Bankruptcy & restructuring: UAE case law

Interim ADGM Courts orders in an administration do not conflict with a final Dubai judgment against the same company

The Federal Supreme Court resolves conflicts of jurisdiction between the federal judiciary and a local judicial authority, or between judicial authorities of different emirates, where each claims or declines jurisdiction or each issues a final judgment…

Partners in a bankrupt free-zone company are not traders and cannot be declared bankrupt with it

Under Articles 4(2) and 142 of the Bankruptcy Law (Federal Decree-Law No. 9 of 2016), bankruptcy applies only to traders in the legal sense, persons who carry on commercial business in their own name as a profession, and to partners who are jointly and…

A debtor's own bankruptcy petition must include the statutory documents, or the court must justify accepting it

Under Article 73 of the Bankruptcy Law (Federal Decree-Law No. 9 of 2016), a debtor applying to open bankruptcy proceedings must state the reasons and attach the listed documents, including a memorandum on its economic and financial position, assets and…

Bankruptcy petitions belong to the court of the debtor's place of business, and jurisdiction rulings can reach cassation

Article 265(2) of the 2023 Bankruptcy Law makes final the Court of Appeal's judgments on challenges to decisions of the bankruptcy court; as an exception it is read narrowly and covers only judgments on the bankruptcy procedure itself, so judgments on…

Once bankruptcy proceedings open, the bankruptcy court alone decides disputes over the debtor company's debts

Under Federal Decree-Law No. 51 of 2023 on Financial Reorganisation and Bankruptcy, the specialised bankruptcy court has exclusive jurisdiction over all requests and proceedings in bankruptcy cases, including disputes over a company's debts, from the…

Directors of a bankrupt company are liable for its debts only on proof of fault under the law applicable then

Where a bankrupt company's assets do not cover at least 20 per cent of its debts, the court may order its directors and managers, jointly or not, to pay all or part of the debts, but only if their liability for the company's losses is proved under the…

Opening bankruptcy of an LLC does not extend to its partners, and the bankruptcy court cannot rule on managers' personal liability

A creditor of a limited liability company may seek its bankruptcy if it has stopped paying a due commercial debt because its finances are disturbed. Refusal to pay without a legitimate reason is evidence against the debtor, but there is no cessation if the…

Dubai courts must stay a claim to receivables of a company under an ADGM administration order barring proceedings

A final order of the ADGM Courts placing a company in administration, which forbids starting or continuing legal proceedings against the company or its property without the administrators' consent or the ADGM Courts' permission, has res judicata effect…

Bankruptcy is not a debt collection tool: a judgment creditor's petition failed without proof of cessation of payments

A creditor owed at least AED 100,000 may petition to open bankruptcy proceedings after a written demand and thirty working days without payment, but the petition must include the documents in Article 74, including the name of a proposed trustee, and the…

Opening bankruptcy proceedings stays creditors' lawsuits and enforcement against the debtor, including against jointly liable co-debtors

A basic rule of bankruptcy, which is of public order, is that creditors may not take individual action against the debtor. Under Article 162(1) of the Bankruptcy Law (Federal Decree-Law No. 9 of 2016, as amended in 2020), the court's decision opening…

An individual seeking insolvency relief must prove how he lost his assets; unexplained default is not insolvency

Insolvency means that a debtor's debts equal or exceed his assets (Article 401 of the Civil Transactions Law). A debtor in that position may apply under Articles 3 and 7 of Federal Decree-Law No. 19 of 2019 on Insolvency to settle his obligations, and the…

A court that finds restructuring futile may declare the debtor bankrupt and order liquidation on a creditor's petition

Opening bankruptcy proceedings does not oblige the court to order a restructuring plan. A plan may be ordered only if the debtor can continue trading and is likely to return to profit within a reasonable period suited to its business and debts (Article…

A debtor who claims insolvency must prove it; the court must rule on the claim as framed and as characterised on cassation

Insolvency (الإعسار) exists where a debtor's debts equal or exceed his assets; once established, the court may place him under interdiction under Articles 401 and 402 of the Civil Transactions Law, and the debtor may himself seek a declaration. Whoever…

An individual seeking a declaration of insolvency must prove it, including by disclosing his assets

Insolvency is the state in which a debtor's assets fall short of his debts that are due. Under the Insolvency Law a debtor may himself apply for a declaration of insolvency and the liquidation of his assets, but whoever claims insolvency must prove it,…

A bankruptcy judgment given on appeal without the Public Prosecution's intervention is void

A bankruptcy petition is a procedural action to establish a legal status, the bankruptcy of a trader-debtor. The Public Prosecution must intervene in bankruptcy proceedings, and a judgment given without its intervention is void as a matter of public order,…

A creditor can have a debtor's sale of property set aside against it where the debts exceed his assets

Where a debtor's due or deferred debts exceed his assets, a creditor whose claim is due may ask that a disposal by the debtor that reduces his assets or increases his liabilities be declared unenforceable against him (Articles 396 to 399 of the Civil…