International Law

FILING FOR BANKRUPTCY IN THE DUTCH CARIBBEAN

By Karel.Frielink

The ultimate recourse against a person not paying his debts

The bankruptcy order can be applied for either by the debtor or by one or more of its creditors. If the debtor is a company then, pursuant to Article 2:8 par. 4 of the Civil Code, the managing directors do not have the authority to file a petition for bankruptcy of the company without prior authorization thereto from the general meeting, unless otherwise stipulated in the articles of association.

The pre-requisites for issuing an order upon an application for bankruptcy, regardless of whether the application is submitted by the debtor or by any of its creditors, is that the debtor?s situation must be such that 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? (supportive claims)). Such a situation must moreover have existed 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. An effect of the bankruptcy is 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 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 liquidate these assets in an orderly fashion and to 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

Full post as published by Karel's Legal Blog on May 17, 2008 (boomark / email).