On 31 October 2023, the Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy (the Bankruptcy Law) was published in the UAE Gazette. The Bankruptcy Law replaces the Federal Law No. 9 of 2016 on Bankruptcy (as amended) (the 2016 Law).
The aim of the Bankruptcy law is to introduce a modern, streamlined and business-friendly approach to restructuring in the UAE (except for the DIFC and ADGM freezones, which have their own insolvency regimes).
Key Changes
- Dedicated bankruptcy unit: the introduction of a Financial Reorganisation and Bankruptcy Unit to support the Bankruptcy Court and streamline the administration of the Bankruptcy Law procedures.
- Enhanced creditor rights: to allow secured creditors to enforce against secured assets through the Bankruptcy Court, without initiating separate enforcement proceedings.
- Extended moratorium (claim suspension period): removes the moratorium time-limit on legal proceedings when a debtor enters bankruptcy proceedings and relieves additional pressure when developing a restructuring plan.
- Replacement of Preventive Composition Tool: with the debtor-friendly "Preventive Settlement" mechanism as an alternative to bankruptcy for companies on the verge of insolvency, allows a debtor to continue its business activities and repay its debts via an approved settlement plan with creditors.
What's next?
These reforms represent a significant development in the UAE's restructuring and insolvency legal framework and will enter into force on 1 May 2024. We look forward to seeing how they work in practice – watch this space!
Find out more
To discuss the issues raised in this article in more detail, please contact a member of our Restructuring & Insolvency team.
