Bankruptcy Laws in UAE:
The bankruptcy laws were published in the official gazette in September month last year which came into effect after 3 months in December 2016 as per Ministry of Finance…
The main aim of the new bankruptcy law is to regulate accumulated debts, restructuring of the companies as well as support troubled businesses.
However, the UAE’s new bankruptcy law will not offer protection from jail for individuals unable to repay their debts. The legislation will apply to all onshore and free-zone companies throughout the UAE, with the exception of companies in the DIFC and ADGM jurisdictions, each of which already have their own separate insolvency regulations in place.
The law is expected to provide a greater flexibility in dealing with financially distressed companies. It will also provide a degree of certainty and security for business owners and investors, who can rely to some extent on protection for their businesses during a restructuring, to enable them to effectively negotiate with their creditors.
The law does not decriminalize bounced cheques, although it does suspend such criminal proceedings, which is a welcome development to give debtors the necessary comfort to remain in the UAE and restructure their debts, especially those with a sustainable business and true intention to restructure. However, the protection offered is only a suspension, meaning some may still choose to skip the country and undertake any restructuring or bankruptcy from outside the UAE.
Like any new law, it will take time for all stakeholders, including the legal fraternity, to fully understand how the law will be implemented in practice. Until applications are filed, the approach of the courts and trustees, timelines and practical implementation of the law will remain a theoretical analysis.