Bankruptcy in the UAE

Bankruptcy in the UAE - Makebiz

On May 1, 2024, a law from Federal Decree No51 of 2023 will come into force in the United Arab Emirates. It envisages certain improvements to the bankruptcy system, with the aim of changing the structure of insolvent businesses and ensuring a dynamic development of the entrepreneurial environment.

The updates include the work of a specialized court dealing with bankruptcy issues, as well as new regulatory procedures and increased responsibility of company management positions.

The preventive composition procedure will be replaced by a preventive settlement controlled by the judiciary. Under the improved rules, there will be no time limit on filing for bankruptcy. The debtor will have the right to continue to carry on its business during the proceedings.

Also, the process of applying for restructuring will not be time-limited. The new procedures may seek to sell the debtor’s entire business as an “existing and practiced business.”

The updated bankruptcy system in the Emirates involves an increase in the liability of the company’s directors or managers, as they may be found to be involved in the actions that caused the bankruptcy of the organization. In this case, they will have to pay compensation for damages as payment for the debts of the firm.

The rulings of the new court will be subject to mandatory enforcement. They can be appealed within 30 days from the date of the ruling. Also in connection with the new legislation, the courts will be authorized to issue warning orders or suspend ongoing claims against the debtor until a final judgment is issued.

The updated bankruptcy legislation in the UAE is primarily aimed at solving the problem of insolvency, finding those responsible for the situation and finding a solution. Most financial problems can be avoided with the professional assistance of accounting experts and careful record keeping of organizations.

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