News & Insights


UAE Bankruptcy law: latest amendments

May 5, 2020 / Author: Irfan Ali Thanvi


In the aftermath of the ongoing COVID-19 pandemic, a significant restructuring of regulations was bound to take effect. Such restructuring procedures could include variation in the oil prices, aviation regulations, health circuits and the federal laws for the UAE. 

The UAE already survived as severe 2008 Global Financial Crisis, which elaborated the need of a debtor protection law, many establishments including several Realty developers faced bankruptcy and could not file it as in the case of the French civil code and the US laws. 

Hence, the UAE authorities, who have been continuously monitoring the situation across the world, promulgated specific laws as part of their legal regime framework and accordingly upgraded their bankruptcy realm on 29th of December, 2016 with the promulgation of the UAE Bankruptcy Law (the “Bankruptcy Law”).

The Bankruptcy Law was a ‘sigh of relief’ development for the UAE’s debtor’s crisis. The success of the nascent law depended subsequently on its enactment.

Significant support from the UAE court systems and court-appointed experts adduced vitality to the doctrine of precedence and performance-evaluation of the legislative arms of the UAE. 

Primarily, the secured creditors were not bound by court proceedings, which limited the effectiveness of the law in mega financing transactions. Nonetheless, the Bankruptcy Law climbed in a vertical direction of a more durable and conducive approach, assisting corporate establishments in the UAE to deter insolvency, improve debt crisis management and substantiate significant losses of the past.

Initially, the Bankruptcy Law applied solely to commercial companies governed by the Commercial Companies Law (Federal Law No.2 of 2015); however, its enactment became much broader than expected.


Since the UAE civil procedure is a manifestation of the French Civil code, hence primary drafts of the Bankruptcy Law provided clauses for arbitration or conciliation through an out of court settlement, adapted from “procédure de conciliation” under French insolvency law of 2018. This consideration remained notwithstanding of the legal realms of Article L313-23, French Monetary and Financial Code, which allows the debtor to transfer existing or future debts owed to it by third parties to the creditor altogether with combined security interests attached to them. 

The most relevant update relates to Article 4, enacted on the 9th of April 2020. Hitherto, this article allows any ‘regulated company’ to file a complaint to the Financial Restructuring Committee (FRC) managing bankruptcy applications. In the other legislative accounts, only ‘commercial institutions’ licensed in the UAE enfaced incumbent financial distress, may have applied the FRC. Article 4 broadens the scope of the FRC’s jurisdiction and the enactment to a larger and large group of business corporations. Inevitably, the legislature targeted to upgrade the existing authority of the FRC and position it as the chief litigator between all regulated parties in the realms of UAE bankruptcy. In the wake of COVID-19 lockdown, it is significantly impertinent to note that certain operations of bankruptcy may now be done electronically. Alternatively, the creditor conveyance interactions can now be available on the audio-visual portals of the government websites, as invitations are the fundamental core to the settlement for bankruptcy. Hence these invitations can also be recorded electronically through the Federal Government’s web portal. This method repeals the erstwhile standard of generating invitations/notices to these meetings; which could only be issued via publication through print media, covering both Arabic and English advertisements. This method was legally hammering the confidentiality of the parties and hence has now been repealed.

Similarly, revised Articles 42 (4) and 103(4) recommend electronic portals, including but limited to social media communication apps, devices, platforms may also be used to evaluate insolvency plans and generate a standard vote process. COVID-19 crisis has already enabled the UAE to access e-court procedures, which is of equal benefit to the Government and residents alike.

Article 69 albeit permits mortgagees to file as creditors until the debts exceed the value of their security, stating:

‘The creditor or the group of creditors with debt of not less than AED (100,000) one hundred thousand may apply to the Court to initiate the procedures…The creditor whose debt is secured by a mortgage shall submit an application…if the amount claimed is part of the difference in the value of the secured debt due, and the value of the guarantee does not cover the entire value of the debt secured by a mortgage when conducting the procedures.’

Above article elucidates the benchmark of AED 100,000/- for the commencement of the procedure stated by the Bankruptcy Law.

Hitherto, Article 73 includes a new point 2, which states:

The debtor may specify whether the application is for the purpose of restructuring, or for the purpose of adjudicating bankruptcy and liquidation. Also, he shall mention the justifications on which the application is based.”

The aforementioned beneficial clause enables the debtor to propagate their intentions during the primary proceedings.

The law further facilitates secured creditors, who may now subsequently file as a creditor akin to all host creditors. The enactment further provides secured creditors with incumbent rights to vote on a preventative composition enabling perimeters of finances owed exceeding the value of the security. The earlier segments did not provide these assurances to secured creditors, and hence it’s a remarkable move. Article 184 substantiates a revised introduction which clarifies that mortgages take precedence over-stimulated debts.

Finally, Article 189 stipulates that debtor’s professional fees which are incurred as a result of bankruptcy proceedings are to be treated as a priority debt. This article is a thorough departure from previous policies, which have now given credence to time-management, smooth proceedings and quick results.


The latest amendments to the 2016 Bankruptcy Law highlight a technical improvement over the previous enactments of the same law, providing an accurate approach conducive to the rescue and turnaround of stressed-out businesses. The law has an immense impact on company resolutions, as the jurisdiction of this law now applied to all free zones (except DIFC and ADGM). The law also applies to overseas branch offices of multinationals, incorporated abroad. Amidst the chaos of the outbreak of COVID-19 pandemic, the latest amendments are albeit desirable to compare to any other jurisdiction, which was previously insuperable in comparison to the UAE. 

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