In line with its ambitions to stay relevant and adapt to dynamic social and economic situations, the government of the UAE has made an important change to its Bankruptcy Law to support businesses to revive from the economic hardships which were introduced by the pandemic.
Approving the amendments of the provisions of the Federal Law by Decree No. (9) of 2016 on Bankruptcy added new provisions to the law with regards to “emergency situations” which affect trade or investment.
The provision of “emergency situations” is expected to allow individuals and businesses to overcome credit challenges in times of pandemics, natural and environmental disasters, wars, etc.
With the new amendment, an individual or a firm will be exempted from commencing procedures to declare bankruptcy given that they file an application which would allow them to reach a settlement with creditors wherein they may request a grace period, or negotiate a debt settlement within a period of not more than 12 months.
The debtor will only be allowed such a leeway once his application citing “emergency situations” is reviewed and approved by the competent court.
The new provision protects the debtor’s funds that are needed to keep business running during the set period in case they defaulted on debt for an emergency. The provision also explores the possibility of getting new financing as per specific terms and conditions in order to secure the liquidity needed to recover businesses and enable them to survive challenges in time of emergencies.