Business bankruptcy in the UAE is governed by Federal Decree-Law No. (51) of 2023 Promulgating the Financial and Bankruptcy Law. The law provides a legal framework to help distressed companies in the UAE to avoid bankruptcy and liquidation through different mechanisms which include:
- consensual out-of-court financial restructuring
- composition procedures
- financial restructuring
- the potential to secure new loans under terms set by the law
- conversion to declaration of bankruptcy and liquidation of the debtor’s assets.
The law does not apply to natural individuals. It applies to:
- companies governed by the Commercial Companies Decree Law
- companies which are not established under the Commercial Companies Law and which are wholly or partly owned by the federal or local government, stipulating that Federal Law by Decree No. 9 of 2016 on Bankruptcy applies
- companies and establishments in the free zones that are subject to the provisions of Federal Law No. 8 of 2004 on Financial Free Zones and which are not governed by particular provisions regulating protective composition procedures, financial restructuring and/or bankruptcy
- any individual who is a trader as defined in the Commercial Transactions Law (Available in Arabic only).
- licensed civil companies carrying out professional activities.
The law aims to increase business stability in the UAE and investors’ confidence in the UAE market.