In a judgment rendered on 10 October 2021, the Dubai Court of First Instance had concluded that current and former directors and managers of Marka were personally liable towards creditors of the company merely on the basis that the assets of the company were not sufficient to pay at least 20% of its debts. The 20% threshold was set in onshore Federal Decree Law No. (9) of 2016 on Bankruptcy (the Bankruptcy Law) as it then was, and the Court determined that liability applied to current and former directors and managers without distinction where the threshold is not met.

On 29 March 2016, Abdul Aziz Al Ghurair, Chairman of the UAE Banks Federation (UBF), announced a new “rescue initiative” in relation to SME debt in the United Arab Emirates, under which UBF member banks might impose a 90-day “standstill” on use of judicial means to enforce the payment of SME debts.

The duties and obligations of directors in the United Arab Emirates (UAE) are drawn from various legislative sources; there is no consolidated legislative framework dealing with the duties and obligations of directors under UAE Law. Squire Patton Boggs’ Dubai office have published a summary of the principal duties and liabilities of a director in the  UAE, both generally and in the event of insolvency.

The United Arab Emirates (UAE) appears to be finally in the process of issuing a long-awaited new federal insolvency law. Described by some as a game-changer, the government announced in July that its Cabinet has approved a draft of the new law replacing the old (and largely unused) insolvency regime. The highly anticipated law is now pending the approval and ratification of the Federal National Council and Supreme Council before it receives final approval by Sheikh Khalifa bin Zayed bin Sultan Al Nahyan, the UAE President.

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”).

In a recent landmark judgment dated 21 February 2016 the Dubai Court of First Instance decided in favour of a foreign shareholder, against a local Emirati, in a winding up petition. This is contrary to the long established protectionist trend employed by Courts in the United Arab Emirates. What is even more surprising is that the Court, in reaching its decision, has adopted a purposive approach, rather than simply applying the black letter of the law, as has traditionally been the case.

Case Details

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.

Prelude

India and the United Arab Emirates (‘UAE’) have witnessed dynamic bilateral relations in the recent past. Leadership of both countries have endeavoured to bolster ties of the two economies which has aligned India to achieve its insatiable ambition of emerging as a USD 5 trillion economy.

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.

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.