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Notable Changes to Insolvency Legislation in the GCC

The interesting times of the last 14 months were preceded by the interesting times of the financial crisis of 2008/2009. The reverberations of that financial crisis had a profound effect upon governments’ presumptions as to the financial stability of economies generally but also the financial stability of sectors such as financial services.

Previous presumptions as to the correct insolvency frameworks for countries were also challenged and the concept of corporate failure necessarily resulting in liquidation was undermined. The concept of ‘too big to fail’ came to the fore and lead to debate over whether any business should be permitted to fail when the knock-on effect of such failures could be so negatively impactful on other aspects of an economy.

Those reverberations and the consequential shift in thinking in terms of insolvency regimes away from a punishment approach and towards a restructuring approach were catalysts for the introduction of the laws that we address below.

Prior to the commencement of the Covid-19 pandemic Gulf nations had already recognised the need to move away from their historic reliance on oil production and had sought to upgrade the infrastructure supporting their economies in order to attract inward foreign investment. A key part of the move to becoming a more attractive home for investment was the necessity for modern, recognisable insolvency regimes, which contain modern restructuring tools for businesses facing distress.

As an example, the UAE’s Vision 2021 states the UAE’s aim to become “the economic, touristic and commercial capital for more than two billion people”. In seeking to foster and promote an environment that encourages entrepreneurialism and attracts inward investment, the UAE recognised the need to strengthen its regulatory framework in order to provide modern, flexible procedures for restructuring under-performing businesses or for providing certainty of outcome in the event of insolvency.

Similarly, the second pillar of Saudi Arabia’s ambitious Vision 2030 programme is to become a global investment powerhouse whilst becoming less reliant on oil revenues.

Bahrain has also stated its own, similar ambitions in its own Vision 2030 programme, which shares common goals and themes with its closest neighbour.

In pursuing those ambitions, the GCC states of the UAE, Saudi Arabia and Bahrain have all implemented new laws in recent years to facilitate effective restructurings for debtors in distressed situations in those jurisdictions. This article will summarize key parts of the insolvency regimes in the UAE, Saudi Arabia and Bahrain, and how these laws change the landscape for restructuring.

United Arab Emirates

The UAE operates a dual jurisdiction system colloquially known as the onshore/offshore system.

The onshore system consists of UAE federal law and the individual laws of the seven emirates that make up the UAE. These laws are civil law based.

The offshore system applies to the free zone areas set up in the UAE, including in particular the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Markets (ADGM) both of which operate their own common law-based legal systems and courts. Even though federal insolvency legislation is not applicable to the DIFC and ADGM, it does apply to all other non-financial free zone areas.

Onshore Insolvency Legislation

In 2016 the UAE introduced widespread reforms to its restructuring procedures through the introduction of the UAE Bankruptcy Law No. 9 of 2016 (which was subsequently amended by Law No. 21 of 2020 (Bankruptcy Law)). This came into force on 29 December 2016 and applies to onshore UAE corporate entities (including financial institutions) as well as free zone companies that are not subject to their own bankruptcy rules.

In terms of individual insolvency, Law No. 19 of 2019 came into force in January 2020 (the “Individual Insolvency Law”). The Individual Insolvency Law differs from the Bankruptcy Law in that it deals with individual insolvency rather than corporate entities. It marked a profound shift in the UAE’s approach to individual insolvency as it effectively decriminalised personal insolvency.

The Individual Insolvency Law only applies to natural persons and the estates of deceased persons. It does not apply to merchants, traders, commercial companies and similar persons, all of whom fall under the scope of the Bankruptcy Law

Procedures under the Individual Insolvency Law

The Individual Insolvency Law addresses two key routes and procedures for individuals facing financial difficulties. The first route relates to an individual seeking court assistance to settle debts. The second route relates to liquidation proceedings as a result of the inability of an individual to pay their debts for an extended period of time.

Court assistance route:

Under the Individual Insolvency Law, a debtor facing financial difficulties may apply to the court for assistance and guidance in the settlement of their financial commitments through one or more court-appointed experts through a court supervised binding settlement plan.

If the court accepts a debtor’s request under this route and appoints an expert, this puts in place an effective moratorium on actions by creditors applying to seize any of the debtor’s assets, unless such assets are the subject of a pledge or security. This process also creates a moratorium on a creditor applying to the court for an order commencing bankruptcy/liquidation proceedings.

The court will terminate the settlement proceedings or reject a request made by a debtor under this route if it determines that:

  1. The debtor has tried to conceal or dissipate any part of their assets;
  2. The debtor has submitted false statements regarding their liabilities, rights or assets; or
  3. The debtor does not settle a due debt for a period exceeding 50 consecutive business days.

