Federal Decree Law No (16) of 2021 (Factoring Law) was issued on 29 August 2021 and came into effect on 7 December 2021. The Factoring Law, whilst laying a legislative framework for a rapidly expanding trade finance industry in the United Arab Emirates (UAE), also provided much needed clarity from, and an update to, Federal Law No (4) of 2020 (Moveables Law) and Federal Law No (1) 1987 (Civil Code).
New entrants to the trade finance market
Patrick Gearon and Roger Elford, Charles Russell Speechlys
This is an extract from the 2022 edition of GRR's Europe, Middle East and Africa Restructuring Review. The whole publication is available here.
In summary
Facts and Trial
A company operating from 2001 till 2012 was in strong financial standing. After 2012, the company faced financial difficulties and lawsuits and by 2020 had encumbered debts amounting to almost AED 20 million.
The new federal decree-law no. 35 of 2021 amending the provisions of federal decree-law no. 9 of 2016 regarding bankruptcy and its amendments has been introduced in the United Arab Emirates (hereinafter referred to as the 'new Decree') to be in effect from 1st November 2021. The new decree brings in a fundamental and crucial change in the position of law that now accords individual liability on the shareholders of the company (subject to further conditions), in the instance the company funds are insufficient to cover even twenty per cent of the company's liabilities.
Liquidity issues within the construction industry have only been exacerbated by the COVID-19 pandemic. Faced with the high-profile collapse of major contractors in the region, the UAE has taken strides to improve upon its existing Bankruptcy Law (Law 9 of 2016) to ensure that it remains capable of facing the very modern challenges presented by the current climate. This includes the introduction of provisions which give debtors limited reprieve in circumstances of “Emergency Financial Crisis” under Law 9 of 2019 amending the Bankruptcy Law.
On 1 November 2021, the Federal Decree Law No. 35 of 2021 (the "Decree") (amending certain provisions of the Federal Decree Law No.9 of 2016 concerning Bankruptcy (the "UAE Bankruptcy Law")) came into force. The publication of the Decree follows a significant decision relating to directors' duties by the Dubai Court of First Instance in the matter involving the bankruptcy of Marka Holdings PJSC ("Marka") (the "Marka Case").
Overview
This inBrief examines the latest amendments to the Bankruptcy Law (Federal Decree Law No. 9 of 2016, as amended) introduced under Federal Decree Law No. 35 of 2021 (the New Law) and their impact on the personal liability of the board of directors and managers of bankrupt companies. The New Law came into effect on 1 November 2021.
In what could prove to be a landmark judgment, a Dubai court ruled earlier this month that the directors of a company in bankruptcy should be personally liable for the company’s debts, to the sum of almost AED 450,000,000 (around US$ 122,000,000).
Article 144 of Federal Law No.9 of 2016 (the “Bankruptcy Law”) allows a court to order directors to pay a bankrupt company’s debts where:
Watson Farley & Williams has developed the Global Aviation Restructuring Index (“GARI“), an online tool providing a comparative index of 50 restructuring processes in 25+ key aviation jurisdictions. GARI also assigns ‘debtor and creditor friendliness’ scores to each restructuring procedure, allowing for easy comparison across different procedures in the same or multiple jurisdictions. Please to access GARI.
On 10 October, the Dubai Court of First Instance issued a potentially ground-breaking judgment in respect of directors’ liability in the context of corporate insolvency.
In particular, in the matter of the liquidation of the public company Marka PJSC (“Marka”), the Court held the company’s board of directors and managers personally and jointly liable for the company’s outstanding debts, totalling close to AED 450 million.