FILING FOR BANKRUPTCY ON ARUBA
The ultimate recourse against a company not paying its debts
The application for a bankruptcy order can be made either by the debtor itself or by one or more of its creditors.
If the debtor is a company, the managing directors do not have the authority to file a petition for bankruptcy of the company without authorization thereto from the general meeting.
The pre-requisites for the making of an order on the application for bankruptcy, regardless of whether the application is made by the debtor or by any of the creditors, is that the debtor must be in the situation in which he has “ceased to pay”. This situation is deemed to exist if, apart from one due and payable debt there are one or more additional debts outstanding (in Dutch: ‘steunvorderingen’). Such situation moreover must exist for a certain period of time.
A petition by creditors to adjudicate a company bankrupt may only be granted if the petitioners have a claim on the company. If this condition is not met or is no longer met at the time of the decision, the petition should be denied, regardless of other debts of the company.
In order to adjudicate a company bankrupt, local law furthermore requires that at least two acknowledged or indisputable claims are left unpaid. These debts need not necessarily be debts to petitioners. Hence, it is technically possible to avert bankruptcy by paying all such creditors but one.
The nature of a bankruptcy order is to impose a general judicial attachment on all the assets of the debtor for the benefit of all of its creditors. The bankruptcy has as an effect that all individual attachments and foreclosures terminate.
It should be noted that a creditor secured by a mortgage, that stipulates that the creditor may execute, as well as a creditor that is secured by pledge, may exercise their rights as if there were no bankruptcy.
The purpose of the bankruptcy is to distribute the net assets of a debtor that is in serious financial difficulties among its combined creditors. It is the court appointed trustee’s task to orderly liquidate these assets and subsequently distribute the funds received for the assets pro rata among all creditors in accordance with each creditor’s individual rights.
Karel Frielink
Attorney (lawyer) / Partner
Karel, thank you for posting this.
Not knowing the bankruptcy laws of the country where the business you do business with can be one of the biggest problems you can face. In some countries the court appointed administrator has the right to ask back for a payment made. While the purpose is clear: To protect the interests of the creditors this sometimes does not work to well – creditors might be forced to pay back a received payment. Either because their loss is considered too small in comparison with the loss of another creditor or the administrator thinks that the creditor received the payment in a try of the debtor to save assets.
A move which has put other companies into bankruptcy.
Frank
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