When a Limited Liability Company (LLC) in Oman starts liquidation, the distribution of its remaining assets is not a random process. Under the Commercial Companies Law, the Labour Law, and the Bankruptcy Law, there is a clear order of payment hierarchy that companies must follow to pay off all their debts.
Liquidators and Administrative Fees
According to article 46(2) of the Commercial Companies Law, first priority goes to the liquidation process itself before any debts are settled. The company pays the liquidator hired to sell the assets, along with any court fees and the costs of keeping the company’s property safe until it can be sold. If these administrative costs are not covered, the legal process cannot move forward.
Worker Dues
According to article 92 of the Labour Law, wages, rights, and all amounts due to a worker or to beneficiaries on his behalf by virtue of the Labour Law have priority over all other debts owed by the employer. This means that priority shifts to staff and employee salaries, end-of-service gratuity, and any unpaid amounts immediately after the payment of fees associated with the liquidation process itself.
Privileged Creditors
Once workers are paid, priority moves to claims by privileged creditors such as government-owed taxes, secured bank loans, and other claims in accordance with article 185 of the Bankruptcy Law.
General Claims
Article 185 of the Bankruptcy Law further details that once privileged claims are settled, the liquidator addresses all other general third-party claims. This category includes business partners, trade suppliers, and contractors.
The Bottom of the List: Partners and Shareholders
Finally come the business owners. The partners or shareholders of the company are at the very bottom of the list. They only receive a distribution if there is money left over after every other debt, tax, and salary is paid in full in accordance with article 46(3) of the Commercial Companies Law.
Conclusion
This post provides a simplified outline of the order in which creditors are paid when an LLC liquidates. The matter becomes more complicated when there are multiple privileged creditors that have to go through their own prioritisation process.
If you are involved in the process of liquidating a business, we highly recommend that you familiarise yourself with the Commercial Companies Law and the Bankruptcy Law.
