The UAE will undergo a significant legal transformation by implementing the new Bankruptcy Law, effective 01.05.2024. Federal Decree-Law No. 51/2023 introduces a comprehensive overhaul of the insolvency framework to improve the efficiency and effectiveness of the bankruptcy proceedings.
Important Aspects of the New Law
Specialized Bankruptcy Court: The new legislation establishes a specialized Bankruptcy Court and an Insolvency Unit to manage insolvency and restructuring cases. Led by experienced judicial personnel, this specialized entity aims to streamline the proceedings and ensure fair outcomes.
Extended Liability Provisions: The new law broadens the scope of liability, including board members, managers, and individuals actively involved in company management. This expanded accountability framework highlights the importance of robust corporate governance practices.
Introduction of Preventive Settlement Mechanism: In a departure from previous practices, the new law introduces a preventive settlement mechanism that allows debtors to restructure their obligations while maintaining business operations. This mechanism aims to facilitate smoother and faster restructurings, minimizing disruptions to business continuity.
Enhanced Legal Framework: The legislation introduces stringent measures to address insolvency-related misconduct. Individuals responsible for mismanagement leading to bankruptcy may face proportional liabilities for their actions, emphasizing the importance of responsible corporate stewardship.
As the UAE transitions to the new Bankruptcy Law, businesses operating within its jurisdiction should familiarize themselves with its provisions. Ensuring compliance with the latest legal framework is essential for effectively navigating potential insolvency scenarios.
