United Arab Emirates

UAE

The options available under the Bankruptcy Law are:

• preventive settlement;
• restructuring; and
• bankruptcy (liquidation).

There are also specific provisions which apply during an “Emergency Financial Crisis”.

Chapter 2 of Federal Decree-Law No. 32 of 2021 on Commercial Companies (“UAE Companies Law”) addresses “Liquidation of the Company and Division of its Assets”.

The DMCC Company Regulations 2024 contain provisions related to insolvency and winding up and explicitly adopt the Bankruptcy Law as applicable in the DMCC.

ADGM

The insolvency procedures available in the ADGM are Administration under Part 1 of the ADGM Insolvency Regulations, Receivership under Part 2 of the ADGM Insolvency Regulations and Liquidation under Part 3 of the ADGM Insolvency Regulations.

Administration involves appointing an administrator to manage the company’s affairs with the goal of rescuing the company or achieving a better outcome for creditors, and it includes an automatic moratorium on creditor actions. A company in administration can enter into a Deed of Company Arrangement (DOCA), which allows it to propose a formal debt restructuring agreement with creditors.

Receivership typically involves appointing an office holder to sell part of a company’s property and to apply the proceeds from the sale to reduce particular debts of the company.

Liquidation is a terminal procedure which can be voluntary or compulsory and entails winding up the company’s affairs, selling assets, and distributing proceeds to creditors.

These procedures provide structured frameworks for addressing financial distress and maximising returns for creditors.

DIFC

The corporate insolvency procedures available in the DIFC are set out in the DIFC Insolvency Law and the DIFC Insolvency Regulations and these include: Company Voluntary Arrangements (CVA); Rehabilitation; Administration (albeit the scope of Administration is limited to circumstances where an application for Rehabilitation has been made and there is evidence of misconduct (see Articles 22(2), 32(1) and Part 6, Chapter 7 of the DIFC Insolvency Law); Receivership; and Winding Up. Winding Up can be voluntary (instigated by members or creditors) or compulsory (by Order of the DIFC Court).

UAE

Preventive settlement. Article 59 of the Bankruptcy Law provides for a “Claims Moratorium” for a period of three months “following the date of issuance of the decision [to open preventive settlement procedures]”, which can be extended by the Bankruptcy Court as long as the moratorium does not exceed six months in total. Subject to the six-month maximum, the moratorium lasts until either the approval of the preventive settlement proposal or the Bankruptcy Court issuing a decision to terminate the preventive settlement proceedings.

Restructuring. Article 92 of the Bankruptcy Law provides for a “Claims Moratorium” imposed “from the day following the issuance of [the Bankruptcy Court’s] decision [to commence restructuring procedures]” and lasts until either the ratification of the restructuring plan or the Bankruptcy Court issuing a decision to terminate the restructuring proceedings. Subject to the foregoing, there is no express limit to the length of the Claims Moratorium period during restructuring procedures, nor is there a limit on its possible extension by the Bankruptcy Court.

ADGM

Administration. Pursuant to sections 44–45 of the ADGM Insolvency Regulations, a company in administration enjoys a moratorium on both “Insolvency Proceedings” (defined in the ADGM Insolvency Regulations) and “other legal process”, which includes enforcing security over the company’s property, repossessing goods in the company’s possession under a hire-purchase agreement, exercising a right of re-entry in relation to premises let to the company, or pursuing any legal proceedings against the company.

Pursuant to section 46 of the ADGM Insolvency Regulations, an interim moratorium will apply from the time when a copy of a notice of intention to appoint is filed with the ADGM Court until such time as a company is “in administration” (i.e. by the administration order taking effect).

The moratorium stays in place throughout the entirety of the administration process, which lasts for an initial period of one year (section 110 of the ADGM Insolvency Regulations) but can be extended via Court Order.

Scheme of arrangement. A moratorium will not be automatically triggered in the context of a scheme of arrangement, however, this may be obtained if the scheme of arrangement occurs in conjunction with another insolvency procedure, such as an administration.

DIFC

CVA. The “Directors” (as defined in the DIFC Companies Law) of an eligible company incorporated under the DIFC Companies Law may make a proposal to the shareholders and its creditors for a CVA (“Proposal”) and in doing so, may seek a moratorium. Regulation 4.4.1 deals with eligibility criteria.

Article 8(2) of the DIFC Insolvency Law prescribes that: “[t]he Board of Directors of the DIFCA may make Regulations in relation to the obtaining of a moratorium” in the context of a CVA. Regulation 4.1.1 of the DIFC Insolvency Regulations provides what the proposal for such should contain.

Rehabilitation. Article 15 of the DIFC Insolvency Law provides for an automatic moratorium which shall be effective from the date on which the Directors “notify the Court in writing … that they intend to make a rehabilitation proposal to the Company’s creditors” (“Notification Date”). The moratorium shall apply to “all creditors, secured or unsecured and without their consent, in respect of such a Company and its assets wherever located from the Notification Date”.

Article 16 of the DIFC Insolvency Law provides: “[u]nless otherwise ordered by the Court the automatic moratorium shall apply for a period of one hundred and twenty (120) days from the Notification Date referred to in Article 15(2) (‘Moratorium Period’).” Pursuant to Article 24(4): “[t]he Court may … extend the Moratorium Period for a specified period to allow the Rehabilitation Plan to be considered by the Company’s creditors and Shareholders.”

Upon the application of any creditor(s) (on notice to the Company), the DIFC Court may grant relief from the moratorium (Article 19 of the DIFC Insolvency Law). Pursuant to Article 23(1): “notwithstanding the moratorium and prior to the expiration of the Moratorium Period”, the DIFC Court may terminate a moratorium upon request of a creditor “upon notice and hearing for cause shown, including bad faith.”

Administration. Article 34 of the DIFC Insolvency Law provides: “[d]uring the period for which an Administrator is appointed a moratorium in accordance with the Regulations shall apply.”

The scope of a moratorium (in general terms) is set out at Regulations 4.5 and 4.6 of the DIFC Insolvency Regulations.

Compromises and arrangements. A moratorium will not be automatically triggered in the context of a compromise or arrangement, however, this may be obtained if such occurs in conjunction with another insolvency procedure (Article 8(1)).

UAE

Preventive settlement (Title 1 of the Bankruptcy Law) and restructuring (Title 2 of the Bankruptcy Law).

ADGM

Administration: Part 1 of the ADGM Insolvency Regulations.

Scheme of arrangement: Part 25 of the ADGM Companies Regulations (arrangements and reconstructions).

DIFC

Compromises and arrangements: Part 9 of the DIFC Companies Law.

Rehabilitation: Article 22(1) of the DIFC Insolvency Law.

CVAs: Article 12 of the DIFC Insolvency Law and Regulations 2.6 and 2.7 of the DIFC Insolvency Regulations.

3.1 What are the conditions to entry?

UAE

General. Article 15 of the Bankruptcy Law provides: “[t]he debtor may submit an application to the Bankruptcy Administration to open preventive settlement, restructuring, or bankruptcy procedures within (60) sixty days from the date of cessation of payment, or from the date on which information became available to it indicating that it will be unable to pay its debts when they fall due …”. “Cessation of Payment” is defined in the law.

