In The Bahamas, families of companies may seek relief from the courts for insolvency. Families of companies include a parent company and subsidiaries or a series of closely related companies doing business with one another. Unlike in some other countries, The Bahamas does not permit joint insolvency proceedings. The court may choose to hear more than one insolvency petition at the same time, but each legal entity must initiate its own separate proceeding.
The only exception to the rule requiring single-entity insolvency proceedings is in the case of fraud. If a group of companies acts together in a common fraudulent scheme so that the companies really acted as one company, the court may agree to “pierce the corporate veil”. This means that the court treats all the companies as one company for purposes of winding up in an insolvency proceeding.
There are three types of insolvency proceedings under Bahamian law: voluntary winding-up, voluntary winding-up continued under the court's supervision, or compulsory winding-up by the court. When a family of companies commences insolvency proceedings, there is no requirement that all family members use the same type of proceeding. Each may choose the most appropriate method for its circumstances.
The same liquidator may oversee liquidation of a family of companies, if so appointed, as long as there is no conflict of interest among the family members and no objection to the liquidator's appointment. The same is true for lawyers, accountants, and other professionals.
One downside to the lack of joint or consolidated insolvency proceedings for families of companies is that different liquidators or professionals overseeing different companies means uncoordinated approaches. The liquidators would have no obligation to work together to maximize asset values for the family of companies as a whole. Another downside is to the creditors' disadvantage: assets of several companies cannot be pooled for the creditors' benefit. If one family member has insufficient assets, another family member's assets cannot be given to a creditor to make up for the deficiency.
For families of companies with both Bahamian and international roots, the insolvency proceedings may occur in different jurisdictions. Generally Bahamian companies must be wound up in The Bahamas. Bahamian liquidators will seek to assert control over all assets of a Bahamian company, no matter where they are located.
To find out more about insolvency proceedings, visit Gonsalves-Sabola Chambers online or call the office at +1 242 326 6400.
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