阿联酋新破产法介绍

通过设立专门的破产法院、新的和解程序和增加管理层的责任而使得新破产法得到完善。

2023年10月31日，第51号联邦法律《财务和破产法》（“破产法”）在阿拉伯联合酋长国《官方公报》上发布，该法律废除了之前关于破产的联邦法律（2016年第9号联邦法律，“前法”），并显著完善了阿联酋的破产制度。新的破产法自2024年5月1日起生效（自其在《官方公报》发布之日起六个月）。值得注意的是，尽管新破产法废除了前法，但在新的法规和决议出台之前，根据前法发布的所有法规和决议仍然有效。新破产法的框架通过引入联邦法律、设立专门的破产法院、新的和解程序和增加管理层的责任而使得新破产法得到完善。以下是新破产法的一些关键点：

On 31 October 2023, Federal Law No. 51 of 2023 Promulgating the Financial and Bankruptcy Law (the Bankruptcy Law) was published in the United Arab Emirates (UAE) Official Gazette, repealing the prior federal law on bankruptcy (Federal Law No. 9 of 2016, the Prior Law) and significantly developing the bankruptcy regime in the UAE. The new Bankruptcy Law entered into force on May 1, 2024 (six months following the date of its publication in the Official Gazette). It is pertinent to note that while The Bankruptcy Law repeals the erstwhile law, all regulations and resolutions issued under the erstwhile law remain in force until they are replaced with new regulations and resolutions. The framework of the Bankruptcy Law has been enhanced with the introduction of the Federal Law, establishment of a dedicated bankruptcy court, a new preventive settlement procedure, and increased liability for management. Following are some of the key features of the new Bankruptcy Law:

Similar to the Old Law, whereby companies subject to the provisions of the UAE Commercial Companies Law, any natural persons having the capacity of a trader, and licensed civil companies of a professional nature, are all caught under the Bankruptcy Law, and does not apply in the DFIC or the ADGM free zones (which have their own insolvency regimes). It is also important to note that some free zone regulations (e.g., the DMCC) 

expressly provide an option of winding up under the UAE bankruptcy law; and the new Bankruptcy Law has clarified and expanded certain definitions, such as “cessation of payments “and “debtor’s assets” , and introduced new definitions, such as “related party”, “ranking of creditors”, and “required majority”.

A specialized approach to handling cases. The Bankruptcy Law is the establishment of a new Bankruptcy Court with jurisdiction to adjudicate on bankruptcy related matters. All existing actions pending before UAE courts arising under the Prior Law shall be transferred to the new Bankruptcy Court on 1 May 2024. The Bankruptcy Law provides for the appointment of experts and auditors to assist the Bankruptcy Court in its decision making. 

And the judgments rendered by the Bankruptcy Court are immediately enforceable, with no requirement to be served. The Bankruptcy Law dictates that decisions from the Bankruptcy Court are immediately enforceable as writs of execution. Challenges or stays to enforcement are only possible if the Bankruptcy Court reverses or stays the decision, either sua sponte (voluntarily) or upon request by a debtor or creditor, or if the decision is contested in the Court of Appeal.

The New Law introduces a specialized division within the Courts, which is overseen by a senior Court of Appeal judge, dedicated to managing and overseeing bankruptcy and restructuring cases to support the Bankruptcy Court (“Bankruptcy Unit”). The Bankruptcy Unit shall be responsible for, processing requests under the law, notifying parties of court decisions, and ensuring compliance with the required information and documentation before presenting it to the Bankruptcy Court. Additionally, it oversees the debtor’s management of the business during the proceedings, facilitates creditors’ meetings, and summons relevant parties for inquiries, along with other duties assigned by judicial authorities or stipulated by law.

And the New Law expanded the mandate of the Financial Restructuring Committee (“FRC”) in relation to various aspects of the bankruptcy process, including overseeing the online platform for the Bankruptcy Register that will be established under the New Law, endorsing the list of trustees and experts, overseeing the training of judges and experts, and assisting the Bankruptcy Court in setting the range of fees for trustees.

According to article no 56, Bankruptcy Preventive Composition, in the Old Law, that became redundant due to its strict conditions, has been replaced by a more user-friendly mechanism described in the New Law as “Preventive Settlement”. The new preventive settlement mechanism include:

a) A debtor may apply for preventive settlement proceedings in certain prescribed circumstances, such as where it has defaulted or has reason to believe it is unable to repay all or any of its debts as they fall due.

b) Once the preventive settlement proceedings begin, a debtor retains the ability to manage its business and assets, including obtaining new financing pursuant to the Bankruptcy Law, provided its actions are not harmful to creditors' interests. Activities beyond "normal business" require approval from the Bankruptcy Court.

c) The decision to initiate preventive settlement proceedings results in a three-month suspension of claims, extendable up to a total of six months by the Bankruptcy Court following the date of the decision.

d) A creditors' committee (comprising representatives from the various groups of creditors) must be formed within 10 days from the initiation decision, and the debtor is required to submit details of the committee to the Bankruptcy Court.

e) Debtors must file a preventive settlement proposal with the Bankruptcy Court within three months from initiation decision, the content of which is prescribed under the Bankruptcy Law.

f)The Bankruptcy Law outlines a comprehensive list of information required to be submitted alongside the application, the procedures for calling a meeting of the creditors to approve the proposal, the corresponding voting requirements, the actions to be taken following the vote, and the circumstances for early termination of the proceedings (e.g., if the debtor commits a "serious error" in dealing with its property or fails to adhere to the terms of the preventive settlement proposal).

