UAE bankruptcy law now covers pandemic

CABINET APPROVES AMENDMENTS TO SUPPORT DEBTORS

The UAE Cabinet has approved amendments to the bankruptcy law to enable individuals and businesses to overcome credit challenges in times of “emergencies” such as pandemics, natural disasters and war.

In a meeting chaired by His Highness Shaikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai, the Cabinet approved amendments to Law No 9 of 2016 on bankruptcy to strengthen the business sector in the country.

Protection for debtors

The new amendments exempt a debtor from commencing procedures to declare bankruptcy. They create a legal mechanism that protects the interests of debtors while deal with the failure of companies to settle debts and meet contractual obligations in emergencies such as the current Covid- 19 pandemic.

How itworks

Should a debtor file an application in a competent court, proving that he defaulted on debt because of an emergency such as the current pandemic, the court will allow him reach a settlement with creditors wherein he may request a grace period, or negotiate a debt settlement within a period of not more than 12 months. Secondly, the court, once it approves the bankruptcy application, will not initiate any proceedings involving the debtors’ funds that are needed to keep the business running during the set period.

Third, the amendments also make room for the possibility of getting new financing as per specific terms and conditions in order to secure the liquidity needed to help businesses recover and survive challenges in emergencies.

The amendments are aimed at ensuring fulfilment of obligations, and mitigating loss given default while enabling creditors to secure their rights, given that the economic sector is a pillar of the UAE 50- year strategy.