Exciting News in the UAE Business Landscape!

A ground-breaking development has emerged in the UAE, where a new Bankruptcy Law is set to redefine the dynamics between debtors and creditors, fostering economic vitality. Expected to take effect on May 1, 2024, this law aims to strike a delicate balance between creditors' rights and debtors' control over business operations, all under the court's careful supervision.

Key Highlights:

Effective Date:

The law will officially come into force on May 1, 2024.

• Purpose of the Law:

The law is a comprehensive overhaul, designed to streamline restructuring and insolvency frameworks, boosting investor confidence and ensuring a smoother, more effective restructuring process.

• Encouraging Amicable Settlements:

Emphasizing negotiation, the law encourages amicable settlements, providing debtors with avenues for protective composition, steering away from immediate bankruptcy.

• Specialized Bankruptcy Courts:

Introducing dedicated courts to handle bankruptcy cases, the new structure includes a "Financial Reorganization and Bankruptcy Unit" to oversee preventive settlement, restructuring, or bankruptcy procedures.

• Innovations for Creditors and Debtors:

Noteworthy features include a moratorium on creditors' actions during restructuring, protecting the bankruptcy estate, and provisions for debtors to request new financing under specific conditions.

• Extended Moratorium Period:

The claims moratorium, initiated with the decision to open preventive settlement procedures, can be extended, not exceeding six months, ensuring a conducive environment for debtors to propose and gain approval for preventive settlement plans.

• Verdicts as Writ of Execution:

All bankruptcy court decisions are now considered as a writ of execution, ensuring enforceability under the new law.

• Suspension of Claims:

Bankruptcy courts have gained the authority to issue precautionary decisions, suspending ongoing claims against debtors before the final judgment is reached.

• Ceasing Payments Date Determination:

A significant departure from the previous law, the court, upon final judgment, will determine the date when debtors cease payments, impacting certain past actions.

• Liability for Management Actions:

Managers, board members, and liquidators may face personal liability for actions detrimental to creditors, reinforcing accountability and adherence to prudent business practices

This transformative law is poised to reshape the UAE business landscape, emphasizing fairness, collaboration, and sustainable economic growth. Stay tuned for a new era of insolvency practices in the UAE!