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UAE’s bankruptcy law include coronavirus

UAE’s bankruptcy law expands the scope of ‘emergency situations’ to include coronavirus pandemic


The coronavirus pandemic has resulted in negative effects on most of the economies of the world – be in developed or developing countries. The international business community has suffered immediate serious repercussions. However, governments all across the world are trying to bring in measures that will reset their economies to a new normal after the pandemic.  

One such measure is the UAE government’s amendment of the Bankruptcy Law by adding new provisions related to ‘emergency situations.’ On October 21, 2020, the UAE Cabinet modified the Federal Law by Decree No. (9) of 2016 on Bankruptcy to address the credit challenges that arise as a result of emergency situations such as natural catastrophes, wars, pandemics, environmental disasters, and others.  

By the new amendment, the debtor has the option to file an application to the relevant courts asking for a grace period for settlement of debt within the next 12 months. For this, the courts will be required to approve the application, and the creditor and debtor must negotiate and agree upon the grace period, which should not be more than a year. Consequently, the courts would not conduct any default on debt proceedings against the debtor during the agreed grace period. 

Such situations generally affect investments and trades worldwide, generating credit issues, which ultimately affect individuals and businesses.  However, with the new provision, the companies would be able to meet their commitments, reduce their losses due to default, and obtain access to a new financing structure for their business. Thus, the new provision allows the debtors not to file for bankruptcy proceedings immediately but access the new funding option to avoid a final collapse. 

The catch is that the struggling businesses must access the new provision only after all other options have exhausted, and they are looking for a lifeline to survive the tough times. If used responsibly and prudently, the amendment will increase investor confidence and bolster the creditors’ assurance, thereby saving the businesses, which, in turn, will save the economy.  


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