The UAE Gazette of 31 October 2023 includes Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy (the “New Law”). Here are some highlights:
- A section of the Courts is designated to monitor and administer bankruptcy and restructuring proceedings. This section is chaired by a Court of Appeal Judge.
- Resolution of claims between debtors and creditors is encouraged; for example, by providing wider scope to debtors seeking Protective Composition.
- Secured creditors remain protected and can utilize the Bankruptcy Court to enforce against secured assets, during bankruptcy proceedings, without commencing separate enforcement proceedings.
- The Court has the power to stay all judicial and execution proceedings commenced by creditors against the debtor, from the date of issuance of a commencement decision by the Court until ratification of a restructuring plan. Moreover, there is no longer any restriction on the period of moratorium. However, labour law and certain family law proceedings (e.g. divorce and custodial guardianship) cannot be stayed. Meanwhile, probate/inheritance matters can also be stayed under the commencement decision. Accordingly, the New Law seeks to avoid the potential for damage to be caused by enforcement against the Bankruptcy Estate during a restructuring while not impeding the entitlement of employees to pursue their dues or the right of spouses to seek financial settlement or child custody.
- Conditions are specified for filing objections and/or grievances on decisions of the Court or the Trustee.
- Federal Decree-Law No. 9 of 2016 on Bankruptcy is repealed, and the New Law is effective, from 1 May 2024.
- There is reference to issuance of detailed regulations (not yet published), such as the minimum value of debt required in order for a creditor to commence proceedings.
The New Law, as issued in the Arabic language, is available here.
Hadef & Partners will issue future articles with detailed analysis of the New Law and its likely impact on the UAE business environment.
See also our recent articles addressing our lead role in each of the KBBO and Drake & Scull restructurings.
Please contact Mohammed Al Dhaheri or Ghalib Mahmoud if you require advice on restructuring and bankruptcy in the UAE.