The current law regarding insolvency in the UAE is not a comprehensive regime, and the present framework is found across three different laws (mainly in the Commercial Companies Law, as well as the Commercial Transactions Law and the Civil Code). Additionally, companies faced harsh penalties in a bankruptcy scenario, and individuals could also face criminal sanctions and penal sentences. In the wake of low oil prices since 2015, and more companies facing distress, a new bankruptcy law drawing from international best practice will come into force in the UAE, from the beginning of 2017.
With the implementation of Federal Law No. 9 of 2016 (the ‘Bankruptcy Law’), the UAE government seeks to create a robust legal insolvency framework within which all businesses can operate and parties can be sufficiently protected. The Bankruptcy Law was promulgated by decree by His Highness Sheikh Khalifa bin Zayed Al Nahyan on 20 September 2016 and published in the Official Gazette on 29 September 2016. The framework under the Bankruptcy Law is based on “Chapter 11” bankruptcy legislation in the United States, and the bankruptcy practices in other countries.