Bankruptcy Report Preparation
The United Arab Emirates (UAE) enacted a specific bankruptcy law in 2016 aimed at protecting the rights of all parties (creditors and debtors) while safeguarding the overall business landscape. This law focuses on easing the long-term debt settlement process for debtors, helping them stay within the country and continue their business activities without being significantly affected by financial distress.
The Bankruptcy Law No. (9) of 2016 serves as a lifeline for companies and businesses facing challenges. It provides protection to business owners and investors in the UAE, helping reduce market manipulation without financial backing.
The law helps debtors restructure their businesses by offering several approaches to avoid bankruptcy and liquidate assets. It includes reorganizing finances outside of court, securing settlements preventing bankruptcy, and enabling financial restructuring. This law provides the possibility to obtain new loans under specific terms outlined by the law. Preparing a bankruptcy report is a critical step in clarifying the debtor’s financial position and offering suitable solutions according to the law’s provisions.
Who Does the Bankruptcy Law Apply To?
- Anyone classified as a trader under the law.
- Free zone companies are not subject to special bankruptcy procedures.
- Government-owned companies not established under the Companies Law but whose founding legislation subjects them to bankruptcy law.
- Companies subject to the UAE Federal Commercial Companies Law No. (2) of 2015.
- Professionally licensed and civilly registered companies.
Key Points of the New Law about Bankruptcy Report Preparation:
- It establishes a committee for financial restructuring, managed by financial institutions as per Cabinet instructions.
What Procedures Does the Law Outline for Debtors Facing Difficulties?
- The law refers to “preventive settlement from bankruptcy,” aiming to assist debtors in reaching amicable settlements with creditors, restructuring debts rather than declaring bankruptcy. Debtors must not delay debt payments for more than 30 days.
- If the court accepts the preventive settlement from bankruptcy, an administrator must be appointed, as specified in the law.
- The law mentions the appointment of observers in Article (29), where the court can assign one or more observers from among the creditors to oversee the implementation of the preventive settlement procedures.
- Article (31) of the law prohibits the debtor from disposing of assets starting from the date of opening the proceedings.
- Article six of the law highlights the suspension of legal proceedings and interest accrual. Upon opening proceedings, all lawsuits and enforcement actions against the debtor’s assets are halted, unless the court decides otherwise.
Obtaining New Financing:
- Article (181) allows the court to permit the debtor to acquire new financing, with or without collateral, provided that the new financing takes priority over existing debts. The new financing can be secured by mortgaging any of the debtor’s unencumbered assets or by creating additional liens on the debtor’s existing mortgaged assets, provided their value exceeds the amount of the original debt secured by the mortgage.
Parties Affected by the Law:
- Creditors
- Debtors
How Does the International Consultancy & Auditing Center Help Clients in Bankruptcy Report Preparation?
The consultants at the International Consultancy & Auditing Center assist in preparing the bankruptcy report by identifying the reasons behind the debtor’s financial instability. They assess the debtor’s current financial position, tailored to each specific activity, and help develop a restructuring plan to recover from the crisis. They determine whether the debtor can return to profitability and provide a detailed report on the debtor’s financial situation, listing and classifying debts and assets in compliance with the law.
Additionally, the center supports the Bankruptcy Report Preparation by thoroughly studying the debtor’s financial status, offering legal solutions for business restructuring, and debt liquidation, and ensuring compliance with all applicable legal provisions. The Bankruptcy Report Preparation is comprehensive, including an assessment of assets, debts, and future plans to ensure business recovery and a return to profitability.
Call us for more info about: Bankruptcy Report Preparation
Frequently Asked Questions (FAQs) about Bankruptcy Report Preparation
What is bankruptcy report preparation in the UAE?
It involves creating a detailed report on the debtor’s financial status, listing assets and debts, and proposing solutions under UAE Bankruptcy Law to help avoid liquidation.
Why is preparing a bankruptcy report important for companies facing financial distress?
Because it provides a clear picture of the company’s financial position, helps develop a restructuring plan, and ensures compliance with UAE bankruptcy laws to protect both debtor and creditors.
Who is subject to the UAE Bankruptcy Law No. (9) of 2016?
The law applies to traders, companies under the Commercial Companies Law, professionally licensed firms, civil companies, and certain government-owned entities.
How does the UAE bankruptcy law help businesses avoid liquidation?
By offering preventive settlement procedures, financial restructuring options, suspension of lawsuits and interest, and even allowing new financing with court approval.
Can a company obtain new financing while under bankruptcy proceedings?
Yes, under Article (181), the court can allow the debtor to secure new financing that takes priority over existing debts, with or without collateral.
What are the key procedures under UAE bankruptcy law to protect debtors?
Procedures include preventive settlement, appointment of administrators and observers, suspension of legal actions, and court-supervised asset protection.
How does the International Consultancy & Auditing Center assist with bankruptcy report preparation?
Our experts assess the reasons for financial distress, prepare a thorough report on debts and assets, and propose restructuring plans compliant with UAE laws.
What is included in a professional bankruptcy report?
It includes a detailed assessment of assets, liabilities, future plans, legal risks, and recommendations to restore business health.
Does preparing a bankruptcy report guarantee business recovery?
While it cannot guarantee recovery, it greatly improves the chances by providing a clear, lawful roadmap to restructure finances and avoid liquidation.
How can I start the process of preparing a bankruptcy report in the UAE?
Simply contact us for a consultation. We'll evaluate your situation and guide you through every step to prepare a compliant and effective bankruptcy report.