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.
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:
UAE Legislators on 9 December 2018 issued a Decision of Council of Ministers Number 57 of 2018 (the Decision) regarding the recent amendments in Federal Law Number 11 of 1992 concerning the UAE Civil Procedure Code (the Civil Law). The decision issued by the Cabinet is major regarding the advertising and notification procedures. The present article by Legal Consultants of Dubai shed lights on the notification procedures in Execution cases. Following are the notable amendments made under the Decision regarding execution orders:
Recent amendments to the UAE Civil Procedure Code (CPC) are aimed at modernising and enhancing the litigation process in the UAE Courts. This includes simplifying and expediting the process for a creditor to obtain an enforceable judgment on admitted debt claims as a "Payment Order". Clyde & Co reports here on this welcome development and a very recent success with such a claim under the new regime.
Civil procedure in the onshore UAE Courts has very recently been supplemented, and in certain key respects has been revised, by extensive Federal regulations signalling continued modernisation of the onshore legal process. These developments, effective from 16 February 2019, are of relevance to all businesses with a presence or commercial interests in the UAE, and are likely to be of particular positive interest to claimants.
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