The Implementing Regulation qualifies the operation of Article 15 to circumstances where the value of the debt that a corporate debtor “has ceased to pay or would be unable to repay when due” is not less than AED 500,000 (or AED 5 million if the debtor is subject to a regulatory authority).

Article 16 of the Bankruptcy Law provides: “[a]n ordinary creditor or a group of ordinary creditors may submit an application to open restructuring or bankruptcy procedures in the event where the debtor stops paying one or more debts to them, provided that this debt is unconditional, undisputed, and due for payment, and provided that the value of the debt is not less than the amount determined by the Implementing Regulation of this Law on the date of submitting the application, and that the applicant has previously warned the debtor of the need to pay the debt owed by it within (30) thirty days from the date of the warning, and the debtor has not taken the initiative to pay it.”

For a creditor-led application, the Implementing Regulation requires debt(s) of not less than AED 1 million (or AED 10 million if the debtor is subject to a regulatory authority). The various thresholds for creditors with debts secured by a mortgage or a lien are set out at Article 6(2) of the Implementing Regulation. Filings by Regulatory Authorities are addressed at Article 7.

Preventive settlement. Pursuant to Article 56 of the Bankruptcy Law, a debtor may apply for preventive settlement “if its business is viable” and:

• It has stopped payment or expects that it will become unable to pay debts as they fall due.
• Creditors previously rejected a preventive settlement or restructuring proposal or the Bankruptcy Court refused to ratify the proposal or if the Bankruptcy Court previously terminated preventive settlement/restructuring procedures. The application must be made within three months of the relevant creditors’ meeting or Court decision.
• After “rehabilitation in accordance with the provisions of this Law” following a final bankruptcy judgment.

Restructuring. Pursuant to Article 87 of the Bankruptcy Law, the debtor, creditors or supervisory entity may apply to open restructuring procedures if the debtor’s “business is viable” and:

• The debtor has “stopped payment”.
• The debtor “is in a state of deficit in its financial position”.
• Creditors previously rejected the restructuring plan, the Bankruptcy Court refused to ratify it, or if the Bankruptcy Court previously terminated restructuring procedures (the application must be made within three months of the relevant creditors’ meeting or Court decision).
• After rehabilitation in accordance with the provisions of the Bankruptcy Law following a final bankruptcy judgment.

ADGM

Administration. An administration application may be made by the company, the directors and/or creditor(s). Demonstrating insolvency is not required to enter into administration, however pursuant to section 7 of the ADGM Insolvency Regulations, the ADGM Court may make an administration order only if it is satisfied that: “the company is likely to become unable to pay its debts; and that the administration order is reasonably likely to achieve the purpose of administration”. Pursuant to section 2, the purpose of administration includes: (1) rescuing the company as a going concern; (2) achieving a better result for creditors than liquidation; and (3) realising property to distribute to secured preferential creditors.

Scheme of arrangement. An application can be made for a scheme of arrangement by the company, a creditor, a member, a liquidator or an administrator. Demonstrating insolvency is not required. The arrangement must be approved by creditors holding 75% in value of the debt, present in the meeting and voting either in person or by proxy (section 805(1)(a) of the ADGM Companies Regulations).

Both frameworks are only available for companies incorporated or domiciled in the ADGM, with few exceptions for non-ADGM companies (sections 801(1)(b) and 810(2) of the ADGM Companies Regulations).

DIFC

Compromises and arrangements. An application may be made for a compromise/arrangement by the company, a creditor, a shareholder or a liquidator. Demonstrating insolvency is not required. Article 117(3) of the DIFC Companies Law provides: “[t]he Court may only sanction a compromise or arrangement if a majority in number representing: (a) three-quarters (¾) in value of the Creditors or class of Creditors; or (b) three-quarters (¾) of the voting rights of the Shareholders or class of Shareholders, as the case may be, present and voting either in person or by proxy at the meeting, agree to the compromise or arrangement.”

Rehabilitation. A company is eligible for Rehabilitation where it is or is likely to become unable to pay its debts and there is reasonable likelihood of a successful Rehabilitation Plan being reached between the company and its creditors and shareholders (Article 13 of the DIFC Insolvency Law). If the Company is an “Authorised Person”, the Directors must obtain the “Consent of the DFSA” (Dubai Financial Services Authority) before delivering a Rehabilitation Plan.

CVAs. Article 7(1) of the DIFC Insolvency Law prescribes: “[t]he Directors of a Company may make a proposal under this Part to the Shareholders and to its creditors for an arrangement of its affairs (a ‘Voluntary Arrangement’)”. If the Company is an “Authorised Person”, the Directors must obtain the “Consent of the DFSA” before delivering a Proposal.

3.2 Can creditor claims be compromised “within a class”?

UAE

Preventive settlement/restructuring. Yes — the quorum for the creditors’ meeting (at which the vote will take place) is a simple majority (see definition of “Required Majority“ in the Bankruptcy Law), with the required majority being creditors holding two-thirds of the value of the debt.

ADGM

Administration. Yes — once administration is on foot, the company can enter into one or more DOCAs, which is a formal agreement with creditors, provided for under Chapter 8 of the ADGM Insolvency Regulations. A DOCA can be used to compromise claims. In an administration, all unsecured creditors vote as a single class by default of there not being any provisions relating to classes and approval of creditors holding a majority in value of the relevant debt is required for ratification of any compromise arrangement contained in a DOCA (paragraph 32(1) of Schedule 6 of the ADGM Insolvency Regulations).

Scheme of arrangement. Yes — creditor claims can be compromised within a class by approval by 75% in value of the creditors in the relevant class (section 805(1)(a) of the ADGM Companies Regulations).

DIFC

Compromises and arrangements. Yes — Article 117(3) of the DIFC Companies Law provides: “[t]he Court may only sanction a compromise or arrangement if a majority in number representing: (a) three-quarters (¾) in value of the Creditors or class of Creditors; … present and voting either in person or by proxy at the meeting, agree to the compromise or arrangement.”

Article 117(4) provides: “[w]here the Court has sanctioned a compromise or arrangement under Article 117(3), such a compromise or arrangement shall be binding on: (a) all the Creditors or the class of Creditors; or (b) all the Shareholders or class of Shareholders, as the case may be, and also on the Company or, in the case of a Company in the course of being wound up, on the liquidator and contributories of that Company.”

Rehabilitation. Yes — Article 25(3) of the DIFC Insolvency Law provides: “If at least three-quarters in value (of claims agreed to by the Company or otherwise allowed by the Court) of any class of creditors or Shareholders … present and voting … agree to any arrangement, the Rehabilitation Plan, if sanctioned by the Court, shall be binding on all persons within such class that have or could have a claim against or interest in the Company before the date the Court sanctions the Rehabilitation Plan.”

CVAs. Yes – Regulation 2.5 of the DIFC Insolvency Regulations provides: “[a]t the creditors’ meeting for any resolution to pass approving any proposal or modification there must be a majority in excess of three-quarters in value of the creditors present in person or by proxy and voting on the resolution.”

