The Oman Commercial Law issued by Sultani Decree 55/90 (the “OCL”) is the primary legislation governing insolvency in Oman. Pursuant to the OCL, if a business is in financial distress and is unable to pay its debts, it will be forced to apply to the Commercial Court for a declaration of bankruptcy. Otherwise, an application can be made by one of its creditors when such debtor has ceased payment of the debt.
In addition, any creditor pursuant to a commercial debt which is not yet due shall have the right to apply for the declaration of the bankruptcy of a debtor, if such debtor has no known domicile, has absconded, has closed the relevant business or initiated the liquidation thereof, or has effected dealings detrimental to its creditors.
How to apply for declaration of bankruptcy
A declaration of bankruptcy shall be by statement submitted to the registry of the Commercial Court, supported by reasons for the cessation of payment of debt. An application must also attach certain documents, including but not limited to:(a) the principal commercial books;
(b) a copy of the last balance sheet and of the profit and loss account;
(c) a statement of personal expenditure for the three years preceding the making of the application;
(d) a detailed statement of the immovable and movable property owned by the debtor and the approximate value thereof on the date of cessation of payment;
(e) a statement as to the names of the creditors and the debtors, their domiciles, the amounts of their entitlements or their debts, and the securities securing the same; and
(f) a statement of the protests for non-payment made against the debtor during the two years preceding the making of the application.
The effect of bankruptcy
After an application has been submitted, the Commercial Court may order the taking of measures necessary to preserve or administer the assets of the debtor until it makes its decision on the declaration of bankruptcy. This may include delegating such person as it sees fit to conduct investigations into the financial state of the debtor and the reasons for its/his cessation of payment, and to submit a report thereon.A consequence of a judgement declaring bankruptcy is such that as of the date it is rendered the bankrupt shall relinquish in favour of the administrator in bankruptcy the management of all his assets, including assets passing to him while he is in a state of bankruptcy. This does not apply, however, to earnings and certain other assets that a judge considers commensurate with the bankrupt’s need to support himself and his family.
Further, the bankrupt may not effect any dealing in relation to any part of his assets, and he shall not be entitled to effect any act of payment or of receiving save where the receiving is of a commercial instrument and bona fide.
Right to restitution
1. Actual items
Any person may obtain restitution from the estate in bankruptcy for specific items in respect of which he can prove ownership, but the administrator may not deliver any item to the person seeking restitution before first obtaining leave of the respective judge.If the administrator refuses to return items in respect of which restitution is claimed, the dispute will be placed before the Commercial Court.
2. Instruments of value
It is permissible to obtain restitution of commercial paper and other instruments of value delivered to the bankrupt in order to realise their value or to apply them to a specific payment, if they are actually present in the estate in bankruptcy and their value had not already been paid out when bankruptcy was declared. Restitution will not, however, be permissible unless the instruments in question have been recorded in a current account between the person seeking restitution and the bankrupt.Restitution of bank notes deposited with the bankrupt will not be permissible until the person seeking restitution proves they are actually the notes in question.
3. Goods in deposit
Under Article 636, it is permissible to obtain restitution of goods present in the possession of the bankrupt as a deposit, or for the purpose of their sale on behalf of their owner, or for the purpose of delivering them to the owner, on condition that they are present in the estate in bankruptcy.If the bankrupt has already deposited the goods with a third party, restitution may be obtained from the third party. If the bankrupt borrows and mortgages the goods by way of security for borrowing, and the lender was at the time of charging unaware that the bankrupt did not have title to the goods, there may be no restitution until the debt secured by the mortgage has been discharged.
4. Spouse’s assets
Either spouse may, whatever the financial regime followed in the marriage, obtain restitution from the other’s estate in bankruptcy of movable and immovable assets if title can be proven and the property will remain encumbered by rights lawfully acquired in respect thereof by third parties.Assets which are purchased by the spouse of a bankrupt or which are purchased for the account of such spouse or for the account of infants comprised within the guardianship of the bankrupt from the date they took up trade will be considered to have been bought with the monies of the bankrupt, and will come into the assets of the estate in bankruptcy unless the contrary is proved.
Neither spouse may claim from the other spouse’s estate in bankruptcy gifts which the bankrupt spouse makes to such spouse during marriage by transaction inter vivos or with posthumous effect.
Similarly, the group of creditors may not claim from either spouse gifts which the bankrupt spouse makes to such spouse during marriage.
