On October 24, 2020, the UAE Cabinet announced its decision to amend Federal Law No. 9 of 2016 (the “Bankruptcy Law”) by including provisions covering emergency situations, such as pandemics and natural disasters, as businesses around the world face new and acute challenges in the aftermath of the COVID-19 pandemic.

The amendments considered by Corporate Lawyers of Dubai aim to ensure obligation fulfillment and loss mitigation in the event of default without prejudice to bankruptcy law, while also allowing creditors to secure their rights.

This was done to help individuals and businesses overcome credit difficulties in \”emergency situations.\” When the Bankruptcy Act was first enacted, the test for determining a debtor\’s bankruptcy was rather methodical and emotionless, but subsequent amendments have completely changed the way an offender\’s default is assessed. Now, one\’s situation and surroundings are considered.

The court don\’t include the funds required to keep the business afloat in the proceedings, especially considering the fact that the debtor also is going through difficult times. This includes affixing seals to a debtor\’s commercial premises or properties. This shields distressed debtors from formal bankruptcy proceedings and allows them to continue operating.

While creditors with debts of more than AED 100,000 can still apply to the Court to initiate bankruptcy proceedings against a debtor who has failed to settle a demand for payment within 30 days, the Court will not consider the creditor\’s application until the Emergency financial crisis has ended. In dealing with all of this, the court will consider whether the debtor\’s default was caused by the Emergency financial crisis. These amendments to the UAE Bankruptcy Law may have provided an alternative path to what was previously perceived as an imminent bankruptcy. This shift toward a more agile and globally aligned approach should help UAE businesses work through financial difficulties and, where possible, avoid liquidation.