Currently in the UAE, laws related to insolvency are unclear.
Companies face harsh penalties in a bankruptcy scenario, and
individuals can face criminal sanctions and penal sentences.
However, a new bankruptcy law drawing from international best
practice is expected to come into force in early 2017, in the wake
of low oil prices since 2015. With the implementation of the new
law, the UAE government seeks to create a robust legal insolvency
framework, within which all businesses can operate and parties can
be sufficiently protected.
Under the proposed new law, a number of options (including
financial restructuring) will be available to insolvent companies
with the aim of identifying ways to prevent bankruptcy. According
to local news reporting, the law will apply to companies
established under the commercial companies law, companies that are
partly or fully owned by the federal or the local government, and
also companies and institutions established in free zones that are
not governed by existing bankruptcy laws. The proposed new law will
not apply to companies in the UAE already governed by bankruptcy
provisions, which include, for example, companies in the Dubai
International Finance Centre (DIFC) and the Abu Dhabi Global Market
(ADGM). These are two free zones which have their own insolvency
It is believed that the law will particularly assist owners of
small and medium sized companies in the UAE, who have recently
faced challenging economic conditions. More generally, it should
also provide comfort to those doing business in the UAE, as well as
prospective investors. The law is expected to be published in the
official gazette in the coming weeks.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
In an era of increasing complexity in regulation globally, the BVI has carefully built a simple and clear regulatory framework that minimises the legal risk for lenders and financial markets participants dealing with BVI companies.
The economic downturn in recent years has resulted in the increase of natural persons declaring their businesses insolvent. Legislation that governs insolvency is based on Chapter 5 of the Insolvency Law...
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).