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: Good Day, We are an LLC based in Fujairah. Due to COVID, we have run out of money and will need to declare bankruptcy or liquidate it. However, when all rental cheques were handed over, they were from my personal account (as we took a loan to start the business and did not have a bank account for the business yet). These cheques are still in the possession of the lessor. It would be possible to replace the cheques but I will still need to personally sign each cheque, as I am the director of the LLC. If we liquidate, would I be held responsible for the payment of the outstanding rent? Can I end up in jail if I don't pay? Is this not exactly why an LLC is established? What will be my responsibilities as we are not getting cash into the business?

Q: In 2020, I was the manager of a company that had an office in a free zone in Dubai. At the time, the partners did not have bank accounts/cheques in Dubai, and to make payments, 4 cheques from a third person were provided, who in addition to the 4 cheques, also provided an undertaking letter attached to the lease agreement. We carefully pay this person the amount related to the lease, as well as the value of all cheques. However, this person did not honor the payment of the last cheque. Now the free zone has opened a case against the company for the non-payment of rent. My question is, will the company be held responsible? If the company is held liable, am I as a manager liable in some way? And will I be responsible for paying this personally? The company no longer exists and I am the only partner who still lives here, in addition to having been the general manager.

Q: Hello, I am looking to hire a new employee who has debts from a company he previously owned. Will my company be responsible for his debts, and can his creditors make a claim against my company?

Over the years the UAE has become a centre of trade and commerce for the Middle East, thanks to its strategic location, excellent connectivity and extensive services to assist with all aspects of business. According to the World Bank's 2016 report, the UAE has ranked 31st in the global index of ease of doing business. This encourages more entrepreneurs to set up different kinds of business entities in the country.

An interview-format article covering the topic of the new amendments to the laws in the UAE. This is from the legal podcast of lawyer Ludmila Yamalova, the founder of Lawgical with LYLAW.

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.

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.

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.

In view of the fact that the manager is primarily the point of reference for the company in the business streets, he is generally authorized by a power of attorney provided by the shareholders of the company or via the MOA of the company. In certain cases exceeding the powers given to the manager may make the manager, or the LLC itself, liable, depending on the nature of the manager’s actions.

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.

This Law applies to merchants, as well as to all acts of commerce carried out in the UAE by any person even though he be not a trader. Commercial matters regarding which specific Federal laws are issued shall be subject to the provisions of such laws, and to the provisions hereof which do not contradict with said laws.

The provisions of this Decree by Law amend the Federal Law No. (18) of 1993 by replacing Clause (4) of Article (379) as well as Articles (600), (617), (641), (642), (643), (644), and adding new articles numbered (635) Bis, (641) Bis (1), (641) Bis (2), (641) Bis (3), (641) Bis (4), (643) Bis (1), (643) Bis (2), (644) Bis (1) and (644) Bis (2). The Decree-Law also repeals Articles (401), (402) and (403) of the Federal Law No. (3) of 1987.

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