New Bankruptcy Law from July next year

A new bankruptcy and insolvency law that sets conditions for declaring bankruptcy will come into effect in Oman from July 1 next year.

The law that includes a set of rules and regulations was passed under Royal Decree No 53/2019.

According to Mohamad bin Rashid al Badi, acting director of the Legal Department at the Ministry of Commerce and Industry (MoCI), the debtor who has stopped paying his debts can apply to the Audit and Control of Commercial Establishments Department to request restructuring through settling the disputes with creditors.

“This is allowed only if the debtor continues to do business during the two years preceding the filing of the application, and that

no final judgment has been issued against him towards declaring bankruptcy,” he said.

At the same time, the inheritors of the debtor have the right to request for the same one year from the date of the debtor’s death, provided the company is not in the process of liquidation.

Also that the heirs continue to manage his funds during the implementation phase of the restructuring plan, and remain responsible for any obligations or contracts arising prior to or after the date of the adoption of the restructuring plan, he added.

“In order to settle the dispute between the creditor and the debtor, the competent department must hold mediation sessions in the restructuring requests submitted to it by the debtor in the presence of the parties involved in the dispute or an authorised representative in order to settle the dispute between the creditor and the debtor,” he said.

According to Al Badi, the ministry officials may meet with the parties in the dispute or their agents and take such action as it may deem appropriate to bring points of view in order to reach a settlement agreement for the parties.

“The competent department shall refer to the restructuring plan after the approval of the signatories by the competent court for approval, in which case the plan shall be binding between the parties,” he said.

The law also allows the debtor to request a protective settlement if his financial business is disturbed which would lead to his suspension of payment of his debts and his heirs may apply for protective reconciliation if they decide to continue trading.

“The competent court shall set forth the reasons for the disturbance of the financial works, the proposals for reconciliation and the guarantees of their execution. All the supporting documents shall be enclosed in the application, he said.

“Considering the request for protective reconciliation, the court may order the taking of precautionary measures on the funds of the debtor. The court shall take the necessary measures to take note of the financial situation of the debtor and the reasons for its disturbance.

“The law, at the same time, grants every trader a right to file for bankruptcy, in case he stops paying his commercial debts following the disruption of his business activities,” he explained.

A bankruptcy case shall not arise except by a court ruling without which the cessation of the payment of debts shall have no effect unless the law provides otherwise, he added.