UAE Law No. 18 of 1993 ‘Concerning Commercial Transactions’ (the “Commercial Transactions Law”) provides a framework for the bankruptcy of persons engaged in trade.

Part Five of the Commercial Transactions Law sets out provisions dealing with the bankruptcy procedure for traders who cease to pay their debts. This article will take a look at the bankruptcy provisions of the Commercial Transactions Law.

Definition of Bankruptcy

Section 1 of Article 645 of the Commercial Transactions Law provides:

Enforcement of a judgment should be the crown jewel of every successful claim.

However, the picture is not always as rosy. Sometimes the successful litigant is faced with the realisation that the judgment debtor has no substantial assets for the enforcement and recovery of the awarded sums. What is left is an ‘empty’ judgment.

This article will attempt to discuss the situation of empty judgments, what brings them about, ways to prevent them, as well as some practical recommendation and suggestions from our practice and experience.

Further to our previous update, the UAE Cabinet has announced the existence of an Emergency Financial Crisis through the Official Gazette dated 31 January 2021.

Factoring is one of the oldest forms of financing and is still relevant to almost all businesses across the globe.

It is a financing arrangement that enables a business to sell its account receivables (ie. outstanding monies owed to that business) to third parties at a discounted price. These third parties are typically banks or financial institutions, also known as factors. A company would agree to sell and assign its receivables to the factor, prior to their due date, at an agreed discounted rate. The discount accounts for the risk of non-payment. 

As announced this week, the UAE Cabinet has approved a further amendment (Amendment Law) to Federal Law No 9 of 2016 (the Corporate Bankruptcy Law). The Amendment Law follows the previous amendment of the Corporate Bankruptcy Law in 2019 (pursuant to Federal Law No 23 of 2019).

The Amendment Law is yet to published in the official gazette, and therefore its effective date is yet to be confirmed. However, in this alert we look at the anticipated content of the Amendment Law.

Primary Change – Emergency Financial Crisis

On 14 December 2014 the DIFC Law No. 2 of 2014, or the “Netting Law of 2014” (the “Law”), came into force as a law in the Dubai International Financial Centre (“DIFC”) following its enactment on 7 December 2014 by His Highness Mohammed bin Rashid Al Maktoum, Ruler of Dubai.

Introduction

Introduction

When a limited liability company goes into liquidation, its creditors are faced with considerable uncertainty, not least over their rights to securities on loans made to the defaulter. In such cases, a number of questions arise, including the following:

OW Bunker, one of the world’s major bunker suppliers and traders, and one of the largest companies in Denmark in terms of revenue, has filed for in-court restructuring for major parts of its business.

The subsidiaries involved face insolvency following the uncovering a $125m fraud in Singapore and a $150m risk management loss.

The New UAE Netting Law

Netting is a standard mechanism used in banking and financial markets for the settlement and payment of competing rights or interests between counterparties. This occurs through an agreed process of termination and evaluation of such rights or interests and consolidation to one single (or ‘net’) payment from one party to another, minimising the overall credit and settlement risk.

This article is a case study on how the UAE, a country with two cities which are significant international financial and business centres (namely Dubai and Abu Dhabi), functions without effective insolvency laws; and why this state of affairs is likely to continue for some time.

Whilst it is not strictly true that the UAE has no insolvency laws at all, it is fair to say that no one (debtors or creditors) makes use of the existing laws. A new UAE insolvency law has been drafted, but in the writer’s view it will be years before it sees the light.