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 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: Dear sir/madam, I have a small civil company for consultancy activity (not an LLC). The company has debts that we have not been able to pay. One of the partners is refusing to cooperate and refusing to sign a company closure contract for mutual dissolution of the company. A) What steps can I take to dissolve the company? B) Is there a difference between "dissolution", "liquidation" and "bankruptcy" for a civil company? C) What are the rights of the creditors of the civil company after the company is no longer existing? D) What happens to earlier existing execution cases against the company after the company is no longer existing? Thank you for your replies and assistance over here! I can visit the offices of the lawyer who makes an informative reply here to negotiate to represent me for this issue.

Q: Dear Sir/Madam, Can a company operate based on the fact that in 2021 it had a profit of 289,000 dollars, but incurred a loss of 268,000 dollars in 2022? Additionally, please clarify the following: - Under what circumstances is bankruptcy mandatory by law? - How many years of losses and what amount of losses can lead to bankruptcy under UAE law?

Q: Can a company in the UAE still operate if it has declared bankruptcy?

This article will briefly explain about the Personal Insolvency Law of 2019 and Bankruptcy Law of 2016 in the UAE. Previously, there was only the Bankruptcy Law that was available for the commercial companies, merchants, traders, and similar persons who were suffering from the financial crisis but now individuals have such options available as well especially considering the effects of COVID-19. Both laws were issued to assist distressed persons and entities by offering them settlement options.

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.

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