UAE: Court saves million-dirham company from bankruptcy

Firm undergoes mediated restructuring process to help pay off debts



by

Ismail Sebugwaawo

Published: Sun 14 Aug 2022, 1:39 PM

The Abu Dhabi Judicial Department has managed to help a company out of bankruptcy after the success of the restructuring process that it underwent before the Bankruptcy Division of the Abu Dhabi Commercial Court.

The initiative was in accordance with the effective legal procedures provided by Federal Decree-Law No. 9 of 2016 regarding bankruptcy and its amendments, with the aim of addressing the conditions of companies. It also protects creditors' funds in a manner that enhances the protection of the state's economic activity and investment climate.

This is the second incident of its kind at the regional level, which competent courts are considering in Abu Dhabi. In such cases, a creditor applies to commence bankruptcy declaration procedures in accordance with the provisions of Chapter Four of the Bankruptcy Law, after the failure of a limited liability company specialising in the field of general contracting to pay its debts following financial distress.

During the course of the procedures, a group of other creditors submitted their debt claims, with a total value of more than Dh76 million and a draft restructuring plan was prepared, which was voted in by 71.54 per cent of the creditors, with a debt value of 71.89 per cent of the total debt. The debtor company, with the assistance of a specialised expert and under the supervision of the Abu Dhabi Commercial Court, was able to pay the debts and disburse a surplus amount to the company estimated at Dh5,400,000 while maintaining its in-kind assets with an estimated value of more than Dh15 million.

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Restructuring is the most effective means provided by Federal Decree-Law No. 9 of 2016 regarding bankruptcy and its amendments, as it provides a forum for dialogue between the debtor and the group of creditors, with the assistance of an expert and under the supervision of the competent court, to discuss ways to confront challenges.

It should be noted that the restructuring procedures begin with limiting the claims to the debtor, determining his financial position, and studying the reasons for his failure to pay his debts. The debtor and the competent expert then prepares the draft restructuring plan, which is presented to the court for review, and in the event of approval, it is presented to all creditors for a vote. The restructuring plan is not imposed on the creditors unless the majority of them agree in terms of their number and the value of their debts.

- ismail@khaleejtimes.com


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