Bankruptcy Law The issuance of a new UAE Bankruptcy Law marks a significant overhaul of the restructuring and insolvency legal framework, poised to take effect on May 1, 2024.
Encouraging Amicable Settlements: A Focus on Negotiation and Resolution
One of the pivotal provisions of the law is its emphasis on promoting amicable settlements. Debtors are granted expanded opportunities to seek protective composition through negotiation, offering a strategic focus on resolving financial difficulties.
Specialized Bankruptcy Courts: Dedicated Entities for Judicial Oversight: Bankruptcy Law
To ensure a streamlined and efficient process, dedicated bankruptcy courts will handle bankruptcy cases. Additionally, a specialized unit, the “Financial Reorganisation and Bankruptcy Unit,” will be established to assist in administrative tasks related to these procedures.
Moratorium and Protection for Creditors: Safeguarding Rights During Proceedings
Introducing a moratorium on creditors’ actions from the initiation of judicial measures until the ratification of the restructuring plan, the law prevents separate enforcement proceedings. Flexible claims moratorium periods are defined, allowing extensions, not exceeding six months.
New Financing Conditions: Supporting Operational Needs During Restructuring
Debtors undergoing preventive settlement and restructuring procedures may obtain new financing under specific conditions. The prioritization of new financing over existing debt, along with securing funds, aims to support debtors’ operational needs.
Ceasing Payments Determination: Impact on Past Actions
Unlike the previous law, final judgments will specify the date when debtors cease payments, affecting past actions executed by debtors.
Enforceability of Decisions: Strengthening Judicial Authority
All bankruptcy court decisions and judgments are considered writs of execution, ensuring their enforceability under the new law.
Precautionary Decisions: Proactive Measures Against Ongoing Claims
Bankruptcy courts are granted the authority to issue precautionary decisions, suspending ongoing claims against debtors before issuing final judgments.
Ratification of Restructuring Plans: Safeguarding Creditor Rights
Debtors retain the right to request the ratification of a restructuring plan if creditors refuse to proceed. The bankruptcy court may intervene to ratify the plan, ensuring creditor rights are not diminished.
Personal Liability and Criminal Accountability: Holding Key Stakeholders Accountable
Managers, board members, and liquidators may face personal liability for specified actions, with liability extending two years before the cessation of payment. The law also introduces criminal liability for committing crimes outlined in its provisions.
Application for Preventive Settlement: Proactive Debt Resolution
Debtors with viable businesses can apply for preventive settlement procedures under certain conditions, providing a proactive approach to debt resolution.
Appeal Mechanism: Recourse for Legal Decisions: Bankruptcy Law
Decisions and judgments from the bankruptcy court are subject to appeal within 30 days, offering a crucial recourse mechanism for all parties involved.
This comprehensive overview delves into the transformative nature of the new UAE Bankruptcy Law, outlining its multifaceted impact on debtors, creditors, and the broader business landscape.
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