The UAE has adopted a new bankruptcy law that will come into effect as of May 1st, 2024. The amendments to the law are aimed at protecting the interests of all parties involved and resolving conflicts as amicably as possible. The goal is to facilitate the conclusion of a peaceful agreement and avoid the need to file for bankruptcy.
Under the new law, special courts, a Financial Reorganisation and Bankruptcy Division and an administrative working group will be established to handle all bankruptcy cases filed in the UAE. Trained specialists will assist in preventative resolution, and debt restructuring or bankruptcy procedures.
The court will be able to impose a moratorium on the creditor’s actions against the debtor from the moment judicial and enforcement actions commence. Unlike the previous law, this moratorium is unlimited and is in effect until a debt restructuring plan is approved.
The decision on preventative settlement will entail a moratorium on claims for a three-month period. The debtor will be able to repeatedly apply to the court to extend the moratorium in month-long increments, with the maximum period of deferral being six months. At the same time, claims related to employment and personal status issues, with the exception of inheritance claims, will be exempt from the moratorium. This exemption aims to protect the rights of employees, spouses and children.
Another important distinction in the law is that damaging the debtor’s property during the restructuring process is now forbidden.
The bankruptcy court may approve financial restructuring for the debtor, but, typically, only if certain conditions are met.
If the court decides to approve a preventative settlement plan, debt restructuring or even bankruptcy, they will also have to set a date for when the debtor’s payments will cease.
The adoption of this new law is expected to streamline the restructuring or bankruptcy process, protect the interest of all parties involved and increase investor confidence.