choose a lawyer who communicates clearly and transparently about procedures, costs, and expected outcomes. They should be able to explain legal terms in a clear manner.
Negotiation skills: In many cases, bankruptcy and restructuring require strong negotiation skills with creditors and other parties to reach acceptable solutions.

List of bankruptcy lawyers in Bahrain

There are a number of lawyers and law firms in Bahrain specializing in bankruptcy and restructuring cases. Among them, some lawyers and firms stand out for providing comprehensive services, including our firm, Abdulrahman Khalifa Law Firm, and the following lawyers:

Name	Specialization and Services
Abdulrahman Khalifa	Leading complex commercial restructuring cases, developing legal strategies for distressed companies before reaching liquidation, representing management or partners in negotiations with major creditors, handling commercial disputes intertwined with financial distress, and reviewing risks related to guarantees, contracts, and obligations prior to initiating bankruptcy proceedings.
Fatima Al Shirawi	Preventive legal consultations before bankruptcy, including reviewing the financial position from a legal perspective, examining ongoing contracts and company obligations to identify early distress risks, preparing negotiation solutions for restructuring liabilities, and drafting legal settlements with suppliers or creditors to help avoid rapid transition to liquidation where possible.
Mohammed Khalid Al Koheji	Managing banking and debt aspects related to bankruptcy, such as reviewing financial claims, auditing company liabilities, representing clients in debt collection disputes related to financial distress, examining creditors’ claims, objecting to invalid or unsubstantiated debts, and handling cases involving overlaps between bankruptcy and banking, financial, or tax obligations.
Noura Ahmed Mousa	Supporting small and medium enterprises during financial distress by restructuring relationships between partners and management, reviewing key commercial contracts, preparing legally required internal resolutions to initiate restructuring, and organizing company legal documents to support creditor protection requests or business continuity under a structured legal plan.
Abdullah Al Faihani	Direct representation in financing and bankruptcy cases, including preparing and following up on applications to initiate bankruptcy or restructuring proceedings, drafting defenses and legal memoranda, handling disputes related to financially distressed partnerships, working on settlement and restructuring plans, and assisting clients in transitioning to legal liquidation when business continuation is not possible.

Frequently Asked Questions

There are many questions that need to be understood, such as:

Can a single creditor file for bankruptcy?

Yes. A single creditor may be able to file a petition to initiate bankruptcy proceedings, but not merely for being a creditor. The law requires that creditors requesting bankruptcy collectively hold at least 10% of the total unsecured debts. Therefore, a single creditor can do so if their unsecured debt reaches or exceeds this percentage.

How long does it take to issue a preliminary decision/order after filing a bankruptcy petition?

The preliminary decision/order is issued within five working days from filing the petition. The law provides that the court shall, based on the apparent documents, issue a temporary decision approving the initiation of bankruptcy proceedings within five working days once the legal requirements are met.

Can the court take precautionary measures before officially initiating bankruptcy proceedings?

Yes. The court can take precautionary or temporary measures before officially initiating bankruptcy proceedings, upon the request of the debtor, creditor, or any interested party, if it deems such measures necessary to protect the assets of the bankrupt entity or the interests of the parties.

Can creditors choose the bankruptcy trustee?

Yes. Creditors have a role in selecting the bankruptcy trustee. The amended law provides that when the court approves the initiation of bankruptcy proceedings, it appoints one or more trustees chosen by the majority of creditors present at the notified meeting. The court may also appoint a temporary trustee until the creditors make their selection. Additionally, the creditors’ committee, or creditors holding at least 50% of the unsecured debts, may request the appointment of another trustee instead or alongside the initially appointed trustee within the legal period.

Is the sale of company assets during bankruptcy a free decision?

No. Selling company assets during bankruptcy is not a free decision, especially if it involves a major part of the bankrupt estate or occurs outside the ordinary course of business. In such cases, approval must first be obtained from the creditors’ committee, if any, or the majority of creditors present according to the prescribed conditions, followed by court ratification of the sale.

Does the Companies Bankruptcy Law apply to insurance companies in Bahrain?

Generally, no. The Companies Bankruptcy Law does not apply to insurance companies licensed by the Central Bank of Bahrain, as the law explicitly exempts those licensed by the Central Bank. Since most insurance companies in Bahrain are licensed by the Central Bank, they are not subject to this law. This is a direct interpretation from the general exemption text.

Can bankruptcy decisions and orders be appealed?

Yes. Bankruptcy decisions and orders can be appealed before the High Civil Court of Appeal within twenty days from the date a copy of the decision or order is filed in the registry. However, not all decisions are appealable; the law excludes certain matters from appeal, including temporary measures and rulings on petitions to initiate bankruptcy proceedings.

Does an appeal of a bankruptcy ruling suspend its execution?

No, an appeal does not automatically suspend execution in cases specified by law. For example, an appeal against the approval of a restructuring plan does not suspend the plan’s implementation and effects unless the court decides otherwise (Article 117). For other bankruptcy rulings and decisions, there is no general legal text granting automatic suspension; the default legal principle is that execution continues unless there is a specific legal provision or judicial order suspending it.

In conclusion, in our article about bankruptcy and appointing a bankruptcy lawyer in Bahrain, we clarified that bankruptcy under Bahraini law is not merely a declaration of financial distress, but a legal framework that determines when restructuring is possible and when liquidation becomes the most appropriate option.

The success of a case also depends on the accuracy of documents, the clarity of the financial position, and prompt action before risks escalate. Therefore, appointing a specialized bankruptcy lawyer in Bahrain who knows what to do is an essential step to protect the rights of the company, management, and creditors, and to build a more secure and clear legal path.

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