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New Insolvency Law Proceedings in UAE

New Insolvency Law Proceedings in UAE

The new insolvency law of UAE helps those who are struggling to meet their financial obligations and are unable to manage their liabilities either by payment plan or insolvency and liquidation proceedings. The ministry of Economics sets the plans, required documents, qualifications, and implications for insolvency proceedings. 

Procedures under Insolvency Law:-

The UAE Insolvency Law provides two ways and procedures with a prescribed time frame for insolvent persons' anticipated financial problems. The first way out is for the individual who sought court indulgence to settle his financial difficulties.2nd procedure is linked with the Liquidation process after the failure of an individual to pay off his debts even after an extended time.

Procedure for Settlement regarding Financial Obligations:-

Following are the steps carried out during the insolvency process under the law

  • Application by the debtor:-The insolvent debtor will file an application for the indulgence of court regarding his financial difficulties. 
  • Required details/documents:-The debtor while applying for a payment plan/ insolvency and liquidation will provide the list of his creditors along with the details of his assets. The insolvent debtor also will provide the details of legal/ judicial proceedings which are pending against the debtor.
  • The decision of the court:-The court will decide the application of the person facing financial difficulties who seeks indulgence from the court within 5 days.
  • Appointment of Expert:-On acceptance of the application, the court will appoint a qualified professional for the assistance of the debtor in respect of the settlement of his debts. The settlement plan is given under the supervisory power of the court.
  • Approval by creditors:-The proposed settlement plan must be approved by the creditors according to voting criteria and specific criteria.
  •  Restricted time line:-There is a restricted timeline for instance 3 years for the implementation of a settlement plan approved by the court which can be extended with the court approval with at least 2/3rd creditor’s consent regarding unsettled debts. 
  • The effective moratorium:-This procedure led to an effective moratorium on further steps of creditors in respect of any assets of the debtors until not pledged. Under this process, there is a moratorium for creditors to apply for liquidation regarding assets of insolvent persons. 
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