UAE amends bankruptcy law to cover pandemic situations
Changes would enable individuals and businesses to overcome credit challenges in times of pandemics, natural and environmental disasters, wars, etc.
The UAE Cabinet, under the chairmanship of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of UAE and Ruler of Dubai, has approved amendments to the provisions of the Federal Law by Decree No. (9) of 2016 on Bankruptcy as part of the government's continuous efforts to develop the legal and legislative frameworks in the various sectors, particularly the economic sector, which is a fundamental pillar within the UAE strategy for the next fifty years.
The amendments stipulate the addition of new provisions to the law with regards to "emergency situations" that impinge on trade or investment, in order to enable individuals and businesses to overcome credit challenges in times of pandemics, natural and environmental disasters, wars, etc.
The amendments are aimed at ensuring fulfilment of obligations, and mitigating loss given default without prejudice to bankruptcy law, while enabling creditors to secure their rights.
The new amendments stipulate that the debtor shall be exempted from commencing procedures to declare bankruptcy. Should the debtor file an application that would be approved by the competent court, he may reach a settlement with creditors wherein he may request a grace period, or negotiate a debt settlement within a period of not more than 12 months.
According to amendments, the competent court, in case of approving the bankruptcy application, would not take any proceedings involving the debtors' funds that are needed to keep businesses running during the set period in case they defaulted on debt for emergency.
The new amendments give room to the possibility of getting new financing as per specific terms and conditions in order to secure the liquidity needed to recover businesses and enable them to survive challenges in time of emergencies.
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