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Legal protection and legislative solutions for businesses distressed due to COVID-19
July 28, 2020

Dubai Economic Department (DED) hosted a dialogue under the name and theme ‘Protecting the rights of distressed businesses during COVID-19 under the new bankruptcy law.’ It was hosted by Khalid Mubasheri, CEO of the Governance & Legislation sector in Dubai Economy.

Mubasheri stressed that the bankruptcy law was initially issued to protect companies under natural conditions. However, in light of the spread of the pandemic as an exceptional circumstance, many companies were forced to restructure to avoid any negative impact, especially in regard to creditors, suppliers, and employees. This emphasizes the importance of the bankruptcy law in helping such companies through mechanisms stipulated by the law, whether by financial reorganization through a committee formed for this purpose or by resorting to a conciliatory bankruptcy reconciliation, and by restructuring the debtor’s money, with positive effects that are reflected on those establishments during these exceptional circumstances to enable them to continue.

‘UAE businesses distressed by debts of AED 100,000 or above as a result of the pandemic can benefit from the UAE bankruptcy law,’ said Mubasheri.

He pointed out that UAE businesses distressed due to the crisis can resort to legislative solutions to adjust their status, especially under the general provisions of UAE Federal Law (5) of 1985, which was amended by Federal Law No. (1) of 1987 on the Civil Transactions Law, by invoking the pandemic as either a case of force majeure or an exceptional circumstance. A distressed company must first prove that the failure came as a result of the COVID-19 pandemic before the provisions in the Civil Transactions Law regarding force majeure or exceptional circumstances can be used. It is also possible to take advantage of the provisions of the bankruptcy law by submitting an application to the Financial Reorganization Committee or the competent court to file a bankruptcy protection request.

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