3.3 Is there a “cross-class cram down”?

UAE

The Bankruptcy Law does not expressly provide for a cross-class cram down. However, the practical operation of the law (in terms of the limits to when secured creditors can vote), given how it is drafted, may result in a cram down absent secured creditors procuring the Bankruptcy Court’s permission to vote/waiving security.

ADGM

Administration. Not applicable, because in an administration all unsecured creditors are treated as a unified class (paragraphs 15 and 32 of Schedule 6 of the ADGM Insolvency Regulations). Secured creditors are only bound by a DOCA if the DOCA so provides and they voted in favour of the DOCA or there is a Court Order binding them (section 76(2)).

Scheme of arrangement. On the basis that section 805(1) of the ADGM Companies Regulations is substantially the same as section 899 of the English Companies Act 1985 and that ADGM follows the English law position, it is unlikely that there will be a cross-class cram down, as it is likely that approval from 75% of each class of creditors is required for the scheme to become binding on that class.

DIFC

Compromises and arrangements. Article 117(3) of the DIFC Companies Law is cited above, Question 3.2. At the time of writing, it is unclear how the DIFC Court will interpret the provisions.

Rehabilitation. There is not a cross-class cram down, given that: Article 24(1) of the DIFC Insolvency Law prescribes: “… voting procedures … shall separately classify secured creditors, unsecured creditors and Shareholders for the purposes of voting …”; Article 25(3) only permits sanction of a Rehabilitation Plan if creditors representing three-quarters “in value ... of any class ... agree to any arrangement” in which case it “shall be binding on all persons within such class ...”; and Article 27 requires that: “… the Court shall sanction the Rehabilitation Plan upon a finding that: … (d)(i) all classes of creditors and Shareholders have voted to accept or are deemed to accept the Rehabilitation Plan; or (ii) if a class of claims or interests is impaired under the Rehabilitation Plan, at least one impaired class of creditors has voted to accept the Rehabilitation Plan”.  

CVAs. Regulation 2.5 of the DIFC Insolvency Regulations is cited above, Question 3.2. At the time of writing, it is unclear how the DIFC Court will interpret the provisions of such.

3.4 Can shareholder claims be compromised?

UAE

Restructuring. The restructuring plan proposed by the company could include a reduction or deferral of shareholder claims.

ADGM

Administration. The administrator’s proposals may include a proposal for a compromise or arrangement to be sanctioned under a scheme of arrangement (section 802(2)(d)). This can involve compromising claims of shareholders as part of the scheme of arrangement. Additionally, the administrator has the power to manage the company’s affairs, business, and property, which includes negotiating and implementing compromises on behalf of the company (paragraph 18 of Schedule 2 of the ADGM Insolvency Regulations) with inter alios various stakeholders, including, potentially, shareholders, to achieve the administration objectives.

Scheme of arrangement. The ADGM Court may sanction a compromise or arrangement if: “members or class of members (as the case may be) representing 75% of the voting rights of the members or class of members (as the case may be)” agree (section 805(1)(a) of the ADGM Companies Regulations).

Further, the arrangement can include a “reorganisation of the company’s share capital by the consolidation of shares of different classes or by the division of shares into shares of different classes” (section 801(2) of the ADGM Companies Regulations).

DIFC

Compromises and arrangements. As set out in Question 3.2, above, the DIFC Court may sanction a compromise or arrangement: “if a majority in number representing: … (b) three-quarters (¾) of the voting rights of the Shareholders or class of Shareholders, … present and voting either in person or by proxy at the meeting, agree to the compromise or arrangement.”

3.5 Can secured creditors’ claims be compromised? Are deficiency claims treated differently?

UAE

Preventive settlement/restructuring. Secured creditors may compromise their security by waiving their security (and must do so in order to vote if their rights are not affected by a settlement proposal/restructuring plan). Pursuant to Article 114(3) of the Bankruptcy Law, the Bankruptcy Court may ratify a restructuring plan rejected by creditors provided that the creditors’ position would be no worse than if the debtor was liquidated. Deficiency claims will likely be treated as unsecured debt claims.

ADGM

Administration. Secured creditors’ claims can only be compromised by a DOCA if the DOCA so provides and they voted in favour of the DOCA or there is a Court Order binding them (section 76(2) of the ADGM Insolvency Regulations). Deficiency claims are not treated differently and will likely be treated as an unsecured debt claim which can be compromised by a DOCA.

Scheme of arrangement. If the arrangement is passed by the requisite majority of secured creditors within their class, it will be binding upon them. Deficiency claims are not treated differently and will likely be treated as an unsecured debt claim which can be compromised if 75% of the relevant class consent to the Scheme.

DIFC

Subject to the relevant provisions of the DIFC Law of Security No. 4 of 2024 (“Security Law”), the DIFC Insolvency Law and the DIFC Insolvency Regulations, secured creditors’ claims can be compromised:

• on a successful application by an Administrative Receiver to the DIFC Court for disposal of property subject to a “Security Right” (see Article 46 of the DIFC Insolvency Law, which also covers the position on deficiency in this context); or
• by agreement or by cram down in the context of compromises/arrangements/CVAs/rehabilitation.

“Financial Collateral” (defined in the Security Law) may be realised pursuant to the terms of Regulation 8.2.1 of the DIFC Insolvency Regulations and/or Article 110(2)(e) of the Security Law.

Pursuant to Regulation 6.47.1, deficiency claims will likely be ranked as unsecured (subject to being “Proved”).

3.6 Can creditors propose competing plans?

UAE

Preventive settlement/restructuring. The Bankruptcy Law does not expressly provide for creditors to propose competing settlement proposals/restructuring plans, however, it does permit an appeal of the decision to approve the preventive settlement proposal or restructuring plan (Articles 77 and 112 of the Bankruptcy Law).

ADGM

Administration. The law does not expressly refer to competing plans, however, creditors may seek to propose modifications to the proposals presented by the administrator.

Scheme of arrangement. The law does not expressly refer to competing plans, however, creditors may seek to propose modifications to the arrangement at any meeting convened pursuant to section 802 of the ADGM Companies Regulations.

DIFC

Compromises and arrangements. The law does not expressly refer to competing plans. However, a creditor may apply to the DIFC Court to order a creditors’/class of creditors’ meeting at which the creditor(s) may seek to propose modifications.

CVAs. The law does not expressly refer to competing plans, however, creditors may seek to propose modifications to the Proposal at the creditors’ meeting.

Rehabilitation. The law does not expressly refer to competing plans. However, the creditors have the right to be heard at the “Directions Hearing” (after giving notice) convened pursuant to Article 24 of the DIFC Insolvency Law.

