The 2022 insolvency framework for ADGM companies, modelled on English insolvency law: administration, company voluntary arrangements, receivership, members' and creditors' voluntary liquidation and compulsory winding up, with a licensing regime for insolvency practitioners under the Insolvency Regulations (Insolvency Practitioner) Rules 2022 and related fees rules.
The Insolvency Regulations 2022 are the corporate insolvency and winding-up code of Abu Dhabi Global Market. Enacted by the ADGM Board of Directors on 29 August 2022 under Article 6(1) of Abu Dhabi Law No. 4 of 2013, they came into force on publication and repealed the Insolvency Regulations 2015 and all seven of its amending regulations (section 306). They cover insolvent companies and the solvent winding-up of companies that simply want to close, the qualification of insolvency practitioners and the penalisation of malpractice.
The Regulations are arranged in twelve Parts. Part 1 provides for administration, in which an administrator manages the company's affairs, business and property; an administrator may be appointed by the court, by the holder of a qualifying charge, or by the company or its directors out of court (section 29), subject to five business days' notice to any qualifying charge holder (section 31) and a twelve-month bar on repeat appointments (section 30). Part 2 deals with receivership. Part 3 covers winding-up: a company may be wound up voluntarily by special resolution (section 174); where the directors make a declaration of solvency, stating that the company will pay its debts in full within twelve months, the process is a members' voluntary winding-up, and otherwise a creditors' voluntary winding-up (sections 175 and 176). A director who makes that declaration without reasonable grounds commits a contravention. Compulsory winding-up by the court follows where a company cannot pay its debts, which is presumed when a creditor owed more than USD 2,000 serves a written demand that goes unpaid for three weeks, when execution is returned unsatisfied, or when current assets are shown to be less than current liabilities (section 200).
Part 4 protects assets in liquidation and administration, including fraudulent trading and wrongful trading, under which a director who knew or ought to have concluded that insolvent liquidation could not be avoided and did not take every step to minimise creditor losses may be ordered to contribute to the company's assets (section 252); transactions at an undervalue and preferences can be unwound (sections 257 to 259). Part 6 adds cross-border provisions and gives the UNCITRAL Model Law force of law in ADGM (section 271). Part 9 restricts service as receiver, administrator, liquidator or provisional liquidator to persons registered as insolvency practitioners under the Insolvency Regulations (Insolvency Practitioner) Rules 2022 (sections 289 and 290). Part 10 provides that a company is dissolved three months after the liquidator sends the final account and return (section 294).
Contraventions are enforced by the Registrar, who may impose a fine up to the maximum level fixed for each contravention in Schedule 9 (section 288). The Regulations are in force.
Companies incorporated in ADGM, extended to limited liability partnerships and protected cell companies (sections 260 and 261), their directors, members and creditors, office-holders appointed over them, registered insolvency practitioners, and unregistered foreign companies that may be wound up in ADGM under Part 6.
| Section 29 | A company, or its directors, may appoint an administrator out of court, in addition to appointment by the court or by the holder of a qualifying charge; section 30 bars a further such appointment within twelve months and while a winding-up petition or administration application is pending. |
| Section 174 | A company may be wound up voluntarily in the circumstances provided in its articles or by special resolution, after at least five business days' written notice to the holder of any qualifying charge unless that holder consents to an earlier resolution. |
| Section 175 | The directors (or a majority) may make a declaration of solvency, within the five weeks before the winding-up resolution, that after full inquiry the company will pay its debts in full with interest within a period not exceeding twelve months; making it without reasonable grounds is a contravention punishable by a fine. |
| Section 176 | A winding-up supported by a directors' declaration of solvency is a members' voluntary winding-up; one without it is a creditors' voluntary winding-up. |
| Section 181 | If a members' voluntary winding-up runs beyond a year, the liquidator must produce a progress report within two months after each twelve-month period and send it to the members and the Registrar, on pain of a fine. |
| Section 200 | A company is deemed unable to pay its debts if a creditor owed more than USD 2,000 serves a written demand that is not paid or settled within three weeks, if execution on a judgment is returned unsatisfied, if it is proved unable to pay debts as they fall due, or if its current assets are proved to be less than its current liabilities including contingent and prospective liabilities. |
| Section 252 | Wrongful trading: on an office-holder's application the court may order a past or present director to contribute to the assets where the company entered insolvent liquidation or administration and the director knew or ought to have concluded there was no reasonable prospect of avoiding it, unless the director took every step to minimise creditors' losses. |
| Sections 257–259 | Transactions at an undervalue and preferences entered into at a relevant time before the insolvency can be set aside by the court on an office-holder's application. |
| Section 271 | The UNCITRAL Model Law on Cross-Border Insolvency, as set out in Schedule 10, has the force of law in ADGM. |
| Section 288 | Where the Regulations state that a failure constitutes a contravention and prescribe a fine level, the Registrar may impose a fine up to the maximum for that contravention in the Fines Schedule (Schedule 9). |
| Sections 289–290 | No person may be appointed or serve as receiver, administrative receiver, administrator, liquidator, provisional liquidator or administrator of a deed of company arrangement unless registered as an insolvency practitioner under the Insolvency Regulations (Insolvency Practitioner) Rules 2022. |
| Section 306 | Short title, extent and commencement: the Regulations apply in ADGM, came into force on publication, and repeal the Insolvency Regulations 2015 and the amending regulations of 2015, 2016, 2018, 2020, 2021 (two) and 2022. |
Schedule 9 lists each contravention with a fine level, from level 1 (for example failing to publicise an administration) to level 6 (making a false declaration in a notice of appointment), and the Registrar may impose a fine up to the listed maximum (section 288). Beyond fines, directors face personal liability to contribute to the company's assets for fraudulent trading (section 251) and wrongful trading (section 252), summary remedies for misfeasance (section 250), and insolvency practitioners who breach the Insolvency Practitioner Rules 2022 may be removed from their appointments (section 291).
When a client winds down an ADGM SPV or holding company we use the members' voluntary winding-up route in Part 3, because our clients' entities are almost always solvent and simply finished with. We prepare the directors' declaration of solvency, make sure it is signed inside the five-week window before the special resolution, and appoint a registered insolvency practitioner, since under section 289 nobody else may act as liquidator. We arrange for creditors and charge holders to receive the notices the Regulations require, and we track the three-month period after the final account before dissolution so that the licence and data-protection renewals are not paid for a company that is about to disappear. Where an entity is dormant and debt-free, we weigh this route against voluntary strike-off under the Companies Regulations and advise on cost and timing.
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