In recent years, businesses in United Arab Emirates have come across multiple problems due to inflation, labor market matters, and interest rates. Companies are struggling with financial problems resulting in issues like bankruptcy, trust deficit among stakeholders, prolonged negotiations with creditors, and so forth.
Therefore, to address the critical matter, the UAE government has introduced changes to existing bankruptcy laws. It is much needed at this point. A lot of new laws are introduced to facilitate the unsuccessful creditors.
The law, bankruptcy laws address the legal procedure of formal restructuring and insolvent liquidation. Businesses and companies operating in the UAE are subject to bankruptcy laws. The words insolvency and bankruptcy mean the same.
Insolvency refers to businesses and companies that have insufficient assets to pay off their debts. Such commercial entities are referred to as insolvent. UAE courts are responsible to declare someone insolvent or bankrupt. The terms “bankruptcy” and “insolvency must not be confused. Insolvency laws are applicable for the dissolution of a company.
In UAE bankruptcy laws apply to all on-shore enterprises, entities, and government organizations. The bankruptcy laws are not applied to incorporated companies in free zones that are categorized as DIFC.
Debtors Company can request to begin a preventative composition procedure in the courts under bankruptcy laws. In addition, the same process is not possible if the company is already subject to a preventative composition procedure. In all this, the timings play a significant role. The corporation must take action before it finds itself passing any of the insolvency criteria.
The preventative plan’s procedure begins with the filing of an application. The request for preventative composition along with an application is sent to the court. It is attached with essential documents including the details of the corporation’s financial position, the status of its assets, debtors, creditors, employees, workers, etc.
A trustee is appointed to keep an eye on the company’s strategy. It is done once the application is approved. The trustee can be an expert listed on the expert’s roster or any other expert not listed on the roster.
Furthermore, the company’s management will continue to run the company with the trustee’s approval. Nevertheless, the trustee is given the authority to impose actions to protect the interest of the creditors in the corporation.
Drafting of the preventative composition plan is done by the appointed trustee. They will collect the details and will construct a detailed plan. The trustee in collaboration with the company will prepare the preventative composition plans and submit them to the court. The approval will take almost 45 days.
Bankruptcy lawyers will play their role in striking a sound arrangement. They will adhere to the court-supervised plan. Besides, they offer time-bound solutions that are transparent. It is an overwhelming task to accomplish for any company or person. It is advisable to approach the court itself for the restricting plan with the lawyer by your side.
Bankruptcy Lawyers in UAE will educate you and guide you about preventative composition plans. Besides, they are capable of suggesting alternative plans according to the relevant laws, regulations, and processes of the UAE.
Note: It is just a blog a content. We suggest readers to book a legal appointment first with top Advocates in UAE, and then build a perception or go legally. It is kind of mandatory, it might be an issue otherwise. Always grab the latest and updated info when it comes to go legally or taking a legal practical action.