BAHRAIN Law and Practice Contributed by: Noor Radhi, Mohamed Ali Shaban and Mohamed Altraif, Hassan Radhi & Associates
and the creditor has notified the debtor of the debt at least 30 days prior to filing. Formal and Material Criteria To initiate bankruptcy proceedings, including restruc - turing and reorganisation, the debtor must have ceased paying debts exceeding BHD5,000 due to financial distress or instability. The Bankruptcy Law does not define “financial distress” or “instability”, but these terms generally refer to the debtor’s inability to meet financial obligations as they fall due. The filing must be made with the High Civil Court and include supporting documents such as the debtor’s finan - cial statements; a list of creditors and debtors; and a description of the debtor’s financial position. Eligibility for the Procedure The Bankruptcy Law applies to commercial compa - nies, individual merchants, and civil companies con - ducting commercial activities in Bahrain. This includes corporate entities and sole proprietorships. Certain entities are excluded from the scope of the law, such as government bodies, banks, insurance compa - nies, and special purpose vehicles unless the CBB approves their inclusion. The Bankruptcy Law does not apply to individuals not engaged in commercial activities. While the law does not explicitly address group insolvency, it is possi - ble for multiple related entities to be subject to bank - ruptcy proceedings if they meet the eligibility criteria individually. 4.2 Statutory Restructuring, Rehabilitation and Reorganisation Procedure The fundamental principles and key objectives of the statutory restructuring and reorganisation procedures under the Bankruptcy Law in Bahrain are defined in Article 2 of the Bankruptcy Law. When interpreting and implementing the Bankruptcy Law, regard should be had to its following goals: • preserving and protecting the bankruptcy estate; • maximising the value of the bankruptcy estate; • considering matters related to the bankruptcy pro - ceedings with integrity and transparency and in an expeditious and orderly manner;
• reorganising the debtor and avoiding liquidation wherever reasonably possible; and • providing fair distribution to creditors and equal treatment of creditors with similar claims and fair treatment to all persons having an interest in the bankruptcy proceedings. 4.3 The End of the Restructuring, Rehabilitation and Reorganisation Procedure Termination, Closing or Completion of the Procedure The restructuring procedure can end in several ways. If the creditors approve the restructuring plan and the court ratifies it, the debtor must implement the plan within the specified timeframe (up to five years, extendable by another three years). The procedure is considered completed once the debtor fulfils all obligations under the plan. If the creditors or the court reject the restructuring plan, the procedure terminates, and the debtor may be placed into liquidation if it is insolvent. The court may also terminate the procedure if the debtor fails to co- operate with the bankruptcy trustee or if the trustee determines that restructuring is not feasible. Fairness Test for Restructuring Plan The Bankruptcy Law requires the restructuring plan to be fair and equitable to all classes of creditors. For the court to approve the plan, it must not unfairly dis - criminate against any dissenting class, and dissenting creditors must receive at least as much as they would in liquidation. The plan must also be feasible, meaning it is likely to succeed in rehabilitating the debtor’s business and ensuring its continued operation. Judicial Involvement The court plays a crucial role throughout the restruc - turing process. The court decides whether or not to accept the bankruptcy filing and opening of proceed - ings; appoints the bankruptcy trustee; and oversees the process. The restructuring plan must be submitted to the court for ratification after creditor approval. The court will review the plan to ensure it meets the fairness and fea -
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