The story of the bounced check is common at present. Given increasing economic competition, and an evolving landscape where businessmen are free to move capital in harsh times, check cases can cause a halt to many business activities immediately. For example, indebted businessmen or women may simply choose to abscond, as is common. Further, investors may decide to put their funds elsewhere if they don’t feel secure in the local market, when there aren’t procedures in place to cater or protect the debtor in case of insolvency.

What are the best legal ways to solve the financial obstacles of any debtor whether an individual or company? Is it advisable to start the bankruptcy or liquidation procedures?

In this Article, we shed light on the Bankruptcy Procedures only and we will summarize the liquidation procedures in the upcoming articles.


Bankruptcy laws are now making waves in the press and are still a relatively new concept in the GCC. The UAE passed a comprehensive Bankruptcy law in 2016, and Bankruptcy Laws are also in the pipeline in some Arab countries.

In the year 2016, a new era of Bankruptcy Regulation was ushered in by the Government of the United Arab Emirates. The UAE passed Federal Law No. 9 of 2016 on Bankruptcy (the “Bankruptcy Law”), which lays out comprehensive procedures with respect to Bankruptcy. The law applies to insolvent companies which are unable to pay debts for at least 30 consecutive days. It also applies to insolvent individuals in some cases. Creditors can also petition the court to initiate bankruptcy procedures where a debt of greater than AED 100,000 remains unpaid for 30 consecutive days.

The law outlines a complex procedure for determining and proving bankruptcy, and provisions the appointment of a “Trustee” who executes and administrates the bankruptcy proceedings. Insolvency, under the bankruptcy law, is determined via a balance sheet test, which demonstrates that the company is unable to meet liabilities with the assets it maintains. The Trustee coordinates the liquidation of assets, and the equitable distribution of the proceeds to secured and unsecured creditors. The Trustee is also responsible for publishing the outcome of the Bankruptcy Court proceedings in English and Arabic, in the local press. After this publication, creditors have 10 days thereafter to file claims.

The law also has provisions which allow the court to determine whether a “debt re-structuring” process is possible, whereby the company may attain profitability if debts are re-organized. Disputed amounts can also be kept in the court treasury until such matters are finally decided (i.e. where the debtor may have counter claims).

In addition, the Bankruptcy law does have provisions for determining unsecured vs. secured debt (i.e. creditors who obtain a security interest from the debtor), and ranking the priority of creditors.


As the law demands a great deal of financial paperwork, the process is quite a lengthy one, involving the debtors submissions, financial documents, predictions with respect to business prospects, and cash flow forecasts. The submission, analysis and review of these documents can take up to a year or more. Given that it has only been about 3 years since the initial launch of the new bankruptcy law, the waters are still untested with respect to the impact of this law on the wider economy.

How does it impact the Treatment of Bounced Checks and other severe penalties in place for insolvent companies?

The word insolvency in the Gulf may trigger mental associations involving prisons and jail, crime, travel bans and court cases. However, the Bankruptcy law can allow for the suspension of criminal proceedings with respect to bounced checks, once the process is initiated. Therefore, for debt ridden businessmen who may feel that there is no way out, this law offers a lifeline and could be a great relief for many.

It should be clear, however, that the law does not prevent the “piercing of the corporate veil” for directors and shareholders of companies who may be implicated in fraudulent activities, via the use of their companies. For example, individuals who use the corporate identity of their company to drum up debt, and then hide the funds in different places, companies or even countries, would still be liable for embezzlement and fraud.

There are also individuals who may use their

corporate identity to take an unreasonable level of business risk and debt, while overextending their personal and business spending dramatically. Such individuals, could be found to have committed “mismanagement”, while breaching their corporate duties under the commercial companies’ law, for example.

If you’re in Debt, and you wish to have benefits from the Bankruptcy Law? What are the solutions?

So, you want to make use of the new bankruptcy law, how do you do it? First, you have to make an application to the court with all the required documents and submissions, in the format stipulated under the law and required by the insolvency court. This will obviously take a great deal of time, and will require thoroughness on the part of the debtor. The documents will be reviewed, and then a trustee shall be appointed.

In light of the high level of expertise needed in the above procedure, assistance of a Legal Expert is highly recommended so as to achieve the most out of the Process by avoiding unnecessary delays due to incorrect or incomplete submissions.


We are a team of Experts specializing in Law and working with Certified Financial Experts to provide professional help in this process and to evaluate your financial position or the financial position of your company.

Our Legal Experts then provide you with the best legal advice as per the applicable laws, so that you can proceed with your Bankruptcy or Liquidation Procedures and achieve the most out of it!

WE ARE AFFORDABLE !!! – We also provide attractive packages and easy payment plans to suit each Client.

(Author’s note: The Bankruptcy Law does not apply to the Dubai International Financial Centre and Abu Dhabi Global Market as these financial free zones have internal legislation in place regarding bankruptcy and insolvency).

For more information and any queries kindly contact us:



Open chat