Bahrain’s New Bankruptcy Law

Bahrain’s new bankruptcy law, established in 2018, has attracted the attention of international legal scholars in an analysis from the Emerging Markets Restructuring Journal’s 2019 issue. The report, which provides information on the recent transformations in insolvency provisions in the GCC, points to Bahrain’s Bankruptcy Reorganisation Law as a leading example of progressive policy reform in the region.

The ‘debtor-friendly’ bankruptcy law, which borrows from both the UK’s and the United States’ federal Chapter 11 bankruptcy codes, acts as a safety net for troubled businesses and gives latitude to concerning companies over their reorganisation plans, while allowing for a moratorium on enforcement actions that enables businesses to continue operating through bankruptcy court proceedings. Moreover, the law, which allows for asset-selling and DIP financing, is the first enacted within the GCC that embeds cross-border insolvency provisions to better protect foreign ventures.

These forward-looking restructuring mechanisms exemplify Bahrain’s insistence on a modernized business environment that prioritizes innovation and experimentation, especially within the start-up field. The law will likely decrease the possibilities of liquidation and open up greater access to credit. Debtors are connected with creditors to allow for greater autonomy over restructuring plans, thus mitigating bankruptcy risks for investors. The reformation of Bahrain’s bankruptcy laws affirms Bahrain’s business-friendly status as a country looking to facilitate the success of its investors and innovators.

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