The rising strength of the United Arab Emirates as a commercial powerhouse has continued as the Covid-19 pandemic recedes. The UAE was a key business hub prior to 2020, but the flow of money and talent into the country has increased since then, driven by numerous factors including the UAE’s business-friendly climate, its stable political regime, and the access to fair and transparent justice mechanisms.
We have recently experienced an increase in mandates concerning disputes between shareholders and the Board of a Cayman company, which in many cases, leads to a shareholder applying to appoint provisional liquidators over the Company on a just and equitable basis. Therefore, we considered it important to remind those considering this remedy of the evidentiary hurdles they need to overcome to exercise it successfully.
Introduction
The civil procedure in the UAE is governed by the Federal Law No 11 of 1992 (Civil Procedure Code) as amended, along with the Cabinet Decisions (including Cabinet Decisions 57 of 2018 and 33 of 2020), and resolutions, etc. issued from time to time. The Civil Procedure Code regulates the procedure for litigation in civil, commercial, administrative, labour and personal status matters. It also governs the procedure of appeals and execution of judgments.
The court system in UAE is hierarchal and operates both at the federal level and a local level.
In Brief:
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