BAHRAIN Law and Practice Contributed by: Noor Radhi, Mohamed Ali Shaban and Mohamed Altraif, Hassan Radhi & Associates
sibility requirements before ratifying it. The court may also intervene if the debtor fails to implement the plan or if disputes arise during the implementation phase. Consequences of Non-Compliance with the Restructuring Plan If the debtor fails to observe the terms of the agreed restructuring plan, creditors can petition the court to terminate the plan and convert the proceedings into liquidation. The court may also hold the debtor’s man - agement personally liable for any losses caused to creditors due to non-compliance with the plan. If a creditor fails to observe the terms of the plan, such as by pursuing individual enforcement actions against the debtor, the court may impose penalties on the creditor and void any actions taken in violation of the plan. 4.4 The Position of the Debtor in Restructuring, Rehabilitation and Reorganisation The position of the debtor in reorganisation is as fol - lows. Continuation of Business Operations Under the Bankruptcy Law, the debtor is allowed to continue operating its business during the restructur - ing procedure, subject to the supervision of the bank - ruptcy trustee appointed by the court. The trustee oversees the debtor’s management and may require the debtor to obtain approval for certain actions that fall outside the ordinary course of business. The pri - mary objective of allowing the debtor to continue its business operations is to maintain the debtor’s going concern value while restructuring its debts and opera - tions to ensure long-term viability. Restrictions on Use of Assets The Bankruptcy Law imposes certain restrictions on the debtor’s use of its assets during the restructur - ing process to safeguard the interests of creditors. The debtor is required to obtain the approval of the bankruptcy trustee for any actions that may have an impact on the value of the bankruptcy estate, such as selling assets; entering into new contracts; or making payments to creditors.
The trustee will review the proposed actions to ensure that they are necessary for the continuation of the debtor’s business and do not unfairly prejudice the rights of creditors. The court may also impose addi - tional restrictions or conditions on the debtor’s use of assets if it deems necessary. Standards and Process for Obtaining Authorisations To obtain the bankruptcy trustee’s approval for actions outside the ordinary course of business, the debtor must demonstrate that the proposed action is neces - sary for the preservation or enhancement of the value of the bankruptcy estate and does not unfairly dis - criminate against any creditors. The debtor is required to provide the trustee with relevant information and documentation supporting the request. The trustee will review the request and make a deci - sion based on the best interests of the bankruptcy estate and creditors. If the trustee denies the request, the debtor may appeal to the court for a review of the decision. Borrowing Money and Seeking Funding The Bankruptcy Law permits the debtor to borrow money and seek new funding during the restructur - ing process, subject to the approval of the bankruptcy trustee and the court. This new financing, also known as “debtor-in-possession” (DIP) financing, is grant - ed priority over other unsecured claims and can be secured by unencumbered assets or through a junior lien on already encumbered assets. The debtor must demonstrate that the new fund - ing is necessary for the continuation of its business operations and the successful implementation of the restructuring plan. The terms of the new financing must be fair and reasonable, and the debtor must pro - vide adequate protection to existing secured creditors whose interests may be affected by the new lien. 4.5 The Position of Office Holders in Restructuring, Rehabilitation and Reorganisation The tasks and powers of the trustees in the reorgani - sation process are as follows.
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