3.7 What level of court or other third-party supervision is there of the process(es)?

UAE

All processes. The Bankruptcy Court oversees all bankruptcy proceedings under the Bankruptcy Law, including preventive settlement, restructuring and liquidation. It approves proceedings, supervises trustees, orders interim measures and ratifies plans. It can also convert preventive settlement into restructuring or bankruptcy (pursuant to Article 84 of the Bankruptcy Law) or convert restructuring into bankruptcy (pursuant to Article 119 of the Bankruptcy Law) in response to an application to do so. In a preventive settlement process, the company may conduct its business as normal but must seek Court sanction for anything outside the normal course and for approval of the settlement proposal (and any amended proposal). In a restructuring process where the trustee is appointed to manage the debtor company, he or she has “all the powers of the debtor, its Board of Directors, and executive management, unless the Court decides otherwise” (Article 90 of the Bankruptcy Law), but must submit any management actions requiring the approval of the General Assembly for Court approval.

ADGM

Administration. Although, once appointed, the administrator enjoys significant autonomy in organising the company’s affairs and proposing arrangements, the ADGM Court’s involvement remains present in various aspects of the administration. Court approval is required for the appointment, resignation, and removal of administrators. The ADGM Court is also involved in giving directions and orders regarding the administrator’s functions, and handling disputes over creditor claims.

Administrators must also report to creditors and the Registrar and seek creditor approval for their proposals and remuneration.

Scheme of arrangement. The debtor’s management remains in place and continues running the company’s operations during the scheme of arrangement process. Although there is no formal supervision, if an arrangement or scheme is not implemented in accordance with the Court Order, an affected third party can make an appropriate application to the ADGM Court.

DIFC

Court supervision is limited in the DIFC, with the Company and/or office holder having considerable autonomy. However, in the context of restructuring processes, Court sanction is required for matters including approving compromises and arrangements and Rehabilitation Plans.

4.1 What is the applicable law that provides for clawback and/or antecedent transaction claims?

UAE

Clawback claims are provided for under Article 148 of the Bankruptcy Law, and cover transactions involving:

• uncustomary donation or gift;
• unbalanced obligations in cash or kind;
• prepayment of a debt prior to the due date;
• payment of a debt other than for the agreed-upon consideration/by an uncustomary method;
• granting of new security in respect of an existing debt (unless commercially justifiable); and
• other actions harmful to creditors where the counterparty was aware, or should have been aware, that the debtor had “stopped payment” or was in “a state of deficit in its financial position” (undefined in the law).

Article 149 addresses invalid security rights.

ADGM

Part 4, Chapter 3 of the ADGM Insolvency Regulations deals with voidable transactions giving rise to clawback claims involving:

• transactions at an undervalue; and
• preferences.

DIFC

Articles 131–134 of the DIFC Insolvency Law deal with antecedent transactions giving rise to clawback or invalidity claims involving:

• transactions at an undervalue;
• preferences; and
• invalid “Security Rights”.

4.2 What are the relevant “look-back” periods for claims?

UAE

The standard “look-back” period is six months preceding the Cessation of Payment date (Article 148(1) of the Bankruptcy Law). “Cessation of Payment” is defined as: “[t]he debtor’s failure to pay any due debt after (10) days have passed from the end of the period specified in the warning, even if the debtor’s assets are sufficient to pay its debts, and even if the debt that has not been paid is secured by guarantees that are sufficient to settle such debt”. The period is extended to two years in the case of the transaction involving an “Insider” or a “Related Party” (Article 148(3) of the Bankruptcy Law) (defined in the law).  Further, Article 151 of the Bankruptcy Law provides: “The trustee may request non-enforcement of the debtor’s actions that occurred before the issuance of the decision to open bankruptcy adjudication procedures that are harmful to creditors, in accordance with the provisions of the [Civil Code].”

ADGM

In order for a clawback claim based on a transaction at an undervalue or a preference to be eligible, the transaction must occur within the “relevant time”, as follows:

Transactions at an undervalue: two years ending with the “onset of insolvency” (section 259(1)(a)).

Preferences:

• Two years ending with the “onset of insolvency”, if the transaction is with a “Connected Person” (otherwise than by reason only of being its employee) (section 259(1)(a)).
• Six months ending with the “onset of insolvency” for preferences given to other persons (section 259(1)(b)).

The “onset of insolvency” is defined at section 259(3) as:

• where an administrator is appointed by an administration order, the date on which the administration application is made;
• where an administrator is appointed following the filing of a notice of intention to appoint an administrator, the date of the filing of such notice;
• the date the administrator’s appointment takes effect in all other cases;
• where a company enters liquidation following an administrator’s appointment or a DOCA ceasing to have effect, the date the company entered into administration; and
• where the company enters into liquidation otherwise, the date of the commencement of winding up.

In order to be considered the “relevant time”, the company must, at the time of the transaction or preference given, be unable to pay its debts or becomes unable to pay its debts in consequence of the transaction or preference within the meaning of section 200 of the ADGM Insolvency Regulations.

DIFC

In order for a clawback claim based on a transaction at an undervalue or a preference to be eligible, the transaction must occur within the “relevant time”, as follows:

Transactions at an undervalue: two years ending with the “date on which the Company goes into Liquidation or an Administrator is appointed pursuant to a rehabilitation proposal” (Article 134(1)(a) of the DIFC Insolvency Law).

Preferences:

• Two years ending with the “date on which the Company goes into Liquidation or an Administrator is appointed pursuant to a rehabilitation proposal”, if the transaction is with a “person who is connected with the Company (otherwise than by reason only of being its employee)” (Article 134(1)(a)).
• Six months ending with the “date on which the Company goes into Liquidation or an Administrator is appointed pursuant to a rehabilitation proposal” for preferences given to other persons (Article 134(1)(b)).

Security Rights: for a Security Right in all or substantially all of the Company’s property to be considered invalid, the “relevant time” under Article 133 of the DIFC Insolvency Law is:

• one year from when the Security Right is created, ending with the “date on which the Company goes into Liquidation, or an Administrator is appointed pursuant to a rehabilitation proposal” and the Company either was at the date of the creation or became pursuant to the transaction in respect of which the charge was created, unable to pay its debts as they fell due;
• two years if the Security Right is created in favour of “a person connected with the Company” (without the condition of the Company being unable to pay its debts as they fall due); or
• if the Security Right was created after the commencement of a CVA.

4.3 Who can pursue the claims?

UAE

Pursuant to Article 258 of the Bankruptcy Law, “[a]ny interested party may file a grievance with the … Court including when the debtor or trustee … propose(s) to act or acts in an unfair manner to harm his interests … neglects or fails to perform his duties or does not exercise due diligence in accordance with the principles in force”.

ADGM

As regards transactions at an undervalue (section 257(1)) and preferences (section 258(1)), a liquidator or administrator can pursue the claims. As regards transactions at an undervalue for the purpose of putting assets beyond reach/prejudicing interests, a liquidator or administrator or, with leave of the ADGM Court, a victim of the transaction can pursue the claims (section 257(5)).

DIFC

An “office holder” (i.e. the liquidator, provisional liquidator or the administrator(s)) can pursue transactions at an undervalue and/or preference claims (Articles 131 and 132 of the DIFC Insolvency Law). In the case of an administrator, pursuance of such claim(s) must be permitted by a Rehabilitation Plan.

4.4 What remedies are available and how do they operate in practice?

UAE

The Bankruptcy Court may rule that certain transactions are not enforceable and that the position be restored. In certain circumstances, the third party involved may seek compensation (plus interest) (Articles 148(2) and 152). 

