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Comprehensive Guide to Bankruptcy Laws in the UAE

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Comprehensive Guide to Bankruptcy Laws in the UAE

Bankruptcy can be a challenging and complex process for businesses and individuals alike. Understanding the laws and regulations governing bankruptcy in the United Arab Emirates (UAE) is crucial for anyone navigating financial difficulties or involved in insolvency proceedings. This comprehensive guide explores the bankruptcy landscape in the UAE, detailing the laws governing it, the procedures involved, and the role of our firm, Al Kabban & Associates, in assisting clients facing bankruptcy-related issues.

What is Bankruptcy?

Bankruptcy is a legal status that declares an individual or entity’s inability to repay their debts, and is an essential aspect of any modern financial system. It provides a structured way for debtors to manage their outstanding obligations while safeguarding the rights of creditors. In the United Arab Emirates (UAE), bankruptcy laws have evolved significantly in recent years to promote economic growth, protect investors, and facilitate business activities.

Laws governing Bankruptcy in the UAE

Bankruptcy in the UAE is governed by Federal Decree-Law No. (9) of 2016 on Bankruptcy (the “Bankruptcy Law”). This law applies to individuals and entities, including companies and partnerships, within the UAE’s jurisdiction. The primary objectives of the Bankruptcy Law are to:

  • Promote Financial Stability: By providing mechanisms for individuals and entities to restructure their debts and avoid insolvency.
  • Protect Creditors’ Rights: Ensuring that creditors have a fair chance to recover their outstanding debts.
  • Enhance the Business Environment: Encouraging investment and entrepreneurship by offering a safety net for business ventures.

Commencing Bankruptcy Proceedings

Bankruptcy proceedings in the UAE can be initiated by the debtor, creditors, or competent authorities. The Bankruptcy Law outlines specific conditions under which bankruptcy can be declared:

Conditions for Debtors:

  • A debtor is deemed bankrupt if they are unable to pay their debts as they fall due.
    • The debtor must have been insolvent for at least 30 consecutive business days.

Conditions for Creditors:

  • Creditors holding undisputed claims of at least AED 100,000 (approximately $27,225) can file a bankruptcy petition against the debtor.
    • The debtor’s failure to satisfy a judgment or execution order is also grounds for creditors to seek bankruptcy.

Conditions for Competent Authorities:

  • Regulatory authorities, such as the Securities and Commodities Authority, can initiate bankruptcy proceedings against entities under their supervision.

Bankruptcy Procedures

Once bankruptcy proceedings are initiated, the Bankruptcy Law prescribes several key procedures:

  • Appointment of a Trustee: The court appoints a trustee to oversee the bankruptcy process, protect the assets, and represent the interests of both the debtor and creditors.
  • Protection from Legal Actions: Upon the commencement of bankruptcy proceedings, legal actions against the debtor, such as enforcement procedures, are suspended.
  • Debtor’s Proposal: Debtors have the option to propose a composition or reorganization plan to creditors. If accepted, it can help debtors avoid liquidation.
  • Liquidation: In cases where reorganization is not feasible, the trustee proceeds with the liquidation of the debtor’s assets. The proceeds are distributed among creditors according to priority.
  • Discharge of Debtor: Once the bankruptcy proceedings are completed, and all obligations are met, the debtor is discharged from remaining debts.

Liability of Directors and Managers

In a landmark judgment in the ‘Marka Case’ in October 2021, the Dubai Court of First Instance held the directors and managers of the bankrupt debtor company (a Public Joint Stock Company) personally liable to pay the company’s outstanding debt (approximately AED 450 million), since the assets of the company were not sufficient to pay at least 20% of its debts.

Shortly after the Marka Case, the Bankruptcy Law was amended to limit the liability of directors and managers to their respective liability for the relevant debts of the company if the Court finds that any of them committed any of the acts set out in Article 147(a)-(c) of the Bankruptcy Law, which requires the directors and/or managers to have contributed to the losses that rendered the company insolvent. The Marka judgment at First Instance was therefore a high watermark decision from which the law rapidly developed through some refinements into the personal liability regime and legal process.

The Marka judgment was appealed by the directors and managers of the debtor company, and the Court of Appeal decided to refer the case back to the Court of First Instance for reconsideration.

In October 2022, the Court of First Instance (in reconsidering the matter) clarified in a judgment that the liability of the decision-makers of the company is not automatically engaged when the company that they manage has insufficient assets to settle at least 20% of its debts. To engage their liability, the decision-makers (managers, directors, or de facto decision-makers) must have contributed to the losses that rendered the company insolvent.

Our Role in Bankruptcy Matters

At Al Kabban & Associates, we have a dedicated team of legal experts experienced in handling bankruptcy cases. We offer comprehensive support throughout the bankruptcy process, whether you are a debtor seeking to restructure your finances or a creditor aiming to recover outstanding debts. Our services include:

  • Legal Counsel: Providing expert advice on the implications of bankruptcy and available options.
  • Representation: Acting as legal representatives for debtors or creditors in bankruptcy proceedings.
  • Debt Restructuring: Assisting debtors in formulating viable debt restructuring plans.
  • Asset Protection: Safeguarding the rights and interests of creditors during liquidation.


Bankruptcy laws in the UAE have evolved to create a more favorable environment for businesses while ensuring fair treatment for debtors and creditors. Whether you are facing financial challenges or need assistance with bankruptcy-related matters, Al Kabban & Associates is here to provide expert legal support tailored to your specific needs.

At Al Kabban & Associates, we understand the complexities of bankruptcy cases and the evolving legal landscape in the UAE. Our experienced legal team is well-equipped to provide expert guidance and representation to both debtors and creditors involved in bankruptcy proceedings. Whether you require assistance in understanding your liabilities as a director or manager or need to protect your rights as a creditor, our firm is here to provide tailored legal solutions. For more information or to discuss your situation, please contact us on or by phone on +971 4 453 9090


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