Navigating Bankruptcy with Confidence and Legal Clarity
Financial instability can strike any business. When debt obligations can no longer be met, and operations are strained beyond recovery, the UAE Bankruptcy Law provides structured legal mechanisms to either restructure or liquidate businesses. However, navigating this landscape requires legal precision and strategic insight.
At FAKHER & CO, we represent both creditors and debtors in bankruptcy-related matters, helping protect rights, recover assets, and ensure lawful outcomes under the Federal Decree Law No. 9 of 2016 and its amendments.
What Triggers Bankruptcy in the UAE?
Under UAE law, bankruptcy proceedings may be initiated if:Â
A business or trader is unable to repay debts for 30 consecutive business days due to financial distress.
Creditors (holding a debt of AED 100,000 or more) have issued a formal demand that remains unpaid.
A debtor voluntarily declares bankruptcy.
The Public Prosecutor or the Court determines a bankruptcy situation exists.
Failure to act in time can expose business owners and directors to personal liability, civil claims, or even criminal prosecution, depending on the facts of the case.
Who is Subject to UAE Bankruptcy Law?
The law applies to the following:
Companies incorporated under the Commercial Companies Law
Licensed civil companies engaged in professional activities
Traders under the Commercial Transactions Law
Free zone entities (excluding those with their own insolvency laws, e.g., DIFC or ADGM)
Government-owned companies (if expressly opted into the law)
Legal Pathways Under Bankruptcy Law: Preventive Composition
Preventive Composition is an early intervention tool within bankruptcy law that allows distressed debtors to negotiate a settlement with creditors before formally becoming insolvent. This legal pathway is designed to provide an opportunity for the debtor to address financial difficulties while avoiding the need for liquidation.
Eligibility and Requirements
Initiation by Debtor
The process must be initiated by the debtor, who is seeking to resolve financial difficulties through negotiation with creditors.
Conditions for Filing
No previous application for preventive composition should have been filed in the last year, and there should be no ongoing bankruptcy proceedings at the time of filing.
Submission Requirements
The debtor must submit detailed financial disclosures and a comprehensive restructuring plan to the court.
Our Services Include:
Drafting and filing bankruptcy or preventive composition applications
Strategic negotiation with creditors and trustee coordination
Defense against fraudulent insolvency accusations
Representation in restructuring or liquidation proceedings
Review and analysis of financial and compliance documentation
Court Supervision
Preventive Composition is supervised by a court-appointed trustee who ensures compliance with the process and acts in the interest of both the debtor and creditors.
Benefits:
Stay of Legal Claims
Once initiated, the process stays legal claims and enforcement actions from creditors, providing the debtor with relief from immediate financial pressure.
Maintaining Operations
The goal is to help the debtor maintain business operations and avoid liquidation by restructuring debt and negotiating new terms with creditors.
By providing an opportunity for early intervention and structured negotiation, Preventive Composition aims to help distressed debtors recover without undergoing full bankruptcy proceedings.
Formal Bankruptcy Proceedings
If restructuring is no longer feasible, the court may initiate bankruptcy proceedings:
A trustee is appointed to manage the business and protect creditor interests
All enforcement actions are frozen (automatic stay)
Creditors are invited via public notice to submit claims
The court determines whether to proceed with restructuring or move to liquidation
Restructuring can proceed if there’s a viable plan and two-thirds creditor approval (by value). If this fails or the debtor is found to have acted in bad faith, liquidation is ordered, and assets are sold to satisfy creditor claims.
Emergency Financial Crisis Exception (2019 Amendment)
A debtor who is unable to meet debt obligations solely due to an emergency financial crisis (e.g., natural disasters or global economic crises) is not required to file for bankruptcy. During such periods:
Courts will not act against debtor’s assets
Creditors cannot initiate insolvency proceedings
The debtor may request settlement approval, which is binding if two-thirds of creditors agree
Why FAKHER & CO?
Our team of bankruptcy dispute lawyers offers unmatched expertise in navigating:
Debtor protection and restructuring
Creditor rights and asset recovery
Negotiated settlements and court-supervised plans
Legal defense against bad-faith insolvency allegations
Representation in bankruptcy, liquidation, and civil liability proceedings
We approach each matter with precision—protecting clients from avoidable liabilities, facilitating financial rehabilitation, and ensuring legal compliance at every step.
Restructure. Recover. Rebuild.
Bankruptcy doesn’t have to mean the end of a business. With the right legal support, it can become a tool for recovery, negotiation, and new beginnings.