What situations may lead a company to declare bankruptcy, and what are the procedures for Limited Liability Company Bankruptcy in Bahrain Law?
How long does it take for a company to have its bankruptcy formally declared? Keep reading to learn about the main details set out under Bahraini company and bankruptcy law.
Is your limited liability company facing financial difficulties, and are you concerned that its debts could affect your personal assets? Protecting your personal finances starts with taking the right legal step.
Table of Content
Procedures for Limited Liability Company Bankruptcy in Bahrain Law
Bankruptcy proceedings begin under Article 6 of Law No. (22) of 2018 when the debtor files a case seeking the opening of bankruptcy proceedings.
The debtor must file a bankruptcy case before the competent court. The case is submitted through the court’s case registration department to begin bankruptcy proceedings in either of the following situations:
- If the company owner is unable to pay debts within thirty days from their due date, or is unable to pay them when they become due.
- If the value of the debtor’s financial liabilities exceeds the value of the debtor’s assets.
Before approving the opening of bankruptcy proceedings based on a case filed by the debtor, the court must verify the following:
- The debtor must be one of the persons subject to bankruptcy proceedings under the provisions of the law.
- The debtor must be legally entitled to file the case. If the person filing is acting on behalf of the debtor, that person must have the required authorization.
- The debtor must be unable to pay debts, or the value of the debtor’s financial liabilities must exceed the value of the debtor’s assets, in accordance with Article 6(a) of the law.
- The statement of claim must satisfy all requirements set out under Article 12 of the law.
The court then issues its decision based on the documents before it within five business days from the date the case is filed. If all requirements are satisfied, the court may issue a provisional decision approving the opening of bankruptcy proceedings. The person filing the bankruptcy case must also pay the required fees in full.
A bankruptcy trustee is then appointed to organize creditors according to their legal ranking, starting with preferred creditors and moving to ordinary creditors. A repayment plan may also be prepared if the company’s management wishes to restructure the business and return it to normal operations in the market.
The company’s assets may then be sold at public auction, and the proceeds are used to repay the outstanding debts. Any remaining amount from the sale of the assets is distributed among the partners equally or according to their respective ownership interests.
You may appoint a Corporate Bankruptcy Lawyer in Bahrain from Abdulrahman Khalifa Law Firm by using the WhatsApp button at the bottom of the screen.
Conditions for Limited Liability Company Bankruptcy in Bahrain Law
Several conditions must be met before the bankruptcy of a limited liability company can be declared. The law sets out these requirements and requires them to be satisfied, including the following:
- An application for bankruptcy declaration must be submitted to the competent court.
- The person seeking the bankruptcy declaration must legally have the status of a trader.
- Evidence must be submitted to the competent court showing that the company has debts it is unable to pay.
- The company must be insolvent, meaning that its accumulated debts exceed the value of its assets and profits combined.
- The application for bankruptcy declaration must be filed with the court in the manner prescribed by law.
- The trader must be unable to pay debts within thirty days from their due date.
Article 3(a) of the law referred to above also addresses this issue. It provides that the bankruptcy proceedings established under the law apply to debtors who are traders, whether natural persons or legal entities, including the following:
- Commercial companies established in Bahrain, including companies created by law or decree and owned wholly or partly by the State.
- Natural persons who carry on commercial activities and whose principal place of business is in Bahrain. For the purposes of this provision, a natural person is considered to have a principal place of business in Bahrain if their usual place of residence is in the Kingdom, unless evidence shows otherwise.
Frequently Asked Questions
Some of the most common questions include:
How Long Does It Take to Declare Bankruptcy?
A bankruptcy declaration may take 30 days from the date the debtor becomes unable to pay its debts, subject to the applicable legal procedures and the court’s review.
What Happens If My Limited Liability Company Goes Bankrupt?
If my limited liability company becomes bankrupt, bankruptcy proceedings may be initiated before the competent court, which will review the bankruptcy application and determine the appropriate legal procedure. The process then follows the requirements set out by law, while possible arrangements with creditors may also be considered, where available, to address the company’s outstanding debts.
This brings us to the end of our article on Limited Liability Company Bankruptcy in Bahrain Law. We have covered the main procedures and conditions for company bankruptcy in Bahrain, along with the period involved in formally declaring a company bankrupt.
For more information: Company Liquidation in Bahrain: Procedures and Legal Steps
A Bahraini lawyer and the founder of a legal consultancy firm established in February 2019. He holds a Higher Degree in Sharia and Law from Al-Azhar University. He has extensive experience in court representation and providing legal advice in criminal, personal status, civil, and commercial matters. He is known for delivering clear, practical, and effective legal advice aimed at protecting his clients’ rights and interests, and has achieved tangible results in notable cases, including commercial litigation and inheritance matters
