dave waite - bankruptcy proceedings in barbados

7/31/2019 Dave Waite - Bankruptcy Proceedings in Barbados

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Dave Waithe

Lex Caribbean Law Offices

Christ Church

Bankruptcy Proceedings in Barbados

The Bankruptcy and Insolvency Act (the Act) came into force in 2002 and is modeled onthe 1992 Canadian Bankruptcy and Insolvency Act. It repeals and replaces the oldBankruptcy Act (Cap. 303) and affects bankruptcy and insolvency proceedings begunafter the Act came into force.

Types of proceedings

Under the Act the following actions can be taken in relation to an insolvent person:

a creditor of the insolvent person can file in court a petition for a receiving order; the insolvent person can file an assignment with the supervisor of insolvency (the

government authority responsible for the administration of all estates and matters towhich the Act applies) and, with the leave of the court, make an assignment of alltheir property for the general benefit of creditors; and

the insolvent party can make a proposal to its creditors, or file a notice of intention todo so with the supervisor of insolvency before proceeding to make a proposal.

Receiving orders and assignments are referred to as the bankruptcy proceedings, becausea bankrupt under the Act means a person who has made an assignment or against whom areceiving order has been made.

Receiving orders

A creditor can file in court a petition for a receiving order against a debtor. The creditormust prove that: (i) the debt owing to the petitioning creditor amounts to at least $4,000;and (ii) the debtor has committed an act of bankruptcy in the six months immediatelybefore the petition was filed.

For the purposes of the Act, creditor means a person with a claim (unsecured, preferredor secured) that is provable as such under the Act. Debtor includes an insolvent personand any person who at the time an act of bankruptcy was committed, resided or carriedon business in Barbados and, where the context requires, includes a bankrupt.

An act of bankruptcy occurs if the debtor, among other things: (i) either in Barbados orelsewhere makes an assignment of their property to a trustee for the benefit of theircreditors generally, whether it is an assignment authorized by the Act or not; (ii) either inBarbados or elsewhere makes a fraudulent conveyance, gift, delivery or transfer ofproperty or of any part of that property; (iii) permits any execution or other processissued against the debtor under which any of the debtors property is seized, levied on ortaken in execution to remain unsatisfied for 21 days; (iv) gives notice to any creditors thatthey have suspended, or are about to suspend, payment of their debts, or makes a
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submission of their inability to pay their debts at any creditors meeting; or (v) ceases tomeet their liabilities generally as they become due.

At the petition hearing the creditor must prove the facts alleged in the petition and of theservice of the petition. If the court is not satisfied with the proof of facts alleged in the

petition or of the service of the petition, or is satisfied by the evidence of the debtor thatthey are able to pay their debts, or that for other sufficient cause no order ought to bemade, the court must dismiss the petition. If, however, the court is satisfied with theproof, it can issue a receiving order.

Once it has issued a receiving order, the court appoints a trustee of the bankruptsproperty. The trustee liquidates the property and distributes the proceeds to thebankrupts creditors.

Assignments

Under the Act an insolvent person can, with the leave of the court, make an assignment ofall their property for the general benefit of their creditors. The assignor must be aninsolvent person. The Act defines an insolvent person as a person who is not bankruptand who resides, carries on business or has property in Barbados, whose liabilities tocreditors provable as claims under the Act amount to at least $4,000, and: (i) who is forany reason unable to meet their obligations as they generally become due; (ii) who hasceased paying their current obligations in the ordinary course of business as theygenerally become due; or (iii) the aggregate of whose property is not, at a fair valuation,sufficient, or, if disposed of at a fairly conducted sale under legal process, would not besufficient to enable payment of all their obligations, due and accruing.

The assignment must be offered to the supervisor of insolvency. Where the supervisoraccepts the assignment, they appoint a trustee in bankruptcy and name the trustee as thegrantee in the assignment document. The trustee makes a court application accompaniedby a sworn statement showing: (i) the debtors property divisible among creditors; (ii) thenames and addresses of all the insolvents creditors; and (iii) the amounts of the creditorsrespective claims and the nature of each claim (secured, preferred or unsecured).

Where the court grants leave to make the assignment, the bankrupts property vests in thetrustee, who liquidates the property and distributes the proceeds to the bankruptscreditors.

General effect of receiving orders and assignments

Under the Act, on a receiving order being issued, or an assignment being filed with thesupervisor, a bankrupt no longer has the ability to dispose or otherwise deal with theirproperty. This will, subject to the provisions of the Act and to the rights of securedcreditors, pass to and vest in the trustee named in the receiving order or assignment. If thetrustee changes, the property passes from trustee to trustee without any conveyance,assignment or transfer.


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Also, on the bankruptcy of any debtor, no creditor has any remedy against the debtor orthe debtors property or can commence or continue any action, execution or otherproceedings, for the recovery of a claim provable in bankruptcy, until the trustee has beendischarged. This stay however does not prevent a secured creditor from realising or

otherwise dealing with their security. For the purposes of the Act, a secured creditormeans a person holding a mortgage, pledge, charge or lien on or against the property ofthe debtor or any part of it as security for a debt due or accruing due to them from thedebtor, or a person whose claim is based on, or secured by, a negotiable instrument heldas collateral security and on which the debtor is only directly or secondarily liable. Thecourt can, however, postpone the secured creditors right to realise security but not formore than six months from the date of the receiving order or assignment. In a case wherethe date at which the debt secured by the security only becomes payable after six monthsfrom the date of the receiving order or assignment, the court can postpone the securedcreditors right to realise the security to the date the debt becomes payable, but only if allinstallments of interest that are more than six months in arrears are paid and all other

defaults of more than six months standing are cured, and then only so long as noinstallment of interest remains in arrears or defaults remain uncured for more than sixmonths.

An unsecured creditor that is affected by the stay may apply to the court for a declarationthat the stay no longer applies to them on the grounds that the creditor is likely to bematerially prejudiced by the continued operation of the stay or that it is equitable on othergrounds to make the declaration.

Role of the trustee in bankruptcy

As noted above, a trustee in bankruptcy is appointed by the court once it has made areceiving order or by the supervisor on accepting an assignment. However, the creditorscan, at any creditors meeting, by special resolution appoint or substitute another trusteefor the trustee named in an assignment or receiving order, or otherwise appointed orsubstituted.

The Act introduces a new licensing regime, which requires all trustees to be licensed onapplication to the supervisor of insolvency and payment of the prescribed fee. The trusteeis also required to pay an annual licence fee. A body corporate may hold a licence astrustee only if a majority of its directors and a majority of its officers hold licences astrustees. The consent of the supervisor of insolvency is required if a company isincorporated with the intention of being licensed as a trustee.

The role of the trustee is generally to administer the estate, which includes receiving anddealing with the bankrupts property, settling any debts owed to the bankrupt, collectingall monies received for the estate and paying any dividends to the bankrupts creditors.

The trustees administration of the bankrupts estate is supervised by the supervisor ofinsolvency and the inspector(s) appointed by the creditors. The supervisor is generally


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responsible for the licensing of trustees, inspecting or investigating the bankrupts orinsolvents estate and examining the trustees accounts of receipts, disbursements andfinal statements. The inspectors are essentially the trustees watchdogs; it is their functionto instruct the trustee to take whatever steps they consider appropriate to protect the estateand the creditors.

dave waite - bankruptcy proceedings in barbados

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