Khaleej Times, Sat, Dec 09, 2023 | Jumada Al-Uola 25, 1445
UAE to set up bankruptcy courts to rule on disputes
Emirates:
The UAE will set up specialised courts to handle bankruptcy cases as the
government seeks to overhaul the restructuring and insolvency legal framework,
streamlining the process to enhance investor trust further.
A federal law on financial restructuring and bankruptcy was published in the UAE
Gazette on October 31 and will come into effect from May 1, 2024, according to
legal experts.
Currently, a dedicated section of the Courts is led by a Court of Appeal judge
responsible for overseeing bankruptcy and restructuring matters. The new law
protects and streamlines the process and avoids separate enforcement proceedings
for creditors.
“The court can impose a moratorium on creditor actions from the commencement of
judicial and execution measures against debtors until the restructuring plan is
ratified, without a specified time limitation. Exceptions are made for
employment and family law matters to protect the rights of employees and
spouses,” said Areen Jayousi, partner at Horizons & Co.
He pointed out that the emphasis on avoiding potential damage to the bankruptcy
estate during restructuring is a notable feature of the New Law in the UAE.
“The law recognises the need to balance the interests of various stakeholders,
including creditors, employees, and spouses. This protection is crucial to
facilitate a smooth and effective restructuring,” he said in a statement to
Khaleej Times.
The new law also sets forth specific conditions for filing objections and
grievances on decisions of the Court or the Trustee. “This is an important
aspect of any legal framework, providing a structured process for addressing
concerns and ensuring a fair and transparent resolution,” he said.
“The law encourages amicable settlements and expands the scope for debtors
seeking Protective Composition, reflecting a focus on resolving financial
difficulties through negotiation,” said Jayousi.
Navandeep Matta, senior associate, Kochhar & Co in Dubai, said the new law helps
the debtor settle its debts with its creditors, avoids liquidation of its
business and the adjudication of its bankruptcy as much as possible, ensures
fair distribution to creditors, preserving and protecting bankruptcy funds, and
maximising the value of bankruptcy funds to the highest extent possible.
“The New Bankruptcy law is a game changer for both debtors and creditors as it
is equally balancing the interest of the creditors for the debt that is owed to
them AND debtor having substantial control over the running of the business with
the approval of the Bankruptcy Court,” said Matta.