The Dubai authorities have decided that there is an urgent need to introduce new regulations in the area of bankruptcy and restructuring of companies.
The ruler of Dubai, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the United Arab Emirates, introduced new regulations in the field of bankruptcy law a few years ago, Act No. 1 of 2019, for companies operating under the DIFC. The new law, which took effect on August 28, 2019, was announced in a statement posted on His Majesty's website. These changes are to introduce a more "efficient, effective and more transparent system of restructuring and bankruptcy of enterprises". The website also states that the new law includes "a redesign of the debtor-in-possession bankruptcy regime in line with global best practice, which will also put DIFC at the forefront of complex debt regulation." The 2019 legislation also provides for a new administrative procedure in circumstances where there is evidence of mismanagement or misconduct by those responsible for directing the entity. Law No. 1 of 2019 was passed after extensive research, but also as a reaction to the high-profile collapse of Abraaj Group. The most recent regulations in this area have also included the UNCITRAL (United Nations Commission on International Trade Law) Model Law on cross-border insolvency matters, reflecting current best practice in this area and the goodwill of the Dubai authorities to create a comprehensive legal framework to address this issue. The inclusion of these globally recognized model rights is likely to encourage existing and future investors in the region to do business in Dubai, and increase the chance of preserving commercial value and rescuing businesses that are facing financial difficulties.
If you need more information related to DIFC or the new insolvency laws, please contact the Eberhard Advisory team.
