The UAE Cabinet recently approved Decree-Law No. (19) of 2019 on the Insolvency of Natural Persons concerning natural person’s inability to pay debts due to insolvency and debt default. This new law is aimed at enhancing the competitiveness of the UAE, ease of doing business and at facilitating more favorable conditions for individuals facing financial difficulties and protecting those unable to meet debt obligations from going bankrupt.
Why are bankruptcy laws needed?
Over the past couple of years, there have been a wave of new insolvency and bankruptcy laws introduced in the GCC. With the exception of Qatar and Kuwait, all other GCC countries have now introduced new bankruptcy laws. As for Oman, its new bankruptcy law is due to come into effect on 1 July 2020.
In brief
Insolvency Law No. 9 of 2019 enters into force from January 2020, which is the year of economic and social betting on development and aspiration for a happier and more stable country.
What is the role of the insolvency law in this context?
The new Bankruptcy Law (Federal Law Number 9 of 2016) is seen as a strategically improved law in comparison with previous insolvency laws. Having said that the Bankruptcy Law so far covers the following:
i. Permits organizations in money related issues and provides the chance to rearrange their issues so as to stay suitable;
ii. Companies failing to stay financially viable, offers them a chance to seek liquidation;
The UAE has pioneered a new insolvency regime for individuals or natural persons with the issuance of the stand-alone Insolvency Law No. 19 of 2019 (Insolvency Law), which has come to effect as of 30 November 2019.
The Insolvency Law is intended to provide sufficient protections to natural or civil persons who are facing financial distress and are unable to settle their debts, unlike the UAE Bankruptcy Law which regulates commercial companies and individuals considered as traders under the Commercial Transactions Code.
The UAE has pioneered a new insolvency regime for individuals or natural persons with the issuance of the stand-alone Insolvency Law No. 19 of 2019 (Insolvency Law), which has come to effect as of 30 November 2019.
The Insolvency Law is intended to provide sufficient protections to natural or civil persons who are facing financial distress and are unable to settle their debts, unlike the UAE Bankruptcy Law which regulates commercial companies and individuals considered as traders under the Commercial Transactions Code.
New Insolvency or Bankruptcy law for individuals has recently received quite a lot of attention from foreign expatriates living in UAE. The Cabinet of UAE has lately sanctioned a federal law to explicitly govern the cases of bankrupt individuals within the country. The law has been issued to safeguard the business interest of UAE residents, enhancing conditions of insolvent individuals and to ensure healthy competition among businesses.
Understanding bankruptcy laws in the UAE and DIFC in the context of COVID-19-related financial pressures.
Recent court service suspensions announced in the UAE – albeit temporary – as part of the government's response to COVID-19 will undoubtedly have an impact on efficacy of debt recovery options available to creditors, at least in the near short term. These measures come at a time when payment default rates are only expected to increase rapidly and creditors will be looking at what actions they can and should take to protect their position, including short and medium term strategies.