The new Bankruptcy Law streamlines and modernizes UAE insolvency law. It places a new emphasis on the restructuring of debts for distressed companies. This feature will destigmatize business failure and will serve as a catalyst for cultural change in the region that will lead ultimately to the promotion of a more robust legal framework for entrepreneurs and an improved climate for investors.
Scope of Application:
Debt restructuring can be carried out by individuals who are heading towards bankruptcy. The debt restructuring process is used by companies to avoid the risk of default on existing debt.
This process can be carried out by reducing the interest rates on loans or by extending the due dates for paying the liabilities.
A debt restructures process also includes when creditors agree to cancel a portion or all of the outstanding debt in exchange for equity in the company.
Below mentioned are the basic steps to start the restructuring process.
The debtor is required to file for bankruptcy if it has ceased payment of due debts due to its financial difficulties or where the debtor’s assets are insufficient to cover due liabilities
Once the bankruptcy application is submitted, a court-appointed expert will then prepare a report on the financial position of the determinism mussy to include their opinion on the possibilities of restructuring.
The court will then approve the application and at the bankruptcy proceedings if all necessary conditions are met
If the court decides to initiate the proceedings the debtor will be placed under the supervision of a court-appointed expert who will take control of management and is granted a wide range of powers in relation to the preservation of assets, dealing with the claims.
All the bankruptcy proceedings and claims and enforcement actions relating to the debtor automatically stay. Creditors have to make specific approval from the court in order to make or continue to make any claims against the debtor.
The will only initiate the process if he debtor express a willingness to continue business and the court believes a possibility for debtors’ business to be profitable again in future
If the restructuring process is finalized a report must be prepared and voted by credits. For the restructuring process to be approved the majority of creditors must vote in favor of the arrangement.
HHS lawyers and legal consultants are one of the leading bankruptcy lawyer that can assist you in bankruptcy procedures. We can also assist in assist in restructuring procedures. If you have any inquiries regarding the restructuring of debts contact us.