How to file for bankruptcy or liquidation in the event of a business failure in the United Arab Emirates? – New
If an entity is unable to pay its debts to its creditors, it may choose to file for bankruptcy, in accordance with section 67 of the United Arab Emirates Bankruptcy Act 2016.
Question: I am a partner of a small civil society with a professional license issued by the DED.
My company has lost lawsuits in which we have to pay 1 million dirhams. These cases are at the execution stage.
My company also has debts of 364,000 Dh on our books. The company is unable to pay the outstanding debts or the outstanding debts mentioned in our books. I want to shut down civil society.
Is it better for me to file for bankruptcy or to file for bankruptcy? How do we do it?
Reply: Following your questions, since you wish to file for bankruptcy of your civil company in accordance with the provisions of the Federal Law by Bankruptcy Decree No. 9 of 2016 (the “United Arab Emirates Bankruptcy Law 2016”) , Federal Legislative Decree No. 23 of 2019 amending certain provisions of Federal Bankruptcy Legislative Decree No. 9 of 2016 (the “UAE Bankruptcy Amended Law of 2019) and the provisions of Federal Legislative Decree No. 21 2020 (amended UAE Bankruptcy Law 2020) will apply.
In the United Arab Emirates, if an entity is unable to pay its debts to its creditors, it may choose to file for bankruptcy, in accordance with section 67 of the United Arab Emirates Bankruptcy Law of 2016, which states: “The procedures of this chapter regulate:
1. Restructuring of the Debtor, if possible, by helping the Debtor to implement a restructuring plan of the Debtor Business.
2. The declaration of bankruptcy of the Debtor and the achievement of a fair liquidation of the assets of the Debtor to cover the Liabilities of the Debtor.
In addition, you can apply to the United Arab Emirates court which has jurisdiction over bankruptcy proceedings. This is in accordance with Article 68 of the United Arab Emirates Bankruptcy Law of 2016, which states that “the debtor shall apply to the court to initiate proceedings in accordance with the provisions of this chapter, if he has ceased to act. make payment of the debtor’s debts on their respective due dates for more than thirty (30) consecutive Business Days due to the Debtor’s precarious financial situation, or if the Debtor is in a state of Over-indebtedness.
If the court approves your company’s bankruptcy application, it can stay all enforcement proceedings against your company if they were filed by your company’s creditors who have judgments against your company.
Subsequently, the court may appoint a trustee as referred to in Section 82 (1) of the United Arab Emirates Bankruptcy Law of 2019 as amended to provide for bankruptcy proceedings and such trustee shall submit his report to the court. in accordance with Article 96 of the United Arab Emirates. Bankruptcy Law 2016.
The trustee’s report may include a restructuring of your debts. However, if you do not agree with the restructuring proceedings, the court may issue an order declaring your business bankrupt.
This is in accordance with Section 124 (3) of the UAE Bankruptcy Act 2016, which states that “the court shall issue a judgment declaring the debtor bankrupt and ordering the liquidation of the debtor’s assets if the proceedings for restructuring are not practical for the debtor, in accordance with the declarations and attachments to the request or the report drawn up by the expert in application of the provisions of article (77) of this law, or the report of the trustee drawn up in application of article (96), noting the impossibility of restructuring.
In addition, you can also file an individual insolvency application according to Federal Insolvency Decree Law No. 19 of 2019.
You can avail the services of a legal advisor in the United Arab Emirates for further advice.
Ashish Mehta is the Founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practice law in Dubai, UK and India. All the details of his practice on: www.amalawyers.com. Readers can email their questions to: [email protected] or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.