ADGM

The ADGM Court may make an order restoring the position to what it would have been if the Company had not entered into the transaction/given the preference (sections 257(1) and 258(1)) and the transferred assets or the payments should be returned to the Company. In practice, this involves enforcing an ADGM Court Order against the relevant respondent (further discussion of which is outside of the scope of this text).

DIFC

The DIFC Court may make an order restoring the position to what it would have been if the Company had not entered into the transaction/given the preference and the transferred assets or the payments should be returned to the Company. In practice, this involves enforcing a DIFC Court Order against the relevant respondent (further discussion of which is outside of the scope of this text).

4.5 What defences are available?

UAE

The statutory defences prescribed by the Bankruptcy Law include:

• The Bankruptcy Court may approve a transaction which would otherwise be classified as unenforceable if it is persuaded that the debtor has acted in good faith and with the aim of carrying out its business, and, when doing so, there were reasons to believe that the action could be beneficial to the business (Article 150(1)).
• “Commercial considerations” can act as valid justification for some transactions that would otherwise fall under the clawback provisions (Article 148).

ADGM

Transactions at an undervalue:

• A defence expressly envisaged in the ADGM Insolvency Regulations is that “the Company which entered into the transaction did so in good faith and for the purpose of carrying on its business” (section (257)(3)(a)) or that “at the time it did so there were reasonable grounds for believing that the transaction would benefit the Company” (section (257)(3)(b)).
• A defence may be to debunk the “relevant time” requirement at section 259 of the ADGM Insolvency Regulations by demonstrating that the Company was not unable to pay its debts or became unable to pay its debts in consequence of the transaction or preference within the meaning of section 200 of the ADGM Insolvency Regulations.

Preferences:

• A defence expressly envisaged in the ADGM Insolvency Regulations is that the Company was not influenced in deciding to give a preference to obtain “the effect of putting that person into a position which, in the event of the Company going into insolvent liquidation, will be better than the position he would have been in if that thing had not been done” (section 258(2)(b)(3) of the ADGM Insolvency Regulations). Influence is presumed in the case of a Connected Person (otherwise than by reason only of being its employee) “unless the contrary is shown” (section 258(4) of the ADGM Insolvency Regulations).
• A defence may be to debunk the “relevant time” requirement (at section 259).

DIFC

Transactions at an undervalue:

• A defence expressly envisaged in the DIFC Insolvency Law is that “… the Company which entered into the transaction did so in good faith and for the purpose of carrying on its business; and … at the time it did so there were reasonable grounds for believing that the transaction would benefit the Company” (Article 131(4)).
• A defence may be to debunk the “relevant time” requirement at Article 134.

Preferences:

• A defence expressly envisaged in the DIFC Insolvency Law is that the Company was not influenced in deciding to give a preference to obtain “the effect of putting that person into a position which, in the event of the Company going into insolvent Liquidation, will be better than the position he would have been in if that thing had not been done” Articles 132(3)(b) and (4) of the DIFC Insolvency Law. Influence is presumed in the case of a person connected with the Company (otherwise than by reason only of being its employee) “unless the contrary is shown” (Article 132(5) of the DIFC Insolvency Law).
• A defence may be to debunk the “relevant time” requirement at Article 134.

4.6 Is there a general right of action in respect of transactions defrauding creditors or Actio Pauliana claims?

UAE

As above, Article 148(2) of the Bankruptcy Law addresses actions harmful to creditors but does not expressly state who (presumably other than the trustee) can file a claim. However, we are aware of a recent case where creditors successfully challenged a bankruptcy commencement judgment (see below). Article 258 states that “any interested party” may file a grievance in certain circumstances, including if the debtor “acts in an unfair manner”. Title 7 (crimes, penalties and rehabilitation), Chapter 1, sets out certain offences committed under the Bankruptcy Law, including those relating to fraud. Criminal proceedings for various fraud-related offences under the Federal Decree-Law No. 31 of 2021 on the Issuance of the Crimes and Penalties Law (“Penal Code”) may also be pursued by the Public Prosecutor, including further to a complaint by an aggrieved party. General rights of action exist to creditors/other affected parties under Federal Law No. 5 of 1985 on the Civil Transactions Law of the UAE (“Civil Code”), for example liability for harmful acts under Article 282.

On 12 June 2024 the Dubai Court of Appeal overturned a CFI decision to commence bankruptcy of a debtor (made under the 2016 bankruptcy law) in a successful application by creditors made on the basis that the debtor had concealed and transferred assets to evade making payments to the creditors, had failed to file required documents, and was using the new bankruptcy law in bad faith, preventing creditors from undertaking execution measures.

ADGM

Part 4 (Protection of Assets in Liquidation and Administration), of the ADGM Insolvency Regulations, Chapter 1 (Contraventions by Directors and others) deals with matters including fraud. The provisions therein cover: fraud in anticipation of winding up or insolvent administration; transactions in fraud of creditors; misconduct in the course of winding up or insolvent administration; falsification of Company’s books; material omissions from statement relating to Company’s affairs; false representations to creditors; fraudulent trading; wrongful trading; and summary remedy against delinquent officers or liquidators (sections 244–252).

DIFC

The general right of action in respect of transactions defrauding creditors is envisaged by Article 108 of the DIFC Insolvency Law (Transactions in fraud of creditors). In addition, Articles 107 and 109–115 cover:

• fraud in anticipation of winding up;
• falsification of Company’s books/material omissions from the Statement of Affairs/false representations to creditors/misconduct in the course of winding up; and
• fraudulent/wrongful trading.

4.7 Who can pursue the claims?

UAE

See Question 4.6, above.

ADGM

The liquidators or administrators and in certain circumstances, the Registrar, creditors or shareholders.

DIFC

Article 115 of the DIFC Insolvency Law provides: “[t]he Court may, on application by any aggrieved person including an Administrator, Liquidator, Administrative Receiver, creditor, Shareholder or other person liable to contribute to the assets of the Company, make any orders as the Court sees fit in relation to a person to whom this Article 115 applies ….” Accordingly, “any aggrieved person” can pursue a claim against a person to whom Article 115 applies (i.e. Articles 107–114, as listed above, Question 4.6).

Across all three jurisdictions

The Public Prosecutor may pursue claims for breaches of the Penal Code, including further to a complaint by an aggrieved party.

4.8 What remedies are available and how do they operate in practice?

UAE

The transactions can be rendered void, and associated funds recovered (plus interest (Article 152(1))). The Bankruptcy Law also envisages punishments of fines and/or imprisonment (Title 7).

ADGM

The ADGM Court has wide discretion to make orders restoring the position to what it would have been if the company had not entered into that transaction or protecting the interests of any victim of the transaction, but it must have regard to the interests of persons who acquired any interest in property in good faith, for value and without notice of the relevant circumstances. Fines may also be levied in accordance with Schedule 9 of the ADGM Insolvency Regulations.

