In UAE business bankruptcy is governed by Federal Law by Decree No. 9 of 2016 on Bankruptcy which came into force on December 2016. to avoid bankruptcy and liquidation through different mechanisms, this law provides a legal framework to help distressed companies in the UAE.The mechanism includes
- consensual out-of-court financial restructuring
- composition procedures
- financial restructuring
- the potential to secure new loans under terms set by the law
- conversion to declaration of bankruptcy and liquidation of the debtor’s assets.
The law applies to:
- companies and establishments in the free zones that are subject to the provisions of Federal Law No. 8 of 2004 on Financial Free Zones and which are not governed by particular provisions regulating protective composition procedures, financial restructuring and/or bankruptcy
- any individual who is a trader as defined in the Commercial Transactions Law (Available in Arabic only).
- licensed civil companies carrying out professional activities.
- companies governed by the Commercial Companies Law
- companies which are not established under the Commercial Companies Law and which are wholly or partly owned by the federal or local government, stipulating that Federal Law by Decree No. 9 of 2016 on Bankruptcy applies.
This law increases the business stability in the UAE and investors’ confidence in the UAE market.