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.
Given the absence of any mandatory set-off rights on insolvency in the current UAE Bankruptcy Law, the application and effectiveness of netting provisions in financial market contracts made with a UAE counterparty has historically been uncertain.
On May 30, 2019, Dubai’s ruler, Sheikh Mohammed bin Rashid al-Maktoum, signed DIFC Insolvency Law, Law No. 1 of 2019 (the “New Insolvency Law”) into law, thereby repealing and replacing DIFC Law No. 3 of 2009. The New Insolvency Law, and supporting regulations (the “Regulations”), became effective on June 13, 2019, and govern companies operating in the Dubai International Financial Centre (the “DIFC”).
The DIFC has introduced a new Insolvency Law (Law No. 1 of 2019) (‘New Insolvency Law’) as a means of enhancing and facilitating a more efficient and effective bankruptcy regime within the free zone. The New Insolvency Law was enacted on 30 May 2019 and came into force on 6 June 2019.
Rather than a wholesale overhaul of the existing law, new concepts have been introduced to provide debtors and creditors a larger toolkit to deal with insolvency situations. We examine three of these new concepts below.
1. Debtor in Possession Regime – Rehabilitation