BAHRAIN Law and Practice Contributed by: Noor Radhi, Mohamed Ali Shaban and Mohamed Altraif, Hassan Radhi & Associates
2. Creditors 2.1 Types of Creditors
the payment of the rights of secured claims. The order is as follows. First Level This is reserved for amounts due to any unsecured form of financing obtained after the commencement of the bankruptcy proceedings in order to finance the continuation of the debtor’s facility operation or for the purpose of maintaining the value of bankruptcy assets and protection of the value. Second Level This level is for bankruptcy costs and expenses, including without limitation the fees of the bankruptcy trustee, lawyers, agents or experts who provide their services in the course of bankruptcy, and amounts due on contracts entered into by the bankruptcy trustee or the debtor after the commencement of the bankruptcy proceedings. Third Level The third level covers the following claims that arose prior to the commencement of the bankruptcy in pro - portion: • salaries and financial benefits due to the debtor’s employees, capped at BHD3,000 for each employ - ee; • clients’ claims for instalments paid to the debtor in order to purchase goods and services from the debtor, capped at BHD1,000 for each client; and • taxes and fees due to government authorities and agencies, capped at BHD10,000 for each authority. Fourth Level All unsecured claims that arose before the approval of the commencement of the bankruptcy proceed - ings, including the remaining amounts of the claims outlined under the third level of priority, are covered by this level. Fifth Level This level includes all other unsecured claims that arose before filing for bankruptcy and were not pre - sented to the court in time but were presented to the court in a timely manner as regards the reporting of distribution rights in the bankruptcy claim.
The Bankruptcy Law recognises different types of creditors and establishes a hierarchy for the priority of their claims. The main categories of creditors and their priority rankings are as follows. Secured Creditors Secured creditors hold a lien or security interest over specific assets of the debtor. They have priority over unsecured creditors and are entitled to recover their claims from the proceeds of the sale of the secured assets. Estate Claims Estate claims arise from the costs and expenses incurred during the administration of the bankruptcy estate. These claims have priority over all other unse - cured claims and are paid from the bankruptcy estate before any distributions are made to other creditors. Preferential Claims Preferential claims are unsecured claims that are given priority by law over other unsecured claims. Examples of preferential claims include employee wages, social insurance contributions, and certain tax liabilities. Non-Preferential Claims Non-preferential claims, also known as ordinary unse - cured claims, are those that do not fall into any of the above categories. These claims rank equally among themselves and are paid on a pro-rata basis after secured, estate, and preferential claims have been satisfied. Subordinated Claims Subordinated claims are those that rank below all oth - er unsecured claims by agreement or by law. These claims are only paid after all other creditors have been satisfied, and they may include claims held by the debtor’s shareholders or related parties. 2.2 Priority Claims in Restructuring and Insolvency Proceedings The Bankruptcy Law sets out eight priority levels for claims in relation to bankruptcy proceedings and after
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