If an organization or business is unable to clear its debt to its creditors, it can opt to file for bankruptcy, as per Article 67 of the UAE Bankruptcy Law. Our blog will provide you with complete guidance about the whole process.
1 Provision for Filing an Application for Bankruptcy in UAE
1.1 Application being a Debtor in UAE
As per Article 68, the debtor can start an application for a bankruptcy procedure, under the condition that,
- The debtor has quit paying his dent payment for more than 30 successive days because of his monetary circumstance or bankruptcy.
- Assuming the borrower is reliant upon the supervisor then he should inform these high-ups through composition of his aim to present the application to the court fifteen days before the submittal date. The concerned authority can then present any documents or any pleas to the relevant court related to the application.2
1.2 The application is a Creditor in UAE
Following Article 69, recently replaced by Article (1) of Federal Decree-Law No.23 (effective from 04/09/2019) states that,
- If a creditor or group of creditors have debt not less than AED 100,000 (one hundred thousand) and have already warned the debtor in writing to manage the debt and it has not been settled by the debtor within 30 uninterrupted working days from the date of notification, then the individual creditor or group can apply to the court to start the procedures as per the provisions of the Bankruptcy law.
- Just in case the creditor’s debt is secured by a mortgage, he/she shall apply, provided the amount claimed is part of the difference in the value of the secured debt due and the value of the assurance given does not cover the complete value of the debt protected by the mortgage.
- As per the guidance of the Minister, the Council of Ministers can then issue a verdict to modify the amount of debt.
Extraction of Payment by Creditors
As per Article 70 about bankruptcy, if the case has been withdrawn by the creditors for payment of due installment before the starting of the procedures, the debtor in this situation shall not be accountable for the stoppage of payment related to the due installment.
Proof of Insolvency
Following article 71, if the debtor is relying on competent supervisory authority as seen above in Article 68, the application might be submitted in front of the court by the authority having proof of insolvency of the debtor.
Following Article 72 considering the public interest, the Public Prosecution might request the court to start the procedures, on the condition that it offers the debtor is insolvent.
Documents for Submission of Declaring Bankruptcy in UAE being a Debtor
As per Article 73, certain documents are required to start an application for declaring bankruptcy in UAE. Documents are as under:
The debtor or the competent authority needs to submit the application stating the below reasons:
- Whether the application is for reorganization, or to avail a legal ruling for bankruptcy and liquidation. He is also required to provide reasoning for this when applying.
- A memorandum has a brief description of the financial and economic situation, asset information, and detailed data of employees.
- Certified copy of the debtor’s commercial, industrial, or professional license and his commercial registration that is provided by the authority at the Emirate.
- Copy of financial bank statements or books having a business for the fiscal year before the starting of the application.
- Submission of Report needs
- Debtor’s flow of cash and profit and loss expectations for 12 months following the submission of the application.
- A statement having the names of the creditors, addresses, amounts due and the guarantees offered to them in return (if any).
- Detailed information about property whether immovable the property, estimated value of these properties on the date of submission of application, and statement of any guarantees or rights provided to others.
- In case of unavailability of any documents by the debtor or applicant, justified reasons need to be mentioned in the application.
- If the court does not consider the documents sufficient enough, it might grant the applicant an extended time to submit the additional information or documents needed to empower support his application
Documents Required as Creditor
- Data related to Debt that contains the amount of debt and any guarantees available. Designation of trustee nominated by the creditor to take actions as per the provisions mentioned in this law.
Moreover, the creditor requires offering specifications like the purpose of the application, whether for reorganization purposes or obtaining a final ruling on bankruptcy and liquidation. Also, he needs to provide the reasons for his request.
Bankruptcy of Company
- If the debtor is a company, the application for a declaration of bankruptcy can be presented even if the company used to be in liquidation or was terminated by the court, provided its corporate personality still exists.
- Make sure that doing the above and presenting the application to open the procedures for bankruptcy in UAE can lead to the suspension or settlement of any application whose purpose is to liquidate the company or place it to recover and resume business operations
Deposit of Money or Bank Guarantee
Article 76 addresses that excluding the application submitted by the Public Prosecution, the claimant requires to deposit to the court an amount or bank guarantee that must not be more than AED 20,000, decided on by the court to cover the expenses for the settlement of the application.
Lawyers in Dubai are always there to help you if you are interested in submitting an application for bankruptcy in UAE
Our team of experienced lawyers in Dubai/UAE will always help you toward the successful completion of your application.