BAHRAIN Law and Practice Contributed by: Noor Radhi, Mohamed Ali Shaban and Mohamed Altraif, Hassan Radhi & Associates
ing the commencement of and participation in pro - ceedings under the Bankruptcy Law. The Bankruptcy Law does not discriminate against foreign creditors in terms of the ranking of their claims, except to the extent that foreign claims may be ranked lower than general unsecured claims if an equivalent domestic claim would also be ranked lower. The Bankruptcy Law also requires that foreign credi - tors be notified of the commencement of proceed - ings in Bahrain and provided with information on filing claims and other relevant matters. 7. Duties and Liability of Directors and Officers 7.1 Duties of Directors The duties of directors are primarily governed by the Commercial Companies Law and the Bankruptcy Law. These laws set out the general duties and respon - sibilities of directors, which apply regardless of the company’s financial situation. Directors have a fiduciary duty to act in good faith and in the best interests of the company. They must exercise reasonable care, skill, and diligence in the performance of their duties. When the company is financially healthy, directors should take into account the interests of shareholders, employees, and other stakeholders, as well as the long-term sustainability of the company. In the event of financial distress, directors’ duties shift towards protecting the interests of creditors. The Bankruptcy Law imposes specific obligations on directors when the company becomes insolvent or is likely to become insolvent. These obligations include: • filing for bankruptcy within 30 days of the company becoming unable to pay its debts as they fall due; • co-operating with the bankruptcy trustee and providing all necessary information and documents related to the company’s affairs; • not concealing, destroying, or altering any of the company’s books or records; and • not disposing of the company’s assets or making payments to creditors outside the ordinary course
of business, unless authorised by the court or the bankruptcy trustee. Directors must also refrain from taking any actions that could worsen the company’s financial situation or prejudice the interests of creditors. The moment at which directors’ duties shift towards protecting credi - tors’ interests is when the company becomes insol - Under Bahraini law, directors can be held personally liable for losses suffered by the company, sharehold - ers, or third parties as a result of their wrongful acts or omissions in the performance of their duties. The Commercial Companies Law and the Bankruptcy Law provide grounds for holding directors personally liable. 7.3 Duties and Personal Liability of Officers The duties and personal liability of officers, such as supervisory board members, are similar to those of directors. Officers have a fiduciary duty to act in good faith and in the best interests of the company. They must exercise reasonable care, skill and diligence in the performance of their duties. 7.4 Other Consequences for Directors and Officers In addition to personal liability, directors and offic - ers may face other consequences for their actions or omissions in the context of financial distress or insol - vency. These are as follows: • civil penalties; • criminal liability; and • disqualification. vent or is likely to become insolvent. 7.2 Personal Liability of Directors 8. Setting Aside or Annulling a Transaction 8.1 Circumstances for Setting Aside a Transaction or Transfer Under the Bankruptcy Law, certain transactions or transfers made by the debtor prior to the commence - ment of restructuring or insolvency proceedings can be set aside or annulled if they are deemed to be
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