A federal law to govern insolvency cases intended to improve the prosperity of the UAE has been accepted by the UAE Cabinet. This is done to create a favorable environment for people experiencing financial difficulties, make it easy for people to do business, and protect them from filing for bankruptcy when they are unable to pay their debts.
The law also ensures that the debtor’s integrity as a natural being is protected and helps to provide them with an ability to control their finances and reduce their economic strain. The new law is an attempt on the government’s part to provide people and expat residents with comfort and address their needs. The legislation would assist them to renegotiate their debts and offer them the option to get new financial assistance.
What is insolvency law in UAE?
The insolvency law is applicable to a natural person who is not a trader and is not involved in economic activity. The aim of the law is to safeguard both the debtor and creditor’s mutual interests in a reasonable and fair manner. The risk is shared between them in a way that relieves the debtor from the burden of financial difficulty and encourages them to pay off their unpaid debt.
The proposed law consists of two methods to deal with individual insolvency – first, through the right to resolve financial obligations, and second, through insolvency and the liquidation of assets.
If the debtor faces current or expected financial issues that prohibit them from resolving all their debts, he/she may submit an appeal with the court to have the chance to resolve their financial obligations. This will be in accordance with regulatory guidance that provides them with the assistance they need, with the court assigning one or more advisors to assist them throughout the procedures. Once the plan is finalized, it shall be implemented by the borrower, with the assistance of advisors and under the court’s supervision.
In the event of the debtor’s insolvency, the statute also offers another means in which they need to liquidate their assets to settle their debts. Under special circumstances, the lenders may also seek the liquidation of the borrower’s assets. In this case, a trustee shall be authorized, in compliance with the guidelines of the proposed legislation, to oversee and assist the liquidation of the borrower’s funds.
How can I apply for insolvency in UAE?
Debtors must submit an application to the court when settling financial liabilities. An array of facts from the debtor must be included in the application, such as his/her financial status, income, property, and occupation. In addition, the debtor must disclose his/her creditor’s particulars and a statement of any legal proceedings involving him/her which may have been taken.
If the debtor fails to provide the records mentioned above, he/she must provide valid reasons for the failure to do so.
Once the application is approved and settlement procedures are initiated, the rights of creditors to claim will be disrupted. An expert will be appointed by the court who works with the debtor in settling their financial commitments.
What are the documents required to be submitted by the debtor?
When filing for the resolution of financial liabilities, the debtor must submit the following documents:
- Proposals by the debtor for the resolution of their liabilities.
- Documentation containing a summary of their financial status and any data relevant to their income sources, within or outside the country.
- A statement containing the names and addresses of lenders whose debts are defaulted, or are likely to be in default.
- A comprehensive statement of movable and immovable properties of the borrower, within and outside the country, and the estimated value of each at the date of the request.
- A declaration of any civil or judicial proceedings, or of any action taken against the borrower.
- A declaration by the debtor that they have current and expected financial problems and that, at the time of appeal or in the future, they seem unable to pay off their debts.
- The finances required to support the borrower, his/her family, and any dependents.
- Any other reports supporting the appeal, or as specified by the court.
What are the consequences of insolvency?
The consequences are quite similar to that of bankruptcy. The defaulter will not be able to discard or get rid of his assets, he/she will not be able to conduct any new business deals, and will be denied any new bank loans or services.
What are the advantages of insolvency law?
The insolvency law is a revolutionary step to ensure a stable and secure economy, especially in cases where large debts are not cleared. Some of the basic advantages of this law are listed below:
- The law offers payment options to debtors for loans while being shielded from criminal cases.
- The debtor gets sufficient time to clear the dues.
- It attempts to decriminalize the financial burden of an insolvent individual.
- The debtor gets the assistance of a legal expert appointed by the court to mediate between the borrower and the lender.
Why do you need an insolvency lawyer in the UAE?
In the UAE, insolvency laws are extremely complicated, and they are constantly changing. If you are contemplating going through the insolvency or bankruptcy process, you must hire a skilled insolvency lawyer in the UAE to direct you throughout the whole process.
Even though a judge may appoint an insolvency lawyer to you, waiting until then is typically a costly mistake. Before you take any action about your case, it is always best to discuss your situation with a competent lawyer. Few reasons why you must hire a lawyer are mentioned below:
- An insolvency lawyer in the UAE can help you with the elimination of entitled debts.
- The lawyer will help you make a more informed decision about whether or not you should liquidate your assets.
- The lawyer will help you understand and accurately assess the choices available to you.
- The legal team will guide you in completing and processing the paperwork.
- It will save a substantial amount of time for you.
At Bin Eid Advocates & Legal Consultants, our team of expert lawyers will help you in the complex task of liquidating a firm in the UAE. We have attorneys and legal advisors who will keep you updated all the time. We understand it can be very challenging to go through the entire insolvency procedure. Contact us to know more details on the insolvency law and its process.
The insolvency law is widely praised by attorneys and legal experts for its positive impact on the lives of loan defaulters. It is anticipated that the existence of standardized rules regulating the insolvency of a natural individual would increase the visibility of civil debt repayment dealings and improve the general protection of financial transactions, thus improving the country’s financial stability.
It is also expected that the new law will speed up growth and make it much easier for people to access loans, as there are simple guidelines that are easy to enforce to recover bad debts and economically rehabilitate the borrower. This increases the confidence of lender banks in consumer loans and encourages individuals to involve in measured borrowing.