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UAE amends bankruptcy law to include pandemics

UAE amends bankruptcy law to include pandemics

Debtors can request a grace period or negotiate a debt settlement with creditors for a duration of up to 12 months

UAE Bankruptcy law

The UAE Cabinet on Wednesday amended the country’s bankruptcy law to provide protection to businesses and individuals during ‘emergency situations’ including pandemics, natural and environmental disasters, and wars, among others.

The amendments are aimed at helping them overcome credit challenges due to the nature of these events that consequently impinge on trade or investments.

Accordingly, the debtor shall be exempted from commencing procedures to declare bankruptcy.

Should the debtor file an application, which is then approved by the courts, he may reach a settlement with creditors wherein he may request a grace period, or negotiate a debt settlement within a period of not more than 12 months.

The court, in case of approving the bankruptcy application, would not take any proceedings involving the debtors’ funds that are needed to keep businesses running during the set period in case they defaulted on debt for emergency.

The new amendments give room to 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 the emergency situations.

Read: No more jail time for bad debts under new UAE bankruptcy law

It also aims to ensure fulfilment of obligations, and mitigate loss given default without prejudice to bankruptcy law, while enabling creditors to secure their rights, reported state news agency WAM.

Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai, has approved the amendments to Federal Law by Decree No. (9) of 2016 on Bankruptcy.

In 2016, the UAE cabinet approved the federal bankruptcy law. The law reduced the risks of doing business in the country, allowing businessmen to avoid time in jail if their companies fail to pay debts.

Earlier this year in August, Sheikh Mohammed issued a new law to regulate family-owned businesses in Dubai.

The law included provisions to tenure of ownership, wealth distribution, and the role of government entities in the formation of family-owned enterprises.

Read: Sheikh Mohammed outlines new law for family-owned businesses in Dubai

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