A continuation of the previous article

Insolvency Law

Measures to Prevent Declaration of Insolvency

Settlement of Financial Obligations

Non-Trader Debtor may furnish before the court an application, without litigating anyone therein, for settlement of his financial obligations. The court shall decide on the application without announcement or pleading no later than five (5) business days from application submission date.

The court’s decision to accept the Debtor’s application to settle their financial obligation entails stay of the Creditor’s right in execution application on the Debtor’s funds, or an application for opening procedures for his insolvency and winding up their funds thereof.

Such stay of execution shall continue until finalization of the settlement of the Debtor’s financial obligations, wherein the court shall appoint – in the decision for opening of settlement procedures of the financial obligations – one or more Experts to assist the Debtor in settling their financial obligations.

The Expert, following validation of the Debtor’s financial position and meeting with Creditors, shall develop a plan for settlement of the financial obligations, where such plan shall be approved by a majority vote of presented Creditors whose debts not less than two-third of the debts have been verified thereof.

The court issue a decision approving the plan, upon satisfaction of its conditions, which shall be binding on all Creditors.

Nonetheless, where the court resolved to reject the plan; thus, it shall immediately adjudge for initiation of Insolvency procedures and winding up of the Debtor’s property.

Opening of Insolvency Procedures and Liquidation of Holdings

The Debtor shall submit an application for the court to open the procedures of their insolvency and liquidation of holdings, where the Debtor stays repayment of debt on maturity, for more than sixty-five consecutive business days, due to his failure to satisfy these debts.

Where the court decided to open the Debtor’s insolvency and liquidation of holdings procedures, it shall appoint a Trustee to perform such procedures. The Trustee shall require the Creditors to furnish their claims within twenty business days of summons thereof, after which the Trustee shall carry out final review of the Creditors’ claims, develop a report on the Debtor’s financial position and handover the same to the court.

If the court issues a decision for opening of insolvency and liquidation procedures, the Trustee shall carry on the liquidation of all Debtor’s property, save for those of which the Debtor may retain (i.e., retirement pension, social benefits provided to him, the Debtor’s necessary money to cover his own needs and dependents).

The Trustee’s assignment includes insolvency procedures, liquidation of holdings, lodging or follow-up any cases, undertaking legal or judicial proceedings versus the Debtor, wherein the court’s decisions for opening of insolvency procedures and liquidation of holdings entail stay of all judicial execution procedures on the Debtor’s funds.

SUMMATION

Building on the foregoing,

It is crystal-clear that the UAE has developed and established elastic legislation that allows the Debtor encountering financial hardships in fulfilling their debts, which prevents declaration of their bankruptcy or insolvency, where the Experts take on the reconciliation procedures with Creditors or settlement of financial obligations thereof.

Nevertheless, where such reconciliation or settlement is not attained, the Debtor shall have no option but to declare their bankruptcy or insolvency, along with provision of great guarantees that make the Debtor safe from legal prosecutions.