New Bankruptcy Law
On 24 October, the UAE government issued the long anticipated decree to help struggling companies avoid bankruptcy and liquidation.
The law, which contains elements of bankruptcy protection laws from jurisdictions including France, Germany and the Netherlands, provides, for the first time, a comprehensive legal framework to help distressed companies avoid bankruptcy and liquidation.
Under the terms of the federal constitution, the new law will come into effect three months from its publication in the country’s official legal gazette.
A senior official at the Ministry of Finance, who asked to remain anonymous, said that the new law had already been published in the gazette, and would come into effect in late December or early January.
A copy of the new law seen by The National dates the law’s approval by the president from September 20.
The new law contains provisions to safeguard the rights of both creditors and debtors in insolvency situations, including measures that prioritise secured creditor rights and enable companies to restructure without unanimous creditor approval.
The law applies to companies established under the commercial companies law, companies that are partly or fully owned by the federal or the local government, and companies and institutions established in free zones that are not governed by existing bankruptcy provisions. It does not apply to companies registered in the DIFC and the Abu Dhabi Global Market, or to private individuals.
The law will establish the Committee of Financial Restructuring (CFR), a new regulatory body which will oversee the procedures of financial restructuring outside the scope of the courts, have responsibility for the appointment of experts in the field of financial restructuring, and establish and maintain a national electronic database of individuals who have had bankruptcy rulings against them.