The Insolvency Law in the UAE was revised and adopted in September 2016 and entered into force in December the same year. Among the main provisions of this important law, we mention that the restructuring methods regard companies which will have better prospects to initiate defensive configurations working alongside with the creditors during the restructuring proceedings for businesses with establishments in the Emirates. A better understanding of the Insolvency Law and its applicability can be offered by our lawyers in Dubai.
The main provisions of the Insolvency Law in the UAE
There have been numerous improvements made to the Insolvency Law in the UAE and those refer to the current Commercial Code insolvency regime which has been revoked. Additionally, the 30-day rule refers to the obliteration of the criminal offences of bankruptcy by nonpayment. The Insolvency Law is applicable to limited liability companies, sole proprietorships established in the free zones of Dubai and also to particular types of government-owned companies. If the Commercial Code in Dubai applied to the companies unable to pay their debts, the new legislation introduces the alternative balance sheet test where the assets are not enough to cover the obligations.
The legislation also regards the period of time in which a company can declare bankruptcy because until recently, insolvencies in Dubai where time-consuming compared to other emirates in the UAE. We remind that our Dubai attorneys are able to provide you with the essential information about the new Insolvency Law in the UAE and can also offer legal support in bankruptcy or insolvency matters.
Insolvency Law procedures in Dubai
For companies found in a financial struggle, the new legislation involves three essential procedures. One is related to the insolvency with restructuring, a case where the courts in Dubai consider that the company can be saved even if the debtor is insolvent, with the help of a restructuring plan. The second procedure regards the insolvency and liquidation, where the courts imposed to the insolvent to sell the assets instead of implementing a restructuring scheme.
As for the third procedure, this is the protective composition which involves a court-sponsored process meant to simplify the rescue process of the company that faces financial struggle without declaring the insolvency. In this matter, the restructuring scheme, which can be implemented in about three years, must be accepted by two-thirds of the unsecured creditors in a company.
If your company is subject to insolvency, please feel free to contact our law firm in Dubai for assistance and legal support.