CORPORATE RESTRUCTURING PROCESS IN UAE | LEGAL GUIDE
Corporate restructuring in the event of bankruptcy or liquidation is a legal means resorted to by companies to significantly modify the operational aspects of the company. This could include financial, technical or organizational changes aimed to correct any operational issues that could led to company’s distressed. Restructuring process is complex process and solutions must be thoroughly tailored enlisting appropriate guidelines to ensure that specific needs and objectives of the company are addressed fully.
UAE Federal Law governing bankruptcy, restructuring and insolvency are embodied primarily under the following legal framework and legislations:
• Federal Law No. 18 of 1993 (the “Commercial Code”)
• Federal Law No. 2 of 2015 (the “Companies Law”)
• Federal Law No. 5 of 1985 (the “Civil Code”)
• Federal Law No. 3 of 1987 (the “Penal Code”)
• Federal Law No. 11 of 1992 (the “Civil Procedures Law”)
• Federal Law No. 10 of 1980 (related provisions concerning bank liquidation and other financial institutions)
Corporate restructuring process often resorted to could be:
• Filing of bankruptcy before the court
• Court will appoint expert to determine the veracity of the petition filed
• If the court is satisfied that bankruptcy is an appropriate measure, then the court will adjudicate an order and appoint a trustee to administer the proceeding
• Bankruptcy order will be made available to the Ministry of Economic and relevant Commercial Register and UAE Central Bank
• Bankruptcy adjudication summary will be published is daily newspapers as specified by the court, this must include invitation to the company creditors to have their debts recorded in the bankruptcy and creditors must subsequently submit a statement setting out their claims against the petitioner.
• Trustee will then deposit with the court a document listing all the company’s creditors and their claims including the securities held against those claims
• The court will then issue statement setting forth the claims of creditors which have been accepted and the court rules on objections.
LIQUIDATION PROCEEDING (WINDING-UP OF THE BUSINESS)
Under UAE Law, liquidation and dissolution of company is a process of bringing a business to an end. This is a tedious process as this involves liquidating the shares and assets, collecting debts and paying the creditors’ or discharging liabilities towards creditors. A Company may be dissolved on any of the following grounds:
• Depletion of company’s assets which renders the remaining assets of the company unbeneficial
• Expiry of the term of the company as specified in its constitutional documents
• Fulfillment of the company’s objectives as stated in its memorandum of association
• Amalgamation of the company
• Shareholders decision as set out in the company’s memorandum of association
Initial step in liquidation proceeding must be initiated by publicly declaring it through registration in the Commercial Register and publication in two local daily Arabic newspapers.
Subsequently, a liquidator will be appointment (could be by shareholder’s decision or by court order) primarily to ascertain the company’s assets and liabilities. This will in effect vest all the company’s board power in the liquidator, this includes the ability to commence or defend legal claims and to take steps necessary for the protection and preservation of the company’s assets.
Liquidator will notify all known creditors to submit their claims and for unknown creditors, notice will be made by publication in two local daily Arabic newspapers. Creditors are given 45 days from notice to present a claim or any debt disputed.
Company assets will be liquidated accordingly (payment of creditors / shares distribution to shareholders ratably. Final account will be submitted by the liquidator and upon ratification of the shareholders, liquidation will cease and will be noted on the Commercial Register. The company will then be struck off the Commercial Register.
AL REYAMI ADVOCATES ARE DEDICATED PROFESSIONALS WHERE YOU CAN GET IN TOUCH WITH FOR INITIAL CONSULTATION. WE CAN GUIDE YOU THROUGH ALL STEPS AND PROVIDE YOU UTMOST LEGAL ASSISTANCE THROUGHOUT THE PROCESS.