Chapter 3 Chapter 3 Compulsory Liquidation
Article (144) Application for Compulsory Liquidation(a) The Administrator, the Licensee or any of its creditors may submit a petition to the Competent Court for compulsory liquidation of the Licensee. A copy of this petition shall be served at the principal place of business of the Licensee in the Kingdom and shall be made available to the shareholders and creditors of the Licensee. Any interested party may take an official copy of the same petition.(b) The person who submits the petition for compulsory liquidation shall advertise such petition, at least fifteen days before submitting the same to the Competent Court, in the Official Gazette and in one Arabic and one English language newspapers.
Article (145) Decision on the Petition of Compulsory Liquidation(a) The Competent Court may impose, during the hearings of a petition for compulsory liquidation, upon the relevant Licensee any measure it considers appropriate including extending the period of placing the Licensee under administration for more than two years and determining the terms and conditions in connection with such extension.(b) The Central Bank, the officials of the Licensee and its shareholders and creditors may collectively or individually, have the right of intervention before the Competent Court during the hearings of the petition for compulsory liquidation of the Licensee..(c) subject to the provisions of the law, the Central Bank may issue directives in connection with liquidation of the Licensees in general or liquidation of any specific category thereof, to be used as a guidance during the hearing of liquidation petition.(d) The Court may order the compulsory liquidation of the Licensee under any of the two following circumstances:1. If the Licensee proved to be insolvent2. If compulsory liquidation is decisively proved to be a just and equitable action.Where compulsory liquidation of a Licensee is ordered, the court shall appoint a liquidator and determine his fees under the guidance of the Central Bank with respect to this issue.
The fees of the liquidator and all other expenses of the liquidation shall be paid by the relevant Licensee. During liquidation hearings, the phrase "In Liquidation" shall be added after the name of the Licensee on all relevant correspondences.
Article (146) Exchange of Information During the Period of Compulsory Liquidation(a) The liquidator shall provide, upon request, the Central Bank with any necessary information relating to the Licensee in liquidation or its creditors, or reports relating to the progress of liquidation proceedings.(b) The Central Bank shall provide, upon request, the liquidator with necessary information relating to the Licensee in liquidation, or in relation to any compensation scheme operated pursuant to Article (177) of this Decree.
Article (147) Powers of the Liquidator(a) Without prejudice to the provisions of the following paragraph, the liquidator shall have all the necessary powers to carry out compulsory liquidation of the Licensee, and he shall also have the right to take any necessary measures to complete the process of such liquidation.(b) The liquidator must obtain the prior written approval of the Competent Court for any of the following actions:1. Sale any of the assets or properties of the Licensee in liquidation the market value of which exceeds one hundred thousand (100,000) Bahraini Dinars.2. Transfer or allocation of any of the assets or properties of the licensee in liquidation as a security for any debt owed by the Licensee.3. Settlement of any claim or waiver of any right of the Licensee where its value exceeds fifty thousand (50,000) Bahraini Dinars.
Article (148) Termination of Contracts Entered into Prior to Liquidation
The liquidator may, upon the approval of the Competent Court and without prejudice to market contracts entered into by the Licensee, and where applicable, the rights of the other party to the contract in obtaining compensation, declare any agreement entered into by the Licensee, prior to placing thereof under liquidation, null and void if such measure is deemed to be in the advantage of the Licensee or taken to protect the interests of the Licensee' customers or to avoid occurrence of irrevocable damage.
Article (149) General Duties of the Liquidator(a) The liquidator shall ensure that the assets and properties of the Licensee under liquidation are properly accounted for, collected, realised and distributed to the Licensee's creditors and, the surplus, if any, shall be distributed to the entitled persons.(b) The assets of the Licensee in liquidation shall not include any financial trusts that the Licensee holds as a trustee.
Article (150) Notification of Creditors
The liquidator shall, within thirty days of his appointment, notify all creditors of the Licensee under liquidation, who are registered in its records, of the decision of such appointment. The notice should be served by a recorded letter accompanied by prove of receipt.
The liquidator shall, within sixty days following the date wherein the decision of appointing him was issued, take such necessary measures to terminate the activities of the Licensee.
Article (151) Submission of Claims Related to Compulsory Liquidation
The creditors of the Licensee in liquidation who seek to recover all or part of their debts, shall submit a written claim to this effect to the liquidator, and the liquidator should send application forms to all of the creditors of the Licensee listed in his records accompanied by the notice stated in Article (150) of this law, and it should be made clear in the form that it should be completed and returned to the liquidator within no more than sixty days as from the date the form is despatched.
