The UAE Bankruptcy Law Published Date: 29 Mar 2022

The UAE Bankruptcy Law

A panel discussion featuring key insights, potential pitfalls & the role of the Courts from a private practice and in-house lawyer’s perspective.

The Oath GC Talk Seminar Series in association with Global Advocacy and Legal Counsel and legal research partner LexisNexis was held on March 29, 2022 at the Emirates Towers Hotel in Dubai.

Enacted in 2016, the UAE’s Federal Bankruptcy Law remained untried and untested for some time, with little clarity as to how courts and insolvency practitioners would interpret and implement its provisions. In recent years, however, the law has been put through its paces, with companies and creditors increasingly recognising the support it provides to companies in financial distress and the protection afforded to creditor interests.

Having worked on some of the most high-profile bankruptcy cases in the UAE to date, the speakers senior partner Hassan Al Shaqsi and senior associate Hana Al Khatib from Global Advocacy and Legal Counsel, and Antoine Abi Rached, group general counsel & BOD secretary of Arabtec shared their unrivaled practical experience in this developing area. They talked about what has worked effectively under the Bankruptcy Law, how the Courts and trustees approach their roles and some of the pitfalls that await the unwary.

Hana Al Khatib moderated the interactive panel session with Hasan Al Shaqsi offering insight from an external counsel’s point of view on the provisions of the law and the practical implementation by the Courts, while Antoine Abi Rached highlighted the critical role of general counsel in bankruptcy proceedings.

Hasan commenced the session talking about how the bankruptcy proceedings are initiated by debtors or creditors, the strict application of Article 73 by the courts in the pre-bankruptcy phase and the role of trustees after official appointment. He explained that once the bankruptcy application is submitted to the court, a court-appointed expert prepares a report on the financial position of the company with their opinion on whether restructuring would be possible and whether the debtor’s assets are sufficient to cover the costs of the process. The court will then decide whether to approve the application and commence bankruptcy proceedings if all necessary conditions are met. If the court decides to initiate proceedings, the company will be placed under the supervision of a court-appointed trustee who will take control of the management of the company who is granted specific powers required to achieve the purpose of the procedure. From the commencement to the end of the bankruptcy proceedings, the speakers stressed on the need for the company to have a transparent and effective channel of communication during the proceedings between the expert, the trustee, external counsel and general counsel. It is important to educate the trustees about the business and how it operates as they are not usually specialists in the industry. The speakers also advised that all required documentation must be systematic, comprehensive, and translated to Arabic. Hassan stressed on the need for intensive preparation especially in the pre-bankruptcy phase, ensuring all documents are submitted and procedures followed to ensure smooth and favourable outcomes. He also advised that preparation be done along with the external counsel as they are attuned to the law and court procedures.

The panel also shared their insights on the liability of directors for a company’s debts, legislative changes and latest court rulings; the procedures adopted for sale of a distressed company’s assets; and the interplay between the onshore and free zone insolvency regimes highlighting recent landmark case examples and the subsequent impact of the business environment of the UAE.

Antoine shared his own experiences with the audience on the critical role of general counsel in bankruptcy proceedings. He advised that as a cyclical task, general counsel should have regular ‘stress tests’ of the financial situation of their companies to identify any early signs and alert the business of possible bankruptcy. If there are signs, Antoine talked about how doing so will enable general counsel to start early, be prepared and appoint the right resources to manage proceedings be it bankruptcy or restructuring. He advised that bankruptcy should be treated as a new line of the business with a business plan, budget, list of resources and assets, financial documents, targets and timelines in place.

The session concluded with an interactive Q&A with the attendees. The speakers facilitated a discussion with the attendees who shared their own experiences and posed queries on the implementation of the law.

Global Advocacy and Legal Counsel is a leading Middle Eastern law firm. Established in 2002, we have offices in Abu Dhabi, Dubai, Muscat and Amman, and provide local, regional and international clients with a full business law service. Internationally licensed, experienced and educated, our diverse team combine a wealth of knowledge from around the globe, including the UAE, US, UK, Oman, Australia, Italy, Germany, Egypt, Lebanon, Jordan, Syria and India. We are permitted to practice local law in each of the jurisdictions in which we operate, and our teams of highly skilled and experienced advocates and legal consultants have rights of audience before the local courts, including the Dubai International Financial Centre and Abu Dhabi Global Market Courts in the UAE.