COVID-19: UAE Cabinet approves amendments to bankruptcy law
Move aims to provide legal mechanism for debtors to be able to fulfil obligations
Abu Dhabi: The UAE Cabinet has amended bankruptcy law, adding new articles related to emergencies affecting trade or investment such as a pandemic, natural or environmental disaster, to give a boost to the economic sector.
Chaired by His Highness Sheikh Mohammed 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.
The move forms part of the government's efforts to keep updating the legal and legislative frameworks in the various sectors, particularly the economic sector, which is a fundamental pillar of the UAE strategy for the next 50 years.
The amendments stipulate adding new provisions to the law concerning "emergencies" related to conditions affecting trade or investment in the country, such as an epidemic, natural or environmental disaster.
The new amendments aim to enable companies to overcome credit difficulties during emergencies, in a manner that ensures the fulfilment of obligations and reduces losses resulting from debtor stumbles.
They also set a legal framework and mechanism that enable debtors to get their rights, as well as to help deal with the failure of companies to pay their debts and meet their contractual obligations under emergency circumstances, without violating bankruptcy laws.
The amended law also aims to enable individuals and companies to overcome credits challenges during emergencies. It also enable companies to overcome credit difficulties in an orderly manner that ensures that commitments are met and that losses of financial default are reduced.
The mechanism of settlement agreement with debtors in order to preserve the rights of all parties. It also allows debtors access to new financing according to specific rules.
New debtor right for extension
The new amendments exempt a "debtor" from filing a request for bankruptcy proceedings. If a debtor submits the application and is approved by the competent court, he can resort to the settlement agreement mechanism with creditors, where the debtor has the right to request time to negotiate with creditors to reach an agreement to settle its debts within a period of more than 12 months.
If the court approves the bankruptcy request, it should not take any precautionary measures regarding any of the creditor's funds that are necessary for him to continue its business within the specified period, if stopping payment is due to emergency reasons.
The newly amended law also allows debtors to obtain new funding in accordance with specific rules and conditions, in order to secure the financial liquidity necessary for companies and business firms to recover and enhance their ability to overcome difficulties they face during emergencies.