According to Article 67 of the UAE Bankruptcy Law, if an organization or corporation is unable to fulfil its debts to its creditors, it may choose to file for bankruptcy. You may find the information you need on our blog to open or submit a bankruptcy application in the UAE.
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Provisions for Submitting a Bankruptcy Application in the UAE
How can creditors and debtors apply?
The factors that are governed by this law are listed in the Bankruptcy Law’s Article 67. From business financial restructuring to assist the debtor in putting into action a well-thought-out restructuring plan, or to either get a definitive bankruptcy judgement so that the assets are liquidated and debts are paid. 1
Making a Bankruptcy Application in the UAE as a Debtor
According to Article 68 of the Bankruptcy Law, the Debtor may request the start of an application for a bankruptcy proceeding, provided that,
Due to his financial circumstances or insolvency, the debtor has ceased making payments on time for more than 30 days in a row.
If the debtor is reliant on a competent supervisory authority, he must expressly inform this authority in writing fifteen days prior to the submission date of his intention to file the application with the court. The appropriate authorities might then provide the court with any papers or arguments related to the application.
Making a Bankruptcy Application in the UAE as a Creditor
In accordance with Article 69, which has been superseded by Article 1 of Federal Decree-Law No.23 (effective as of 04/09/2019),
If a creditor or group of creditors have a debt of at least AED 100,000 ($100,000) and have explicitly warned the debtor in writing to settle the debt if it has not been settled by the debtor within 30 consecutive working days from the date of notification, the creditor or group of creditors may apply to the court to open the bankruptcy law procedures.
If the debt owed by the creditor is secured by a mortgage, the creditor must file an application as long as the amount requested makes up a portion of the difference between the secured debt’s outstanding balance and the guarantee’s unmet value.
The Council of Ministers may then make a decision to alter the debt’s amount under the direction of the Minister.
Creditors’ Withdrawal of Payment
According to Article 70 of the bankruptcy legislation, the debtor in this circumstance is not accountable for the halting of payment for the due instalment if the case has been withdrawn by the creditors for payment of due instalment prior to the commencement of the processes.
Evidence of Insolvency
As stated in Article 68, if the debtor is reliant on a competent supervisory authority, the authority may submit the application to the court together with evidence of the debtor’s insolvency. 2
Public Prosecution Article 72 states that, if it can demonstrate that the debtor is bankrupt, the Public Prosecution may ask the court to begin the proceedings in the public interest. 2
Documents Required for Filing for Bankruptcy in the UAE as a Debtor
Certain papers must be given to the court in order for the debtor to be qualified to start an application for declaring bankruptcy in the United Arab Emirates. The following are covered under Article 73 of the Bankruptcy Law:
The application must be submitted by the debtor or the appropriate supervisory authority and include the justifications listed below:
No matter if the request is for restructuring or to get a court decision on bankruptcy and liquidation. When applying, he must also offer and include arguments for this.
- a note that includes a succinct explanation of the financial and economic position, asset data, and specifics about the personnel.
- Certified copies of the debtor’s business, professional, or industrial licenses, as well as his commercial registration, both issued by the appropriate Emirate government.
- Copies of any financial records or books referencing the business for the year prior to the application’s submission.
- Additionally, a report containing the debtor’s anticipated cash flow, profit, and loss for the twelve months after the submission of the application is required.
- a declaration listing the creditors’ names, locations, amounts owed, and the assurances promised in exchange (if any).
- a thorough list of all properties, the approximate worth of each on the day the application was submitted, and a list of any guarantees or rights granted to third parties.
The application must provide a justification if the debtor or applicant is unable to submit any of the required papers.
The applicant may be given more time to submit the necessary supporting information or papers if the court does not deem the applicant’s materials to be sufficient.
Document order for a creditor to declare bankruptcy
The following documents must be submitted with an application to the court in order for a creditor to declare bankruptcy in the United Arab Emirates, according to Article 74:
- information on debt, such as the total amount owed and any available guarantees.
- designation of a trustee chosen by the creditor to carry out the requirements of this legislation.
- The creditor must also provide details in the application, such as whether it is for restructuring purposes or to get a final decision on bankruptcy and liquidation.
Company Insolvency
If the debtor is a corporation, the application to file for bankruptcy may be made even though the corporation was previously in liquidation or was terminated by the court, so long as its corporate identity is still present.
Last but not least, Article 76 stipulates that, in addition to the application filed by the Public Prosecution, the applicant is required to deposit with the court, in the manner and on the date specified by the court, an amount or bank guarantee that does not exceed AED 20,000 to cover the costs associated with the settlement of the application.
However, if the applicant lacks the funds necessary for a deposit on the day the application is submitted, the court may decide to postpone the deposit.
Sara Advocates and Legal Consultants provide you with top bankruptcy experts across the UAE. They will help you streamline the process of filing application and court hearings so it is hassle free for you. Contact us today to get the best legal advice in town.
