BAHRAIN Law and Practice Contributed by: Noor Radhi, Mohamed Ali Shaban and Mohamed Altraif, Hassan Radhi & Associates
Appointment and Qualifications Upon accepting the bankruptcy filing and opening the restructuring proceedings, the court appoints a bankruptcy trustee. The trustee must be a natural person registered with the MOIC and must possess the necessary expertise and qualifications to carry out their duties. The trustee is an impartial party who acts in the best interests of the bankruptcy estate and all stakeholders. Key Tasks and Responsibilities The key tasks and responsibilities of the trustee are as follows: • overseeing the debtor’s business operations and management during the restructuring process; • verifying and admitting creditors’ claims and main - taining a register of claims; • preparing an inventory of the debtor’s assets and liabilities; • investigating the debtor’s financial affairs and transactions to identify any fraudulent or preferen - tial transfers; • developing and proposing a restructuring plan in consultation with the debtor and creditors; • convening and presiding over creditors’ meetings to vote on the restructuring plan; • implementing and supervising the execution of the approved restructuring plan; and • reporting to the court on the progress of the restructuring process and any issues that arise. Powers and Authority The powers and authority of the trustee include the following: • approving or rejecting the debtor’s actions outside the ordinary course of business; • accessing and examining the debtor’s books, records, and financial information; • interviewing the debtor’s management, employees, and other relevant parties to gather information; • engaging professionals such as attorneys, accountants, and appraisers to assist in the restructuring process; • selling or disposing of the debtor’s assets with court approval, if necessary for the restructuring;
• pursuing legal actions on behalf of the bankruptcy estate, such as clawing back fraudulent transfers or preferential payments; • modifying or rejecting executory contracts and unexpired leases to which the debtor is a party; and • obtaining new financing for the debtor’s business operations with court approval. 4.6 The Position of Shareholders and Creditors in Restructuring, Rehabilitation and Reorganisation The Bankruptcy Law governs the rights and remedies of shareholders and creditors in reorganisation pro - ceedings. The law seeks to balance the interests of the various stakeholders while facilitating the success - ful restructuring of the debtor’s business as follows. Pre-Restructuring Rights and Remedies Prior to the commencement of restructuring proceed - ings, creditors may exercise their contractual rights and remedies against the debtor, such as attach - ments, retention of title, and set-off. These rights are generally governed by the terms of the contract between the creditor and the debtor, as well as the relevant provisions of the Civil Code and the Law of Commerce. Intercreditor Agreements The exercise of creditors’ rights and remedies may be subject to contractual intercreditor agreements, which regulate the relationship between different classes of creditors. These agreements may establish priori - ties, subordination, and other arrangements among creditors. The Bankruptcy Law does not specifically address intercreditor agreements, but they are gener - ally enforceable to the extent they do not conflict with the Bankruptcy Law’s provisions. Creditors’ Ability to Disrupt the Process Secured creditors, unsecured creditors, and share - holders have limited ability to disrupt or block the restructuring process once it has commenced. The Bankruptcy Law provides for a moratorium on indi - vidual enforcement actions against the debtor dur - ing the restructuring proceedings. However, creditors and shareholders can participate in the process by attending creditors’ meetings, voting on the restruc -
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