DIFC

Pursuant to Article 115 of the DIFC Insolvency Law, the DIFC Court may order one or more of the following orders: (a) “… to repay, restore or account for the money or other property of the Company which he has misapplied or retained or become accountable for, with interest at such rate as the Court determines”; (b) “… to compensate the Company in respect of any misfeasance or breach of any fiduciary or other duty in relation to the Company”; (c) “… to make such [c]ontributions … to the Company’s assets as the Court thinks fit”; or (d) “… requiring the person to do, or not to do, any act or thing.”

4.9 What defences are available?

UAE

See Question 4.5, above, regarding defences envisaged by the Bankruptcy Law for clawback claims and actions harmful to creditors. See Question 5.2, below, regarding defences available to claims against directors/managers under Article 246.

ADGM

There are various defences available which are specific to the particular statutory provision in the ADGM Insolvency Regulations. These are generally set out at the end of each relevant statutory provision. In relation to most of the provisions, a person will have a valid defence if they are able to show that they lacked the requisite intention. Further, in relation to section 245, a person will not be liable if the conduct was carried out more than five years before the commencement of the winding-up or entry into insolvent administration. In relation to section 249, if consent was not obtained as a result of false representations. In relation to section 252, a person will not be liable if he/ she took every step with a view to minimising the potential losses to creditors.

DIFC

A defence expressly envisaged in response to “misconduct in the course of winding up” is set out at Article 114(2) of the DIFC Insolvency Law. Other defences may include proving that the intent required by particular statutory provisions (including Articles 107–110 and 112) is not present, that consent was not obtained as a result of false representations (Article 111) or that the relevant person took every step with a view to minimising the potential loss to the Company’s creditors (Article 113).

UAE

The UAE Companies Law contains provisions relevant to the duties of directors and managers. The Bankruptcy Law contains provisions relevant to the liability of directors and managers, including “any person responsible for the actual management of the company,” in the context of companies adjudicated bankrupt. The Civil Code may also be relevant.

ADGM

The ADGM Companies Regulations contain provisions relevant to the duties of “Directors” (as defined therein). The ADGM Insolvency Regulations also contain provisions relevant to the liability of officers (which includes directors and managers) (past and present).

DIFC

The DIFC Companies Law contains provisions relevant to the duties of “Directors” and the liability of “Officers”, including in the context of compromises and arrangements and as regards “Creditors” in certain circumstances. The DIFC Insolvency Law also contains provisions relevant to the liability of Officers (which includes directors and senior managers) (past and present).

5.1 What are the duties of directors and managers?

UAE

The UAE Companies Law sets out general duties of the managing director (or general manager) at Article 22 as follows:

• preserve the rights of the company;
• act with due care;
• act within powers; and
• carry out acts consistent with the company’s objectives.

Liability of managers of limited liability companies is set out at Article 84 as follows:

• fraudulent acts;
• losses incurred due to abuse of power or contravention of the law/the memorandum of association or appointment contract or gross error; and
• provisions applicable to liability of Board Members of Joint Stock Companies (Article 162) apply as follows: fraud, abuse of power, violation of the provisions of this law or the company’s statute.

Liability of managers of joint liability partnerships is set out at Articles 51–52 as follows:

• violation of the provisions of the company’s memorandum of association or his or her appointment contract;
• negligence or error committed by the manager upon performance of his or her job; and
• failure to carry out work with due care.

ADGM

“Director” is defined in section 146 of the ADGM Companies Regulations as, “any person occupying the position of director, by whatever name called”. Sections 161 to 167 of the ADGM Companies Regulations set out the general duties of directors which include the duty:

• to act within powers;
• to promote the success of the company;
• to exercise independent judgement;
• to exercise reasonable care, skill and diligence;
• to avoid conflicts of interest;
• not to accept benefits from third parties; and
• to declare interest in a proposed transaction or arrangement.

These duties are to be interpreted in line with English common law rules and equitable principles, including in the context of insolvency. Section 162(3) of the ADGM Companies Regulations provides: “[t]he duty [to promote the success of the company] imposed by this section has effect subject to any rule of law applicable in the [ADGM] requiring directors, in certain circumstances, to consider or act in the interests of creditors of the company.”

Various people, including directors (past and present), also have duties under the ADGM Insolvency Regulations to cooperate with office holders (section 255).

DIFC

The duties of “Directors” (as defined in the DIFC Companies Law) are set out in Articles 69 to 75 of the DIFC Companies Law, and they include the duty:

• to act within powers;
• to promote the success of the company;
• to exercise independent judgement;
• to exercise reasonable care, skill and diligence;
• to avoid conflicts of interest;
• not to accept benefits from third parties; and
• to declare interest in a proposed transaction or arrangement.

Most relevant from an insolvency perspective is Article 70(3) of the DIFC Companies Law which provides: “[t]he duty [to promote the success of the Company] imposed under this Article has effect subject to any law applicable to the Company requiring Directors, in certain circumstances, to consider or act in the interests of a Company’s Creditors.”

Various people, including directors (past and present), also have duties under the DIFC Insolvency Law to cooperate with office holders (Article 129).

5.2 What claims can be brought against directors and managers arising from breaches of those duties?

UAE

Under Article 246 of the UAE Bankruptcy Law, claims can be brought against members of the board of directors, managers, liquidators, or any person responsible for the actual management of the company, for misconduct committed in the two years preceding the company’s “Cessation of Payment”. This includes the use of ill-considered commercial methods such as selling assets at undervalue to avoid or delay bankruptcy, disposing of assets without or for inadequate consideration, making preferential payments with the intention of harming other creditors, or negligent management resulting in the company’s assets being insufficient to cover at least 20% of its debts. Liability may be apportioned proportionately. Pursuant to Articles 51 and 84 of the UAE Companies Law, claims can be brought by the company, the partners or third parties. Shareholders also have certain rights of action under the UAE Companies Law. Pursuant to Article 246 of the Bankruptcy Law, claims can be brought by the trustee, the “Unit” (if the debtor is subject to a supervisory entity) or creditors. Please also see Title 7 - Crimes, Penalties and Rehabilitation. Again, the Civil Code may also be relevant.

ADGM

In the ADGM, directors and officers (current and former) (and in some cases shadow directors) may be subject to liability under the ADGM Insolvency Regulations, particularly sections 244 to 252. Claims may relate to wrongful trading, fraudulent trading, fraud in anticipation of winding up, falsification of company books, material omissions from the Statement of Affairs, and false representations to creditors. Depending on the type of claim, claims may be pursued by an office holder, the company (with leave of the ADGM Court), the Registrar, a creditor, a contributory or a victim of the transaction. Specific claims may also be brought by an office holder under sections 257 and 258 for transactions at an undervalue or preferences. In addition to civil liability, fines may be imposed where directors are found to have contravened their statutory duties. The company, shareholders by way of a derivative action, creditors, liquidators, administrators or the Registrar can pursue the claim. A liquidator or administrator may assign a right of action arising under or by virtue of sections 251, 252, 257 or 258 of the ADGM Insolvency Regulations.

An ADGM Court judgment dated 8 July 2024 in NMC Healthcare Limited & Others v Shetty & Others ([2024] ADGMCFI 0007) confirmed that fraudulent and wrongful trading claims can be brought against directors before the ADGM Courts for conduct predating the insolvent company becoming an ADGM one (i.e. being redomiciled into the ADGM), and for conduct predating the enactment of the ADGM Insolvency Regulations.

