International Law

THREE QUESTIONS ON ARUBAN BANKRUPTCY LAWS

By Karel.Frielink

FAQ

Question 1

In which cases and by whom may bankruptcy proceedings be initiated in accordance with Aruban bankruptcy law?

Filing for bankruptcy may be done either by the debtor itself or by one or more of its creditors. If the debtor is a company, generally speaking the managing directors do not have the authority to petition for bankruptcy of the company without authorization thereto from the general meeting.

The pre-requisites for making a bankruptcy order on application, regardless of whether the application is made by the debtor or by any of the other above mentioned persons, is, that the debtor must be in the situation whereby 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 a situation must moreover have existed for a certain period of time.

Question 2

What are, in general, the procedures for (i) voluntary and (ii) involuntary bankruptcy according to the laws of Aruba?

The Court will first check its competence to hear the application. The Court will then summarily check whether the debtor is in a situation of ?having ceased to pay?, i.e. does one outstanding and payable debt remain unpaid, despite requests for payment and are there any additional outstanding debts. The bankruptcy decree itself does not mention any materials that are required to be filed in support of the application.

The application must be submitted in writing. If the debtor is a company, an excerpt from the trade register regarding the debtor should be filed with the application. If a debtor company files for its own bankruptcy, in addition to the excerpt it should also provide a copy of its articles of association, a copy of its shareholders register as well as a copy of the minutes from which it is apparent that the corporate body that is entitled to do so has resolved to file for the bankruptcy.

Question 3

If the claims of creditors are secured by a right of pledge or mortgage, will these claims be frozen in case of initiation of bankruptcy proceedings along with the claims of other creditors?

A creditor secured by a mortgage, that stipulates that the creditor may execute, as well as a creditor that is secured by a pledge, may exercise their rights as if there were no bankruptcy. The trustee of a bankrupt estate (in Dutch: curator) must recognize such right of mortgage or pledge, provided however that the trustee may determine a reasonable period within which the pledge must exercise its rights.

Karel Frielink
Attorney (Lawyer) / Partner

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Full post as published by Karel's Legal Blog on February 13, 2010 (boomark / email).