Article (152) Determination of Claims
The liquidator should, within six months immediately following the expiration of the period specified under Article (151) of this law or such other period as may be specified by the Competent Court, reach a decision on the claims submitted by the creditors of the Licensee in liquidation, whether by accepting thereof totally or partially, or by rejection. The applicant should be notified of the decision made on his claim by means of a recorded letter accompanied with prove of receipt. The applicant shall have the right to challenge the decision of the liquidator before the Competent Court within fifteen days as from the date he receives the decision notification.
Article (153) Conduct of the Liquidation
Subject to the provisions of Article (149) of this law, the liquidator shall carry out the following:(1) Submit his proposals for the conduct of liquidation to the Competent Court. These proposals shall be notified to all creditors and shareholders of the Licensee, and any other interested parties.(2) Comply by orders of the Competent Court in relation to publication of such proposals.
Any creditor or shareholder of the Licensee in liquidation or any other interested parties may, within a period of thirty days as from the date they were notified of the proposals, challenge such proposals before the Competent Court.
The Competent Court may upon receiving such challenge in accordance with this Article, make amendments to the liquidator's proposals as it deems fit.
Article (154) Interim and Final Distributions
The liquidator may, with the approval of the Competent Court, make partial distributions to creditors whose claims have been accepted in accordance with the provisions of Article (152) of this law.
The liquidator shall make the final distribution after all claims are determined.
Article (155) Determination of Due Amounts
The liquidator shall take into consideration in determining the amounts due to each creditor, the administration costs incurred all through the period in which the Licensee was placed under administration.
The liquidator may, upon the approval of the Competent Court, distribute among the creditors of the Licensee in Liquidation any properties which are, due to their nature or any other reasons, not ready to be disposed of, if such distribution is in the interest of the creditors.
Article (156) Priority of Claims(a) The rights pertaining to any of the following shall have preferences over the property of the Licensees in liquidation.1. The Administrator's fees and reasonable expenses incurred by the Administrator during the administration period of the Licensee, and the wages and salaries of the officers and employees of the Licensee up to the date on which the petition for compulsory liquidation was filed at the competent court or the date of termination of the relevant contract of employment whichever is earlier.2. The liquidator's fees and reasonable expenses incurred by the liquidator during the period of liquidation.3. Fees and taxes due to the Government, its organisations, Agencies and the Central Bank.4. Deposits and loans taken with the approval of the Central Bank to protect the Licensee from insolvency.5. Deposits of value not exceeding twenty thousand (20,000) Bahraini Dinars per depositor.6. Other deposits that exceed the amount stated in the previous item and all other unsecured debts due upon the Licensee.7. Amounts due to the shareholders in proportion to their respective shares.(b) Each of the rights stated in the items of the above paragraph shall all have equal status and shall be paid in full after settling the rights of higher priority according to the order of priority in the above paragraph, unless the assets are inadequate to meet all of the said rights, then such debts should be reduced in equal proportions.(c) The secured debts of the creditors of the Licensees and the current settlements taking place in the clearing house of the stock exchange shall be paid without reference to the order of priority set in paragraph (a) of this Article.(d) Interest due on the debts of the Licensee shall accrue up to the date of filling the petition for the compulsory liquidation to the Competent Court or any date agreed by the Licensee and its creditors whichever is earlier,
Article (157) Final Accounts of Liquidation
After completion of distribution of all assets of the Licensee in liquidation, the liquidator shall submit within a period not exceeding three months final liquidation accounts to the Competent Court and the Central Bank.
Article (158) Void Transactions(a) The Licensee under liquidation is prohibited from undertaking any of the following actions during the "Prohibition Period" stated in paragraph (b) of this Article:1. Concluding any transaction at an undervalue with any person.2. Entering into a transaction for the purpose of defrauding any of its creditors.3. Giving preference to any person,(b) The expression "Prohibition Period" referred to in the preceding paragraph shall denote the following:i. A term of two years prior to the date in which the Licensee was placed under administration or the date in which the liquidation ruling was issued, if the date of the ruling does not precede the date of placing the Licensee under administration. This term applies to any transaction concluded, or priority given to any person who has relation with the Licensee, in violation of the provision of the above Article.ii. Six months prior to the date of placing the Licensee under administration or the date of issuing the liquidation ruling if the Licensee was not placed under administration. This term applies to any transaction concluded, or priority given to any person who has no relation with the Licensee, in violation of the provision of paragraph (a) of this Article.
Article (159) A Person in Relation with the Licensee
For the purpose of implementing the provisions of the preceding Article, a person is considered as having relation with the Licensee if he is a member of the board of directors, an official or a partner of the Licensee.