DIFC

In the DIFC, directors or shadow directors may be subject to liability under the DIFC Insolvency Law, in particular claims may relate to falsification of books, fraud in anticipation of winding up, material omissions in financial disclosures, false representations, wrongful trading, and misconduct during the winding-up process (Articles 107 to 114). Article 115 permits claims by any aggrieved party, including creditors, shareholders, administrators, liquidators, or persons liable to contribute to company assets. Specific claims may also be brought by an office holder under Articles 131 and 132 for transactions at an undervalue or preferences. DIFC law permits broad remedies, including orders for compensation or contribution to the company’s assets by directors.

Across all three jurisdictions

Directors may also face criminal prosecution under the Penal Code. Directors and officers may be found criminally liable where breaches of duty involve criminal offences such as fraud (Penal Code Title 8, Chapter 2), embezzlement, breach of trust (Title 8, Chapter 3), concealment of the proceeds of crime (Title 8, Chapter 4), breach of confidentiality (Articles 432–434) or violations relating to public safety or workplace health (Title 4, Chapter 1).

5.3 Who can pursue the claims?

See Question 5.2, above.

5.4 Do directors have, at any time, a strict obligation to file for insolvency and, if so, when does that arise?

UAE

Pursuant to Article 240 of the Bankruptcy Law, directors/managers are unable to submit an application to open any of the procedures under the Bankruptcy Law without general assembly/majority partner/owner approval.

ADGM/DIFC

Neither the ADGM Insolvency Regulations nor the DIFC Insolvency Law contain any express provisions obliging directors to wind up an insolvent company. However, directors must be mindful of their duty to act in the best interests of the company and its creditors, and of the risk of engaging in wrongful trading. The duty to act in the best interests of creditors is engaged when directors know or ought to know that either the company is insolvent or bordering on insolvency or that an insolvent administration or liquidation is probable.

5.5 Can directors and managers be found liable for the increase in sums owed to creditors after a company becomes insolvent?

UAE

Pursuant to Article 246 of the Bankruptcy Law, directors, managers, or “any person responsible for the actual management of the company” may be ordered to pay an amount proportionate to the error attributed to them.

ADGM

Based on the English common law position, directors can be found liable for the increase in sums owed to creditors if they are found liable for wrongful trading or have been found to have breached their duty to act in the best interest of creditors once that duty has been engaged. This is a liability owed to the company and not directly to creditors.

DIFC

It is likely that directors can be found liable for the increase in sums owed to creditors if they are found liable for wrongful trading or have been found to have breached their duty to act in the best interest of creditors once that duty has been engaged. It is likely that this is a liability owed to the company and not directly to creditors. At the time of writing, the authors are aware of at least one instance where the DIFC Court considered the English case law position as regards the content and engagement of directors’ duties to creditors.

5.6 In what other circumstances can directors and managers be found liable directly to creditors of the company?

UAE

A civil claim for loss and damage caused by a company’s directors or managers may be available to affected parties under, for example, Article 282 of the Civil Code.

ADGM

Directors can be found directly liable to a “victim of the transaction” (which may include a creditor of the company) under section 257(4)–(6) of the ADGM Insolvency Regulations, for entering into transactions at an undervalue with the company for the purpose of putting assets beyond the reach of a creditor, or otherwise prejudicing the interest of such a creditor.

DIFC

Pursuant to Article 115 of the DIFC Insolvency Law, the DIFC Court may order certain remedies on the application of “any aggrieved person”, which includes a creditor.

6.1 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

UAE

Under Article 89(2) of the Bankruptcy Law, as part of restructuring proceedings, the trustee can request the debtor, the creditors or the Bankruptcy Administration to provide them with any information in their possession regarding the debtor’s debts, business or assets. The trustee is further empowered by Article 97(1) to request data in relation to the debtor’s assets or business from any person holding such information.

ADGM

Office holders have extensive powers under the ADGM Insolvency Regulations to obtain the property and find out information about the property and affairs of the debtor both from current and former office holders and employees of the debtor as well as from third parties (sections 254–256 of the ADGM Insolvency Regulations).

DIFC

Office holders have extensive powers under the DIFC Insolvency Law to obtain both the property and information about the property and affairs of the debtor both from current and former office holders and employees of the debtor as well as from third parties (Articles 128–230 of the DIFC Insolvency Law).

6.2 How is that information obtained in practice?

All jurisdictions

The information is obtained by corresponding with the relevant parties, relying on the trustee/liquidator’s powers or via a court process.

6.3 Can the court assist in obtaining that information and how does that work in practice?

UAE

If an individual refuses to provide the trustee with the required information, the trustee can escalate the matter to the Bankruptcy Court, which, upon determining the importance of the information, can order its submission to the trustee.

ADGM/DIFC

The ADGM or DIFC courts can assist in obtaining information related to the debtor, including by way of issuing orders compelling the provision of information, examination orders or third-party disclosure orders. Note that, in practice, third parties situated outside the ADGM or DIFC (in onshore UAE) may require that the ADGM/DIFC Court Order is enforced via the relevant onshore court.

7.1 Is the UNCITRAL Model Law on Cross-Border Insolvency adopted?

UAE

The UNCITRAL Model Law on Cross-Border Insolvency is not adopted, however, this does not mean that recognition of foreign insolvency proceedings is not possible.

ADGM

The UNCITRAL Model Law on Cross-Border Insolvency is incorporated (with such modifications required for application in the ADGM) into the ADGM Insolvency Regulations by way of Part 6, Chapter 2 and Schedule 10.

DIFC

The UNCITRAL Model Law on Cross-Border Insolvency is incorporated (with certain modifications for application in the DIFC) into the DIFC Insolvency Law by way of Article 117(3) and Schedule 4.

7.2 Is it possible to recognise office holders from other jurisdictions?

UAE

Foreign insolvency procedures/office holders may be recognised by the UAE courts, however at the time of writing, there are extremely limited examples of this.

ADGM

Recognition of a foreign office holder is implied pursuant to recognition of a “foreign proceeding” (as defined at Schedule 10 to the ADGM Insolvency Regulations) pursuant to Article 15 of Schedule 10.

DIFC

Recognition of a foreign office holder is implied pursuant to recognition of a “foreign proceeding” (as defined at Schedule 4 to the DIFC Insolvency Law) pursuant to Article 15 of Schedule 4.

7.3 What is the process and what are the conditions for recognition?

UAE

The execution of foreign judgments and orders is addressed at Article 222 of UAE Federal Decree-Law No. 42 of 2022 on the promulgation of the Civil Procedure Law. We anticipate that the Bankruptcy Court would consider this article in respect of an application for enforcement of an order appointing a foreign office holder. Article 222 requires that:

• the UAE courts are not exclusively competent in the relevant dispute and that the foreign court is competent;
• the judgment/order was delivered by a court in accordance with the law of the country in which it was issued and duly ratified;
• the litigants were summoned and duly represented;
• the judgment/order is final (i.e. no longer subject to appeal); and
• the judgment/order does not conflict with any judgments of the UAE courts or contain anything contrary to public order/morals.

