Business law and ethics
Business law and ethics
Bankruptcy can be defined as the inability of a person or an entity to repay some debt. Bankruptcy is mostly used in legal framework where a debtor fails to honor his or her outstanding debts to a creditor in the course of business. Bankruptcy in big corporations involves long court battles as they try to relieve themselves out of the huge debts that may have been accrued over time. In the legal entity bankruptcy is instituted to try free up the debtor's obligation in paying the debt he or she owes the creditor. Bankruptcy proceedings involve measuring and valuing the debtors’ assets and the proceeds used to repay a portion of the outstanding debts. Individuals and business premises can file for bankruptcy if their financial position fails to meet the outstanding debts they owe to their creditors. Bankruptcy proceedings vary in different countries as they are determined by the law of a particular country or state (Jones, 2004). Some bankruptcy cases arise out of bad faith competition in Kuwait and this has led to some companies being put under receivership as they are unable to meet their financial obligations. They are thus forced to file for bankruptcy as they can no longer remain in business if they fail to meet their creditors’ needs. This paper seeks to establish a company bankruptcy case in Kuwait and the main cause of the filling. Companies that have in the recent past filed for bankruptcy in Kuwait include Kuwait National Oil Company and Kuwait’s Agility. In recent times the Bahrain air has filed for bankruptcy in what it terms as stiff competition from its rivals.
Bahrain Air was founded in the year 2007 in the united kingdom of Bahrain in the Middle East. The company commenced its operations in February 2008 amid the Europe Crisis which was crippling many businesses around the world. The Airline has headquarters in Bahrain but it has operational offices in many countries in the Middle East. The Airline had a fleet size of four airplanes which operated around the Middle East as it frequented Kuwait. The Airline started as a low cost airline trying to tap into the already existing market around Asia. It later changed its low cost service to incorporate a full service operational mode in 2010. The Airline acquired several airplanes more so from the Airbus and the common one being the Airbus A320. The airline incorporated both the business and economy class seats as it tried to tap into the new market. The airline had a total of sixteen destinations by the year end where it had included the African Market and South Asia (World Bank & International Finance Corporation, 2009).
The Kuwait National Oil Company was a state owned corporation with prospects in oil and petroleum products where it supplies to other countries around the world. The company was incorporated in the 1960 by the Government of Kuwait to have the responsibility of oil refinery, distribution of petroleum goods and the liquefaction of gas in the country. The company was state owned by a partnership with the private sector. In the 1980 the restructuring of the oil sector in the country came into effect and it ceased to be a partnership and the Government acquired the full stake in the company (Gilson & Altman, 2010). This followed a company restructuring due to competition and failure to meet its financial obligations due to mismanagement. Due to its management structure the company incurred a lot of losses and had to be placed under receivership to try and revive it. The private sector stake was liquidated and the state took full control of the company where it was placed under receivership of the Kuwait Government. The company would later be placed under the Kuwait Petroleum Corporation which was a state owned corporation. Kuwait Petroleum Corporation also took control of several refineries which included the Mina Abdullah and Mina Ahmadi.
Bad faith competition arises out deceit which in most cases is intentional and thus accounts for fraud or business deception. Bad faith can attribute to poor execution of business practice where one individual or business wants to benefit at eh expense of the other. In the bankruptcy case involving Bahrain Airline, the management accuses the government of political instability that has led to a poor business environment in the country. The Airline also claims that the government has been demanding immediate debts the company owes the state. The Airline owed the government and this led to paralyzing its operations due to high operational costs and the pressure from the government to pay its debts. In the case of Kuwait National Oil company which attributed its poor financial position as a result of stiff competition from rival companies that had acquired licenses to operate in Kuwait. The result came tickling after some of its employees sued the company for failure to pay their accrued salaries and some suppliers halted their business operations with the company for failure to pay their debts. Bad faith competition arose out of the deception where the company failed to pay its debts. The government intervened to avert the crisis which had paralyzed the petroleum business in the country and to its neighbors. After Kuwait Petroleum Corporation took up the operations of the Kuwait National Oil Company a decision would be reached to have the corporation join OPEC (Jones, 2004).
In the case of Kuwait National Oil Company that was placed under liquidation after it failed to meet its financial needs attributed to high operational costs and mismanagement of company funds. The management failed to avert an economic crisis in the company which led to the operations of the company being placed under a newly created company. The failure of the company to meet its financial obligation led to the government intervention to avert the crisis by placing it under Kuwait Petroleum Corporation which was fully owned and controlled by the government (Al-Sabah, 1984). In the case of Bahrain airline which suffered a major financial set back in February 2013 due to its inability to honor its financial obligation to the government and its suppliers which included petroleum companies. The company management has been accused of mishandling company assets and funds that lend to its operations being halted after its major suppliers joined in the bankruptcy suit against the company.
In bankruptcy cases the law that governs the filing of bankruptcy in any country must be followed. In the case of Kuwait the law on bankruptcy is very clear and lays the framework that needs to be followed for any individual or business that wishes to file for bankruptcy. Bankruptcy fraud is regarded as a crime in many countries that may constitute a criminal case against the individual. Bankruptcy fraud may take the form of fraudulent claims raised or false statements in a court of law. In Bahrain Airline case the management is accused of mismanagement and fraud which forced the company to halt its operations in major cities in the Middle East. The management on the other hand claims the government is to be blamed for the woes the company is facing due to the political instability in the home country that has affected the Air transport in the Middle East (Al-Sabah, 1984).
Kuwait court decision
In the Kuwait National oil company case the court decision revolved on the ability of the company to meet its financial needs and be able to pay its suppliers. The company failed to meet its financial obligation and it was placed under receivership and it was later acquired by the newly created Kuwait Petroleum Corporation. Kuwait Petroleum Corporation was a state owned company under the control of the government of Kuwait. This led to cease of operations of the Kuwait National Oil Company and an emergence of a new company which took all its operations and acquired more stake in the petroleum business in the Country (Jones, 2004). In the Bahrain Airline case the airline is still facing the financial burden where Almoayed Wilhelmsen Company filed a case to declare the company bankrupt after paralyzing its full operations in 2013. The case is yet to be decided but the airline operations have been halted in all its branches especially in Kuwait. The company decision to go into voluntary liquidation was annulled by the logistics and shipping company by the name Almoayed Wilhelmsen.
Al-Sabah, S. M. (1984). Kuwait: Anatomy of a crisis economy. London: Eastlords Pub.
Gilson, S. C., & Altman, E. I. (2010). Creating value through corporate restructuring: Case studies for bankruptcies, buyouts, and breakups. Hoboken, N.J: Wiley.
Jones, T. (2004). Business Economics and Managerial Decision Making. Chichester: John Wiley & Sons.
World Bank., & International Finance Corporation. (2009). Doing business 2010. Basingstoke U.K.: Palgrave Macmillan.