The UAE is in the process of implementing a new bankruptcy law.
The new bankruptcy law is intended to create a more modern, debtor-friendly regime, with particular emphasis on the rescue of a distressed debtor’s existing business or the restructuring of the debtor’s liabilities, rather than formal liquidation or bankruptcy. The new law will be equivalent of Chapter 11 of US bankruptcy laws. Read more about the UAE’s new bankruptcy law.
The existing bankruptcy provisions are contained in Volume V of Federal Law No. 18 of 1993 (UAE Commercial Transactions Law). The current bankruptcy provisions contained in the UAE Commercial Transactions Law are limited to formal bankruptcy proceedings and a limited composition procedure, both of which are court-driven and heavily dependent on oversight of a bankruptcy judge. Any action taken in the context of prescribed insolvency proceedings must be subject to formal court approval. The current provisions do not, therefore, offer any informal insolvency procedures to help survival of an existing business or the restructuring of a debtor’s liabilities. Moreover, the existing bankruptcy laws are broadly untested in the UAE courts as there has not been a major corporate insolvency in the UAE to date.
The UAE bankruptcy laws have been brought into sharp focus following the much-publicized financial problems of Dubai World and related entities. The introduction of a new bankruptcy law could have a huge impact on businesses in the UAE. Lawyers and businesses have long been calling for changes to bankruptcy rules to mitigate financial problems and attract foreign investment. It will be interesting to see what shape the revised laws will eventually take and how they will be applied. Diaz Reus provides legal expertise in multinational corporate bankruptcy, international liquidations, creditors’ rights, and international asset collections in the US, Latin America, Europe, Asia and the Middle East.