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, Can a partner of a company make an acknowledgment of debt to himself? There is a small professional license company with two partners. Each partner has the power to sign documents singly. Partner 1 gave 1 Million AED as a loan to his company from his personal account. There is no equal amount paid by Partner 2. The company bank accounts show that the company received money from Partner 1 and there is no evidence that this amount was paid back. There is an existing court verdict that states that Partner 1 gave loans to the company and partner 2 did not provide any evidence that it was paid back. Can Partner 1, in his role as partner and signatory with power to sign singly, sign an acknowledgment of debt on company letterhead in favor of himself in his personal capacity? I thank you for your help!

Q: Good afternoon, I am writing from Italy. Before going to court, I would like to know, according to UAE's laws, if I'm entitled to claim my money against my former Bangladeshi partner. I will sum up the situation briefly: I and my Bangladeshi partner opened on 23rd April 2019 a fifty-fifty trading company in Ajman FreeZone. Due to Covid in June 2020, we decided to separate. Meantime in July, we received an order from a customer with a shipment date in November. After order, proforma invoice, adjustment quantity, etc, on 1th of September, we received a definitive LC at sight from the customer. On the 14th of September, I signed in favor of my partner and left him all my 50% shares for free. I want to know if I'm entitled to ask for my part of the money because I brought the customer and my former partner doesn't want to pay. Please note that I signed a transfer share form in Ajman FreeZone offices, but nobody wants to give me a copy. Many thanks for helping!

Q: Hello! I hope all is well. Long ago, there was a hotel where we placed our employees for an event. The event got canceled early by the government under a situation not under our control. We then simply paid for the number of nights we stayed. However, the agreement was for a longer duration. The event cancellation led to a three-year legal case where we had testimonials from the hotel itself, the government, and staff regarding this issue. The case was dismissed, and we won. However, they reapplied the case a year ago, and since then, we haven't heard anything or received any notification. The judge gave them the right, and now we need to pay them over 100,000 AED. I'm worried that they can attack my personal assets since everything within the operation was done via an FZ LLC company. The case was dismissed thrice, but on the fourth attempt, it was accepted by the judge. What do I do now? Do I sell my house, or is my house safe since it's under a mortgage by a bank? Can they attack it?

Q: We have a Dubai Mainland Foodstuff trading company that is undergoing legal issues and the company’s assets like company-owned cars, etc are attached by the court. One of the partners is out of the country but the other partner and sponsor are here in the UAE. No travel ban has been issued. Our query is regarding the company car which is currently in the partner’s building parking lot and due to the attachment, it is not allowed to move as the mulligan is unable to be removed. The partner cannot afford to live at this apartment anymore and would like to vacate but what can be done about the car? The other party’s lawyers are not responding regarding this issue either. The company trade license is still valid, can the company car Mulkiya be renewed? What is the option available so that there are no fines due to moving the car out of the building? Thank you

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.

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.

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