Skip to content Skip to Search
Skip navigation

UAE sets up bankruptcy court to rule on disputes

The UAE bankruptcy law seeks to 'strike a balance between the rights of creditors and the interests of debtors' Shutterstock/Rido
The law seeks to 'strike a balance between the rights of creditors and the interests of debtors' to rescue businesses, says one expert
  • Law takes effect next May
  • Closer to global best practices
  • Emphasis on amicable deals

The UAE is overhauling its bankruptcy and restructuring law, introducing a specialist court to oversee disputes.

The legislation – formally Federal Law Decree No 51 of 2023 – comes into force on May 1, 2024, and replaces the 2016 bankruptcy framework.

It will emphasise the importance of amicable resolutions, broadening the scope for debtors to seek agreement with creditors.

However, it will also allow secured creditors to enforce claims against assets directly through the bankruptcy court, which should streamline enforcement.

The move is expected to have a significant impact on how insolvency cases are handled in the UAE, aligning the country more closely with global best practices.

“The UAE has always issued laws that adapt and mirror its positive trajectory in the economic and financial sectors,” Ghalib Mahmoud, a senior associate at Hadef & Partners in Dubai, told AGBI.

“The new bankruptcy law appears to provide further avenues for businesses and traders to seek legal assistance and recover from financial difficulties.” 

The law also introduces an extended moratorium period. The bankruptcy court will have the authority to halt creditor actions from the start of proceedings until the approval of the restructuring plan, with no set time limit. 

Raza Mithani, managing partner at Conselis Law, told AGBI that the aim was to “strike a balance between the rights of creditors and the interests of debtors” in rescuing viable businesses. 

“For example, whilst there is provision for an extended moratorium in respect of creditor actions, there is an exception in respect of employment and family law matters, to ensure some measure of protection for what may be classed as vulnerable creditors,” he said.

Mahmoud added that the law would also allow proceedings to be initiated by either a debtor or creditor, with proper notice, regardless of the debtor’s ability to cover the underlying debt.

The federal decree was published in the UAE Official Gazette on October 31, but the full text and detailed regulations have yet to be released, including the minimum debt value required for a creditor to initiate proceedings.

While the text available so far does not mention startups, legal experts believe it will help the founders of these enterprises.

Creditors – particularly banks – typically have minimal interest in dedicating resources to restructure small enterprises, even if they are viable.

The new law would give founders “an opportunity or security blanket” to address financial struggles amicably while working to achieve long-term goals, Mahmoud said.

The UAE’s 2016 bankruptcy law was designed to streamline company dissolutions and halt prosecutions during court-approved insolvency proceedings. 

It emerged in response to the 2008 global financial crisis, which highlighted deficiencies in the UAE insolvency regime that meant unpaid debts or bounced cheques landed business owners in prison.

A study published last week in the US journal The National Law Review pointed out that Gulf countries, including the UAE, had increased their interest rates in line with US policy to combat rising inflation.

This hike in borrowing costs, coupled with the end of Covid-19 support schemes, has led to a global upsurge in insolvencies.

Insolvencies in England and Wales in the year ending June 30, 2023, had “more than doubled” compared to the same period in 2020, it said. While the UAE does not have a formal insolvency register, “a similar picture is perhaps emerging in the Middle East”.

Latest articles

FILE PHOTO: United Arab Emirates Minister of State for Foreign Trade Thani Al Zeyoudi gestures during an interview with Reuters in Dubai, United Arab Emirates, June 30, 2022. REUTERS/Abdel Hadi Ramahi/File Photo

UAE and Kenya complete Cepa negotiations

The UAE and Kenya have completed negotiations on a comprehensive economic partnership agreement (Cepa) between the two countries. It is the 12th Cepa deal secured by the UAE and its third in Africa, after agreements were signed last year with Mauritius and the Republic of the Congo (Congo-Brazzaville). “The UAE-Kenya Cepa will not only boost […]

Adnoc has bid for German polymer manufacturer Covestro but its offers €55 and €57 per share were rejected

Adnoc faces hurdles in completing ambitious European deals

Abu Dhabi state oil company Adnoc is facing challenges to a duo of major European deals it is trying to get over the finish line, according to media reports. Talks with Austrian energy group OMV have been put on hold to allow parties to navigate a series of disagreements, the Financial Times reported on Friday. […]

The 450 companies operating at Dubai Science Park include AstraZeneca, and the free zone plans to add 200,000 sq ft of lab and office space

Dubai Science Park reveals expansion plans

Dubai’s biotechnology free zone is adding 60 percent more offices, laboratories and warehouses over the next few years to cater for an influx of new companies, its senior vice-president told AGBI.  Dubai Science Park, part of Dubai-listed Tecom Group, is planning an expansion of 200,000 sq ft of additional storage and logistics facilities at the […]

A worker at a phosphate production plant in Metlaoui, Tunisia. Phosphate accounts for 15% of Tunisia's exports

Saudi Arabia loans $55m for Tunisian rail renewal

Saudi Arabia has signed a $55 million loan deal with Tunisia to finance the renewal of the North African country’s rail network.  The railway is used to transport phosphate, a sector that makes up around 4 percent of Tunisia’s GDP and 15 percent of the country’s exports. Tunisia plans to produce eight million tonnes by […]