Insolvency & Bankruptcy

Insolvency can be defined as the inability to pay debts in full when they fall due. For the individual, insolvency can be dealt with by means of individual voluntary arrangements with creditors or by bankruptcy. Insolvency of the company can be dealt with by means of company voluntary arrangements with creditors, administration procedure, administrative receivership or by winding up. We will look briefly at the most drastic of measures in respect to the individual and corporate body may address insolvency, for the individual, bankruptcy and the company, winding up.

Bankruptcy

Bankruptcy is governed by the Bankruptcy Act, 1870 and the Bankruptcy Rules 1958. The Bankruptcy Rules were modeled on the First and Second Schedules of the United Kingdom's Bankruptcy Act of 1915. Only an individual can be declared a bankrupt. For a company, relevant legislative framework is to be found in The Companies Act, 1992; The Companies (Winding Up Amendment) Act, 2011; Companies (Amendment) Act, 2012; The International Business Companies Act 2000; and The International Business Companies (Winding Up Amendment) Act, 2011

How can a person become bankrupt and a company be wound up?

An individual under the Bankruptcy Act, 1870 can petition the court on his/her own behalf to be adjudicated a bankrupt. Creditors standing alone or as a combined class can also apply for a debtor to be adjudicated as a bankrupt.

Under the Bankruptcy Act, 1870 only persons residing, holding assets or conducting business in The Bahamas can be adjudicated a bankrupt. The grounds for being adjudicated a bankrupt in The Bahamas are as follows:
  • The debtor must owe a prescribed minimum;
  • The debtor has left the jurisdiction of The Bahamas;
  • The debtor has made fraudulent conveyances;
  • The debtor has filed a declaration admitting his inability to pay his debts;
  • The debtors summons demanding payment and the debtor does not pay within three weeks.
A company is deemed insolvent when it is unable to pay its debts as they fall due or when the value of the company's liabilities exceeds its assets.

A company is deemed unable to pay its debts where a statutory demand has been served on the company and the company has for the space of 3 weeks succeeding the service of the demand neglected to pay the sum or to secure or compound for the same to the satisfaction of the creditor; a judgment, decree or order has been obtained by a creditor has been returned unsatisfied in whole or in part; or it is proved to the satisfaction of the court that the company is unable to pay its debts.

The application for winding up may be made by the company, any creditor, any contributory or by the relevant regulator

A debtor (be it actual or legal person) can avoid bankruptcy or insolvency proceedings after a creditor has obtained a judgment demand or issued a statutory demand by
  • Reducing the debt to less than the prescribed minimum
  • Apply to the court to have the judgment demand or statutory demand set- aside. Some of the basis under which the demand may be set aside
  • There exist a substantial dispute to whether the debt or a part of the debt sufficient to reduce the undisputed debt to less than the prescribed sum is due and owing;
  • Debtor has a reasonable prospect of establishing a set-off or counterclaim equal to or greater than the amount claimed in the demand, to make the amount claimed less than the prescribed amount;
  • Creditor holds a security from the debtor for an amount equal to or exceeds the purported amount owed;
  • The Court is satisfied that a substantial injustice would be caused if the demand were to stay in place.
If the demand is not set aside and the court goes onto hear (and accedes to) the petition then a Trustee in Bankruptcy (in case of an individual) or a Liquidator (in respect to a company) would be appointed to administer the estate for the benefit of creditors.

Evans & Co. has both applied for and set aside bankruptcy proceedings against individuals, and acted as attorneys for the Receivers/Managers and Liquidators in insolvency proceedings involving a variety of corporate structures, and advised companies in voluntary winding up.

At Evans & Co. this area of our practice comes under the direct leadership of our Senior Partner Mr. Thomas A. E. Evans, Q.C.; with Ms. Veronique J.N. Evans and Mr. Gladstone Brown, Jr assisting him.
Contacts:

(242) 328-8510/1
tevans@tevanslaw.com
 
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