How Does the UAE Court Appoint Trustee & Inspector for Bankruptcy Cases?

After the settlement of your bankruptcy application is the process by which trustees and inspectors are appointed by the court. Our blog covers the provisions to consider when dealing with a bankruptcy case. 

1. Provisions of Appointing Trustees According to Bankruptcy Law in UAE

       Article 82: This article of the bankruptcy law covers who the trustee can be, how many trustees can be appointed, their method of operations and the decision of continuation or dismissal of the trustee.

• In the case that a court decides to accept the application submitted in line with the provisions mentioned in the bankruptcy law, it shall appoint a trustee that is among a panel of experts or from among legal or physical experts registered in the panel of experts. On the other hand, the court may also appoint an expert from outside this roster if it does not find a person with the required experience.
• The court may at their own accord or at the request of a debtor, creditor or inspector, appoint more than one trustee, with the condition that they do not exceed more than three trustees at one given time.
• If more than one trustee is appointed, they have to perform their work in a joint manner and the decisions will be taken as per the majority. In case there is a tie, or such that an equal number of individuals have given a decision for respective things, the court gets a final say in the decision. The court shall divide among the trustees the tasks and mention to them the method of operations, whether together or separately.
• If the court decides to appoint a legal person as a trustee, he shall appoint one or more representatives that carry out various tasks of the trustee, on the condition that the representative or representatives are registered in the panel of experts according to the provision of the Bankruptcy law in the UAE.
• The court has a right to continue the appointment of the preventive composition trustee to take care of the functions of a trustee as per the provisions and appoint other trustees. The court can also dismiss any of them under the provisions of the Bankruptcy law.
• The court needs to notify the trustee of the decision taken regarding his appointment not later than the day after the issuance of the decision.

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2. Assistance to Trustee by Appointment of Experts

• The trustee that gets appointed can submit to the court any application that helps or assists him in his performance. This can include, for instance, the application for the appointment of one or more experts under his wing that is registered as the panel of experts, to help him in any matters falling within his competence and jurisdiction. Based on the consent of the court, the expert may also be appointed from outside the roster of experts, when required. The task and fees of the expert should be decided by the court upon the recommendation of the trustee.

3. Individuals that are Exempt from Becoming Trustees or Experts

The following individuals cannot be appointed as trustees or experts

• The creditors of the debtor’s
• Anyone the debtor is closely related to, such as the spouse, in-law, or any of his relatives up to the fourth degree.
• Any individual that has been sentenced for a felony or misdemeanour of embezzlement, theft, fraud in commercial transactions, has been in breach of trust, deceit, forgery, or any of the crimes that are set forth in the bankruptcy law as well as bribery or any offence that has affected the national economy even if he was rehabilitated.
• Any person who used to be the debtor’s business partner, previous employee, agent or auditor two years before the opening of the procedures.

4. Provisions Regarding Trustee’s Fees for Tasks Carried Out

• The fees of the tasks carried out by the trustees or experts according to the provisions of the bankruptcy law, need to receive the expenses incurred from the assets of the debtor that are known to the court. The court can give a decision on paying this amount and fees in advance.

• If the debtor does not have any assets or the assets he has are not sufficient enough to cover the fees and expenses of the trustees, then the debtor can give an application to the President of the court to pay this from the Treasury of the Court. If any fees are paid from the Court’s treasury, then the amounts paid shall be redeemable by the court and given priority over all other creditors, that is, from the first amounts present in the debtor’s assets.

• In case, an individual is concerned regarding the estimation or expenses of the appointed trustee or experts, he should file a grievance according to the bankruptcy law. It is important to note that filing such a grievance does not include suspension of this bankruptcy procedure. The court shall go through the grievance and make a decision within 5 working days from the filing and the decision made in this matter shall be considered final.

5. The decision of Replacement of Trustee by the Court

     Article 86 of the Bankruptcy law states that;

• The court, at any time, can replace the existing trustee or expert and can appoint another one it deems fit as per the provisions of the bankruptcy law. The debtor also has a right in regard to request the court to replace the trustee or expert if they prove that their continuation may be destructive to the interests of the creditors. This request is not subject to the suspension of procedures and the replacement trustee or expert shall also be appointed according to the provisions stated in the law. Cooperation is also needed from the substituted trustee such that it enables the substitute to perform their tasks.

• The trustee may also request the court to be relieved from his tasks and the court may accept the request and appoint a substitute. The court may also for the trustee who was relieved decide the fees of the services provided by him.

6. Appointment of Inspector

According to Article 29 of the bankruptcy law, the text of which has been replaced by Article (1) of Federal Decree-Law. No 23, (2019/09/04) as follows: 

• The court shall appoint one inspector or more from among the creditors who nominate themselves to be an inspector to look after the execution of the preventive composition procedures. In case the nominated creditors are holders of debts secured by mortgage, preferential rights, at least one creditor shall be appointed for each group.
• In case more than one creditor has applied for each group, the court shall select the one it deems fit, taking into account their representation of the number of creditors and the debt amount represented by each candidate to be appointed as inspector.
• Each one of the inspectors can be represented by one of his legal representatives or workers.
• In case the debtor requires a competent supervisory authority, the court may decide to appoint an inspector from the above upon the request of the debtor.
• The inspector appointed cannot be a spouse, in-law or relative of the debtor up to the fourth degree.

The inspector will not receive any fees and is only liable for the serious or intentional errors made when performing his duties or tasks.

• A grievance can be filed by the debtor or creditor to the court regarding any concerns he may have about the appointed inspector or representative. The filing of the grievance does not mean the suspension of the procedures. The court shall decide within 5 working days from the date of filing and the decision taken will be deemed final.
• The court may at the request of the trustee or at its own accord, dismiss the inspector and find a substitute.
• The court may also release the inspector at his request and appoint a substitute.

7. Role of the Inspector Under Bankruptcy Procedure

   • The inspector appointed shall ensure that he assists the trustee and the court to serve in the public interests of the creditors. He shall look after the implementation of the conditions under the preventive composure plan and inform the court if any violations have taken place under such conditions.

   Conclusion:

   The appointment of a trustee and inspector by the court is of crucial importance when it comes to how your bankruptcy case goes. At HHS, we have the best Bankruptcy lawyers in Dubai and all over UAE, that can help you achieve a successful outcome. Give us a call today!