In a significant recent judgment, the ADGM Court has clarified that it has jurisdiction to hear an action for fraudulent trading against the former directors of an onshore UAE company.

By way of background, NMC Healthcare LTD (NMC), and its various subsidiaries, were incorporated in onshore UAE. On 17 September 2020, NMC was redomiciled as an ADGM company. Shortly thereafter, on 27 September 2020, NMC was put into administration pursuant to the ADGM Insolvency Regulations 2015 and joint administrators (the Joint Administrators) appointed.

Over the past year or so, we have seen a number of examples of Dubai Courts taking an extremely cautious approach to handling debtor-led bankruptcy cases, particularly in relation to determining whether there is a legitimate distressed financial position and enquiring as to the conduct of managers leading to the bankruptcy of companies.

1. State of the Restructuring Market

1.1 Market Trends and Changes

State of the Restructuring and Insolvency Market

There were 27,359 insolvencies in France as of the end of September 2021, down 25.1% from the same period in 2020, and down 47.9% from September 2019. Such reduction is relatively stable across all sectors, including those most severely affected by the health-related restrictions, such as accommodation and food services (down 44.2% year-on-year) and trade (down 28.1% year on year).

Fewer Insolvencies for More Opportunities

At the end of 2021, corporate bankruptcies (for most company sizes and in most sectors) were at their lowest level compared to the pre-COVID-19 figures from 2019, with a 50% drop in insolvency proceedings and a 10% decrease in pre-insolvency situations. This was largely due to the temporary impact of government emergency measures and support, including:

On 9 June 2021, the Dubai Court of Cassation adopting a restrictive interpretation of the UAE Federal Law No 11 of 1992 and its amendments (the Civil Procedure Code) has added a requirement for the success of a debt recovery claim through a payment order application to the summary judge: there must be written evidence that the debt was either accepted or acknowledged by the debtor. This article provides an overview of the legal requirements of the payment order claim and what this new requirement of the Dubai Court of Cassation means for creditors in Dubai.

On 22 October 2020, the UAE government made various changes to the UAE Bankruptcy Law*, including the concept of Emergency Financial Crisis (EFC). Subsequently, on 10 January 2021, the UAE Cabinet declared the existence of an EFC in the UAE. In this article, Partners Michael Morris and Keith Hutchison explore how this declaration may impact on debtors and creditors.

Emergency Financial Crisis

One of the key changes implemented was a power given to the UAE Cabinet to declare an EFC. An EFC is defined as:

Introduction

The concept of winding up does not exclusively apply to insolvent companies. Solvent companies can also be wound up, on the initiation of the company’s directors and shareholders (for example, as part of a corporate reconstruction or to close down non-operating or redundant entities). 

An overview of the two key procedures to effect the dissolution of a solvent Australian company, being Members’ Voluntary Liquidation and Deregistration, is set out below. 

In brief

Even with the fiscal stimulus and other measures taken by the Federal and State governments in Australia, corporate insolvencies are likely to increase in coming months.

Under Australia's insolvency regimes, a distressed company may be subject to voluntary administration, creditor's voluntary winding up or court ordered winding up (collectively, an external administration). Each of these processes raises different issues for the commencement and continuation of court and arbitration proceedings.

In summary

In our previous alert we discussed how Justice Markovic in the Federal Court of Australia had granted the administrators of retailer Colette Group relief from personal liability for rent in respect of 93 stores.  

The Australian Federal Court has made orders relieving the administrators of retailer Colette from personal liability for rent in response to the COVID-19 crisis and the current uncertainty in respect of government policy about rent relief for tenants: see

What you need to know