On 31 October 2023, Federal Law No. 51 of 2023 Promulgating the Financial and Bankruptcy Law (the Bankruptcy Law) was published in the United Arab Emirates (UAE) Official Gazette, repealing the prior federal law on bankruptcy (Federal Law No. 9 of 2016, the Prior Law) and significantly developing the bankruptcy regime in the UAE.
UPDATE ON TEMPORARY PROVISIONS
This case is within the Chestnut Portfolio acquired by the Cerberus global private investment group and has been one of its most hard fought cases, involving personal debts and security of over £12m and litigation spanning back to 2016.
Summary
The Corporate Insolvency and Governance Act 2020 (Act) received Royal Assent on 25 June 2020. The majority of its provisions commenced on 26 June 2020, with the exception of the temporary measures which have retrospective effect from 1 March 2020.
1. TEMPORARY PROVISIONS
WHAT HAS CHANGED?
The Act outlines certain insolvency law reforms in response to the COVID-19 crisis, including a temporary suspension of wrongful trading provisions for company directors. The suspension applies retrospectively from 1 March 2020 until 30 September 2020, and aims to encourage directors to continue to trade during the pandemic.
This change will not affect the directors’ duties regime. Directors must continue to comply with their duties, in particular those owed to the company's creditors where the company is, or is likely to be, insolvent.
In Shameeka Ien v. TransCare Corp., et al. (In re TransCareCorp.), Case No. 16-10407, Adv. P. No. 16-01033 (Bankr. S.D.N.Y. May 7, 2020) [D.I. 157], the Bankruptcy Court for the Southern District of New York recently refused to dismiss WARN Act claims against Patriarch Partners, LLC, private equity firm (“PE Firm“), and its owner, Lynn Tilton (“PE Owner“), resulting from the staggered chapter 7 bankruptcies of several portfolio companies, TransCare Corporation and its affiliates (collectively, the “Debtors“).
Joining three other bankruptcy courts, Judge Thuma of the District of New Mexico recently held that the rules issued by the Small Business Administration (“SBA“) that restrict bankrupt entities from participating in the Paycheck Protection Program (“PPP“) violated the Coronavirus Aid, Relief, and Economic Security Act, H.R. 748, P.L. 115-136 (the “CARES Act”), as well as section 525(a) of the Bankruptcy Code.
On 28 March 2020, the Government proposed certain insolvency law reforms in response to the COVID-19 crisis, including a temporary suspension of wrongful trading provisions for company directors.
The measures are intended to apply retrospectively from 1 March 2020 for three months, and aim to encourage directors to continue to trade during the pandemic.
The Southern District of New York recently reminded us in In re Firestar Diamond, Inc., et al., Case No. 18-10509 (Bankr. S.D.N.Y. April 22, 2019) (SHL) [Dkt. No. 1482] that equitable principles in bankruptcy often do not match those outside of bankruptcy. Indeed, bankruptcy decisions often place emphasis on equality of treatment amongst all creditors and are less concerned with inequities to individual creditors.