Navigating financial instability can be daunting, especially when considering bankruptcy. In the UAE, Federal Decree-Law No. 51 of 2023 is pivotal in guiding individuals and businesses through this challenging time. This legislation aims to provide financial stability, protect creditor rights, and support debt settlement through restructuring rather than liquidation, wherever possible. Here’s what you need to know about filing for bankruptcy in the UAE.
In the UAE, bankruptcy is a legal procedure designed to aid those unable to pay their debts. The law’s primary objectives are fairness, transparency, and efficiency, aiming to maximize asset value. It covers companies under the Commercial Companies Law, sole proprietors, and licensed civil companies offering professional services like legal and engineering consulting.
However, certain entities are exempt from this law. Public companies partially or fully owned by the UAE’s federal or local government, free-zone companies with separate jurisdiction, and financial institutions overseen by the Central Bank are excluded. The law also does not cover personal debts related to domestic needs or property purchases for personal use.
To declare bankruptcy, a minimum debt threshold must be met: AED 300,000 for natural persons, AED 500,000 for legal entities, and higher amounts for those under regulatory oversight. Creditors can also initiate proceedings if the debtor owes at least AED 1,000,000, with different criteria for secured and unsecured debts.
Applications can be submitted by debtors, creditors, or regulatory bodies when a debtor cannot settle their debts, has poor financial status, or if a restructuring plan fails either at the creditors’ behest or the court does not approve it. If proceedings are dismissed, a waiting period of three months is enforced before refiling.
The bankruptcy process involves several stages: eligibility determination, document gathering, and application submission to the Bankruptcy Department. These proceedings are overseen by the court, which may decide on a preventive settlement or commence formal bankruptcy proceedings depending on the specifics of the case. The court’s decision is disseminated publicly and relevant parties are informed.
Settlement options under UAE’s bankruptcy law include preventive settlements, financial restructuring, debt settlement, and, if necessary, formal bankruptcy proceedings to liquidate assets and satisfy creditor claims. These processes help troubled companies avoid bankruptcy and liquidation, ensuring business continuity and strengthening market confidence in the UAE.
Understanding the intricacies of UAE’s bankruptcy laws can empower individuals and businesses facing financial distress. By focusing on restructuring and fair settlements, the law supports stability and market confidence, offering a constructive path forward.
