Q: I am a partner of a small civil company with a professional license issued by DED. My company has lost court cases wherein we have to pay 400,500 AED. These cases are in the execution stage. My company also has debts of 364,000 on our books. The company is not in a position to pay the proven debts in execution court or the pending debts mentioned in our books. I want to close the civil company. Question 1: Is it better for me to file for bankruptcy or file for liquidation of the company? (Or will the court immediately start one procedure if I register the other procedure?) Question 2: I heard that the court starts criminal proceedings automatically if bankruptcy proceedings are started. Is this true? What rules to follow to avoid criminal charges? Question 3: After the civil company is declared bankrupt, will the partners still have to pay the creditors (In the ratio of the shares they held in the civil company) because our company is not an LLC. Thank you for your help!

Q: In the UAE, a company in financial difficulties should go for bankruptcy or liquidation? What is the cheaper and faster option provided the owner is a manager and partner in the company?

Q: I have an LLC company in Dubai mainland since March 2013, and I'm a 49% shareholder of the company. I have taken a loan from a bank in August 2019 and have paid 7/48 instalments to the bank. Then, I was unable to pay back due to the COVID-19 crisis. I have the following unpaid debts: 1. Business loan from a bank, outstanding about 300,000/- 2. Principle outstanding credit cards on personal name: A. 60,800/- B. 15,000/- C. 5,000/- Sum of 3 cards 80,800/- 3. I have unpaid rent of business office in Dubai amount 8000/- of period Sept 2020 - Dec 2020. The landlord refused to accept to take keys as the contract ends in December. He perhaps filed some case against me. Currently, I'm out of the UAE and would like to get a benefit from the law of bankruptcy/law of insolvency.

Q: Dear Sir/Madam, Where do I file for insolvency as an individual under the Insolvency Act, and where do I file for bankruptcy as a company? Please provide specific locations. What happens if I don’t have any money to pay anything? Do I go to jail after filing for any of these if there is no way I can pay the debt even after liquidation?

The UAE continues to strive to modernize its laws and create more flexibility in meeting the needs and requirements of investors and businessmen and elevate its economy to the highest levels of growth and development.

Companies can be wound up by Voluntary Liquidation. This shall proceed as initiated by shareholders or creditors of a company by passing a valid shareholder’s resolution. When a company’s financial mechanism fails, and the company is in financial distress and/ or becomes insolvent whereby it is unable to pay off its debts, the company may file a petition for winding up to the court.

بتاريخ 24/10/2023، صدر قرار الهيئة العامة لمحكمة تمييز دبي في الطعن 4 لسنة 2023 مرسياً مبدأً جديداً مفاده أن الأصل في الناس هو الإعسار وأن اليسار عارض، وأنه يتعين -تبعاً لذلك- على طالب التنفيذ أن يثبت يسار خصمه المنفذ ضده أو تهريبه لأمواله كي يستصدر أمراً بضبطه وإحضاره ثم حبسه لإكراهه بدنياً على السداد. وكما هو متوقع، أحدث هذا القرار ردود فعل كثيرة ومتنوعة، سيما وأنه قرار نوعي يقلب كثيراً من الأوضاع المعتادة رأساً على عقب ويغير من الحالة الاجتماعية السائدة الشيء الكثير.

Dealing with financial difficulties can be overwhelming, but the UAE provides a comprehensive legal framework to manage bankruptcy and insolvency in a way that benefits both debtors and creditors. Understanding these laws and how they work can make a huge difference in navigating the process successfully.

The provisions of this Law apply to the commercial companies established in the UAE and the foreign companies that have established in the UAE a base to conduct any activity therein or established a branch or representative office. The Law abrogates Federal Law No. (8) of 1984 Concerning Commercial Companies.

The provisions of this law, promulgating UAE Civil Code, govern the civil transactions in the United Arab Emirates. The commercial transactions remain subject to the laws and regulations applicable in their regard.

The provisions of this Federal Decree-Law No. (51) of 2023 Promulgating the Financial Restructuring and Bankruptcy Law, known as the "Bankruptcy Law" governs Financial Restructuring and Bankruptcy regulations in the United Arab Emirates