Bankruptcy Proceedings In Oman

Although there is no separate bankruptcy law in Oman, both the Commercial Code of 1990 and the Commercial Companies Law of 1974 provide a framework for the bankruptcy of traders and liquidation of insolvent companies. Under the laws of Oman, bankruptcy of a person must be declared by the Court. Article 579 promulgates that, "Every merchant who faces difficulties in his financial activities and suspends payment of his commercial debts may be adjudicated as bankrupt. The suspension of payment of the debt shall prove the difficulties faced in the activities unless it is proven otherwise."

When an insolvent person declares bankruptcy, the interests of that person will cease to accrue on the debts. Upon the declaration of bankruptcy, debts should be settled in the following order of priority:

salaries of employees; government dues and taxes; preferred or secured creditors; unsecured creditors The Commercial Companies Law sets out the grounds for dissolution or liquidation of a company. The declaration of bankruptcy of a company is one of the grounds for its dissolution. As a result of being declared bankrupt, a company must be liquidated and struck off the Commercial Register. The court will usually appoint a liquidator for effecting the transfer of the company's remaining assets. The liquidation is usually effected by way of judicial sale or public auction. In accordance with the Law of Commerce, after being declared bankrupt, the company is required to surrender the management of all assets to the appointed administrator in bankruptcy. Bankruptcy does not have the immediate effect of vitiating, or automatically terminating, those contracts that were entered into by the bankrupt prior to his or her declaration of bankruptcy. Any contract entered into by the bankrupt before the date of declaration of bankruptcy remains valid and continues to exist although certain obligations under those contacts may become suspended by reason of bankruptcy. Commonly, commercial contracts include the right to termination for a party in case the other party under the contract is declared bankrupt.

Speaking about the effect of bankruptcy on employees, Oman Labor Law states that the liquidation, insolvency or bankruptcy and final authorized closure of an employer is valid ground for termination of the employment contract by that employer. What is the effect of bankruptcy on parties to a contract? Generally, a contract counterparty is not responsible or liable to...