Further, the judgment/order must be final, translated into Arabic, and legalised and attested for use in the UAE. In practice, the UAE courts also require evidence of reciprocity in terms of the foreign court enforcing UAE courts’ judgments. There is one bankruptcy-specific case that we are aware of where the English Court recognised insolvency proceedings in Abu Dhabi (Re Almuhairi & Anor [2024] EWHC 535 (Ch)).

ADGM

The conditions for recognition are prescribed by Articles 17(1) and (2) of Schedule 10, which provide that the “foreign proceeding” and the “foreign representative” must be considered by the ADGM Court to be as such in accordance with the defined terms prescribed by Article 2 of Schedule 10, and that the application must be accompanied by the documents identified at Articles 15(2) and (3) of Schedule 10. Recognition is subject to the overriding provisions set out at section 274 and, pursuant to Article 6 of Schedule 10, must not be manifestly contrary to the public policy of the ADGM. Pursuant to Article 9, a foreign representative may apply directly to the ADGM Court for recognition. Such application should be made pursuant to the ADGM Courts, Civil Evidence, Judgments, Enforcement and Judicial Appointments Regulations 2015 and the ADGM Court Procedure Rules.

DIFC

The conditions for recognition are prescribed by Articles 17(1) and (2) of Schedule 4, which include that the “foreign proceeding” and the “foreign representative” must be considered by the DIFC Court to be as such in accordance with the defined terms prescribed by Article 2 of Schedule 4 and that the application must be accompanied by the documents identified at Articles 15(2) and (3) of Schedule 4. Recognition is restricted to “Foreign Companies” (as defined in the DIFC Companies Law) and must not be manifestly contrary to the public policy of the DIFC. A foreign representative may apply directly to the DIFC Court for recognition. Such application should be made by way of a Part 8 Claim pursuant to the Rules of the DIFC Courts and Dubai Law No. 2 of 2025 pertaining to the Dubai International Financial Centre Courts.

7.4 What information can be obtained by office holders in respect of a debtor’s property, information and affairs?

UAE

Once an enforcement order is obtained, an execution file can be opened before the relevant UAE execution court(s). This court, by the office holder’s request, can make investigative inquiries with various authorities to identify any domestic bank accounts, properties, vehicles and shares the debtor may hold.

ADGM

Article 21(1)(d) of Schedule 10 of the ADGM Insolvency Regulations provides that the ADGM Court may grant relief including “providing for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities.”

DIFC

Article 21(1)(d) of Schedule 4 of the DIFC Insolvency Law provides that the DIFC Court may grant relief including: “[p]roviding for the examination of witnesses, the taking of evidence or the delivery of information concerning the debtor’s assets, affairs, rights, obligations or liabilities ….” Pursuant to Article 23 of Schedule 4, upon recognition of a foreign proceeding, the foreign representative has standing to initiate any actions in accordance with Articles 128 to 137 of the DIFC Insolvency Law which include “[g]etting in the Company’s property” and “[i]nquiry into Company’s dealings.”

7.5 What steps can a foreign office holder take to recover assets belonging to the debtor?

UAE

Should the investigative inquiries by the execution court locate assets, these can be made subject to attachment orders and ultimately sold for the benefit of the execution applicant/other creditors who successfully join the execution file.

ADGM/DIFC

Pursuant to Articles 21(1)(e) and (2) of the UNCITRAL Schedule of the ADGM Insolvency Regulations or the DIFC Insolvency Law, a foreign representative can make an application to the relevant court for an order entrusting the administration/realisation/distribution of the debtor’s assets in the ADGM or DIFC (as the case may be) to the foreign representative.

7.6 Is a foreign office holder able to bring clawback claims or fraudulent transaction claims?

UAE

A foreign office holder may potentially be able to bring such claims.

ADGM

Pursuant to Article 23(1) of Schedule 10 of the ADGM Insolvency Regulations, upon recognition of a foreign proceeding, a foreign representative has standing to make an application to the ADGM Court for an order under or in connection with Chapter 3 (Voidable Transactions) of Part 4 (i.e. clawback claims, being transactions at an undervalue or preference claims). A foreign office holder may be able to bring claims for fraudulent transactions as part of said claim(s). Article 23(3) requires the ADGM Court’s permission for a foreign representative to pursue such claims whilst “a proceeding under these Regulations is taking place regarding the debtor.”

DIFC

Pursuant to Article 23(1) of Schedule 4 of the DIFC Insolvency Law, upon recognition of a foreign proceeding, a foreign representative has standing to initiate any actions in accordance with Articles 128 to 137 of the DIFC Insolvency Law, which includes clawback claims (i.e. transactions at an undervalue or preference claims). A foreign office holder may be able to bring claims for fraudulent transactions as part of said claim(s).

8.1 Can a foreign office holder take appointments?

UAE

Non-UAE nationals may take appointments on the basis discussed in Question 8.2, below.

ADGM

Non-UAE nationals may take appointments as office holders in the ADGM subject to being registered as an insolvency practitioner under Part 9 of the ADGM Insolvency Regulations and the ADGM Insolvency Regulations (Insolvency Practitioner) Rules 2022 (“IP Rules”).

DIFC

Non-UAE nationals may take appointments as office holders in the DIFC subject to being registered as an insolvency practitioner under Part 10 of the DIFC Insolvency Law and Regulation 7 of the DIFC Insolvency Regulations.

8.2 What are the conditions for becoming an office holder?

UAE

In the UAE, it is generally necessary for an office holder to be listed on either the Ministry of Finance’s Reorganisation Committee List (which is, at the time of writing, undergoing revision), or the relevant court’s expert list. Individuals not listed may also be appointed, subject to providing appropriate justification.

ADGM

The conditions are set out in the IP Rules. In summary, the office holder must be “in continued employment with, or a member, director or partner of, a firm, partnership or body corporate registered within or outside the ADGM capable of supporting the Insolvency Practitioner with the provision of Insolvency Practitioner Services”; be a member of a recognised professional body (defined therein) or be able to explain why they are not a member of any such body; and must have professional indemnity insurance.

DIFC

Part 10 of the DIFC Insolvency Law and section 7 of the DIFC Insolvency Regulations set out the conditions, which include being a member of a recognised professional body, having professional indemnity insurance, and in the case of a liquidator, an acknowledgement that the insolvency practitioner will accept any appointment made by the DIFC Court as a liquidator.

8.3 What are the main rules of professional conduct?

UAE

The Bankruptcy Law (at Chapter 3 of the Preliminary Title) outlines the trustee’s powers and obligations, lists those not permitted to take appointments, mandates that trustees are obliged to carry out procedures promptly and ensure that they take all measures that provide protection of the interests of the debtor and creditors.

ADGM

Various “principles” are set out at Part 4 of the IP Rules, including integrity, due skill, care and diligence, confidentiality, transparency, and conflict of interest.

DIFC

The DIFC does not have a framework which sets out rules of office holder professional conduct. However, Article 125 of the DIFC Insolvency Law contains certain obligations of disclosure.