Under the Bankruptcy Law, a debtor must submit its preventive settlement or bankruptcy application to the Bankruptcy Department within 60 days from the date of ceasing of payments or becoming aware of information confirming that it would be unable to pay its debts as and when they become due, unless a creditor or the regulatory authority has already made an application. Following the submission of a bankruptcy application, the debtor is prohibited from disposing of its property.

Alternatively, the Bankruptcy Law provides that an ordinary creditor or a group of creditors may apply to initiate bankruptcy proceedings if a debtor defaults on any debts owed to them, provided the debt is unconditional, undisputed and payable, the applicant has served notice to the debtor of the necessity to pay the debt, and the debtor has not repaid the debt within 30 days from the notice.

Apart from the above, any UAE authority may also apply to initiate bankruptcy proceedings in respect of any debtor subject to its supervision, provided the debtor has been notified and a period of 30 days has lapsed since such notification.

In the event multiple applications are submitted by and/ or against the debtor, such applications shall be combined into a single action. Comprehensive detail regarding the required content of an application by the debtor or the creditor are set out in the Bankruptcy Law.

With respect to preventive settlement proceedings, any judicial and execution proceedings commenced by creditors against the debtor in relation to the debtor’s assets and liabilities, will be stayed following a decision to commence restructuring proceedings, until the ratification of the restructuring plan or the issuance of a decision ending the proceedings, without any restriction on the moratorium period and its extension, unlike the Old Law were the moratorium period was not supposed to exceed 10 months (subject to renewal of up to 4 months).  However, the New Law excludes labour and personal status claims (excluding succession related claims) from the moratorium. This is a positive development under the New Law whereby the Bankruptcy Estate is protected during the proceedings, while not impeding claims such as labour, divorce or child custody.

The New Law also prohibits filing new claims against the debtor following a decision to initiate its bankruptcy proceedings, excluding certain specific claims set out under the New Law. Such prohibition remains applicable following the declaration of bankruptcy. Creditors have the right to commence individual action following the closing of the bankruptcy.

The New Law brings about notable changes to the accountability of board of directors, managers, and liquidators in the event of bankruptcy.

Under the Old Law, these individuals could be held financially accountable for certain actions taken two years prior to the initiation of bankruptcy proceedings. These actions include engaging in uncalculated business risks, entering into undervalued transactions, and favouring certain creditors to the detriment of others. However, such individuals can be exempt from responsibility if they can prove that they took all measures to minimize potential losses to the debtor and creditors, or if they were not involved in the specified actions.

The New Law enhances these provisions. It extends the potential liability to  the actual managers and any person responsible for the actual management of the company (this may include controlling shareholders). If a company is declared bankrupt, the Bankruptcy Court may find the aforementioned persons liable for prescribed acts committed within two years before the company’s cessation of payment. If proven, the individuals may be required to pay an amount proportional to their mistakes, which will be used to repay the company’s debts. For example, if the company’s assets are insufficient to pay 20% of its debts and the relevant individual’s actions led to the financial deterioration, then they may be held liable.

Remarkably, the Bankruptcy Law imposes a two-year limitation period (from the issuance of the judgment declaring the entity bankrupt) for proceedings to be initiated against the aforementioned persons. Such individuals may not be found liable if they can demonstrate that they took all precautionary measures that a reasonable person could take to reduce the potential losses or if they had documented their objections to the relevant action.

预计新破产法的引入将改善阿联酋的重组和破产程序。预防性结算和重组计划的目的在于加快批准确认进程。然而，持异议的债权人将有极少的时间来对他们反对的任何和解或重组计划提出上诉。

新的专门法院对破产事务拥有管辖权，可以加强债权人权利保护，简化执行程序，以及澄清诸如追回、抵消和暂停期等重要事项。此外，管理层责任的扩大也可能促进更负责任的管理，并使高级管理层对其行为负责。

最后，遵守新破产法对于在阿联酋运营的公司和人员来说至关重要，因为该法规定了债务人的某些行为将涉及刑事处罚，如以给债权人造成损害为目的而隐瞒资产等。

The introduction of the Bankruptcy Law is anticipated to improve restructuring and bankruptcy proceedings in the UAE. Preventive settlements and restructuring plans are intended to be ratified on an expedited basis. However, dissenting creditors will have minimal time to appeal any settlement or restructuring plan they object to.

The new specialist court with jurisdiction over bankruptcy matters, strengthening of the ability of creditors to protect their rights, and streamlined enforcement procedures, together with clarification in respect of important matters such as claw back, set-off, and moratorium periods. And also, the widening of management liability may also encourage more responsible management and serve to hold senior management accountable for their actions.

Finally, Compliance with the Bankruptcy Law is critical for those operating in the UAE because the law establishes criminal penalties for certain actions committed by a debtor, such as concealing assets with the intention of causing damage to creditors.

Published By   

Yingk & Shayan Legal Consulting