Legal perspective : Dealing with claims in the liquidation process

All debts of liquidated companies fall due with effect from the time of initiating the liquidation process by the appointed liquidators.

The liquidators shall take all necessary steps to inform and invite all creditors to forward their claims along with the necessary documents to support whatever they claim. The appointed liquidators are empowered by the law to sell all belongings of the liquidated company such as real estate, movable property or immovable property, shares and stocks etc.

In case there is not enough money to settle all dues, the principle of proportionate payments should be applied between all creditors and without prejudice to any creditor or group of creditors.

The liquidation process should be finished as quickly as possible. However, this process is full of practical difficulties and liquidators are supposed to perform their duties with all patience and due diligence.

A good example of difficulties is that some creditors may not appear, for any reason, before the liquidators on time or as scheduled to claim their entitlements. This may delay the liquidation process. However, the law provides that in such instances, liquidators shall deposit amounts of all undisputed claims with the competent court.

Undisputed claims are claims that will not be disputed by the liquidator or any other person such as the rent of offices or agreed remuneration for contractors or confirmed debts of other institutions.

Also, extra money to meet other disputed claims should be deposited with the court. That is to say, the liquidators shall deposit extra money with the competent court to meet and/or cover all disputed claims.

However, the liquidators are not obliged to do so in case the creditors of these debts have obtained sufficient guarantees to their satisfaction that there is enough money to meet their debts. Also, the liquidators may not deposit an extra money with the court if it was decided to postpone the payment of all debts until the settlement of the dispute or disputes concerning the said debts.

In relation to disputed claims, the law gives liquidators the discretion to reach an agreement with any of the claimants not to deposit any money with the court and to furnish a sufficient guarantee to the satisfaction of such claimant. This enables the liquidator to use available money to meet other payments.

A. Warsama Ghalib is legal advisor to the Central Bank. The opinions expressed above are his own.