The proposed settlement plan must be voted on by the creditors approved by the court pursuant to certain quorum and voting criteria. The settlement plan must then be approved by the court.

The timeline for the implementation of the settlement plan should not exceed three years from the date of the court’s approval of the settlement plan, albeit this timeline may be extended with the approval of creditors holding two thirds of the as yet un-settled debts at the time of the extension.

The Individual Insolvency Law allows the court appointed expert to request a secured creditor to replace its security with another security if this achieves the interests of the settlement plan. If the secured creditor rejects that request, the expert may then submit such request to the court. The court has the discretion to approve such replacement if it achieves the interests of the settlement plan and does not harm the interests of the secured creditor.

Where the court decides to terminate the settlement proceedings or annul the settlement plan, its decision will immediately initiate liquidation proceedings under the Individual Insolvency Law.

Liquidation route:

The second process is liquidation and is used in circumstances where a settlement with creditors is not possible.

When a debtor fails to pay any of their due debts for a period exceeding 50 consecutive business days as a result of their inability to settle such debts, they can apply to the court to commence liquidation proceedings for the liquidation of their assets.

Such application may also be made by a creditor or a group of creditors where the total amount of their debts is not less than AED 200,000, provided that the debtor has been formally notified to pay the debt and they have failed to do so within 50 business days from the date of notification.

The court will appoint a trustee to carry out the liquidation proceedings, handle the debtor’s assets and pay their liabilities.

All creditors are then invited to make submissions of their claims to the trustee within 20 business days from the date of publishing in the newspapers the court’s decision to commence liquidation proceedings.

The court, upon the request of the debtor and the recommendation of the trustee, may decide to grant the debtor a grace period of not more than three months (this may be extended for a similar period) before the liquidation of their assets to try to reach an agreement with their creditors.

Pension and social support, along with necessary living expenses determined by the court, will be exempted from the liquidation proceedings. The court may also permit the debtor, upon their request or the request of the trustee, to maintain certain amounts necessary for the debtor to carry on their business or profession.

The Individual Insolvency Law also permits the court, as part of the liquidation proceedings, to issue a decision to sell a residence owned by the insolvent debtor, subject to certain conditions.

The Individual Insolvency Law identifies the ranking of creditors in the individual liquidation process as follows:

  1. Secured creditors (in respect of their secured assets);
  2. Court, expert and trustee fees;
  3. Expenses and fees disbursed by the order of the court to preserve the debtor’s assets;
  4. Debtor’s employees and servants entitlements;
  5. Family alimony as determined by the competent court;
  6. Amounts due to governmental bodies; and
  7. Unsecured creditors.

Corporate Insolvency under the Bankruptcy Law

The Bankruptcy Law first introduced the concept of a ‘preventive composition’ in Law No. 9 of 2016 as an alternative to liquidation and to enable debtors to restructure their affairs on a consensual basis. Additionally, many (but not all) of the criminal sanctions for individuals involved with companies that did not pay their debts were removed or relaxed.

The UAE followed the lead of the US by rendering void any provision in a contract that defines the debtor’s entry into a preventive composition as an event of default for which a counterparty could terminate (known as ipso facto clauses).

Preventive composition (and bankruptcy) proceedings include a moratorium on claims, which subsists for the duration of the restructuring, save where the court orders otherwise.

The preventive composition procedure can be pursued by a debtor who, whilst not technically insolvent (on a balance sheet basis), has defaulted on the payment of its debts, provided that such default has not been subsisting for more than 30 business days. It cannot be imposed on the debtor by its creditors.

Filing an Application for Preventive Composition

When filing the application for preventive composition, the debtor must also file cash flow projections and a proposed restructuring plan. The court will then appoint a trustee to supervise the process. Working with the debtor, the trustee will devise a settlement plan to be put to creditors.

As with an English company voluntary arrangement, one of the perceived limitations of a plan for preventive composition is that the plan may not seek to compromise the rights of secured creditors without their express consent – secured creditors will not be able to vote on the plan unless they relinquish all of their security.

In order for the scheme to be approved, unsecured creditors (whose debts are admitted) must vote in favour of the scheme both by a majority in number, and by two-thirds in value of total ordinary admitted debts. The vote is binding on non-consenting unsecured creditors.

In contrast to preventive composition, bankruptcy proceedings can be instigated by creditors owed debts of at least AED 100,000 (c. US$27,000), by the debtor, or by the Office of the Public Prosecutor. It should be noted that under the Bankruptcy Law, a bankruptcy proceeding will no longer lead to an inevitable liquidation of the debtor’s assets and the law’s primary aim is to facilitate the ongoing trade of the debtor as a going concern through the restructuring of its debts.

Once the bankruptcy petition is approved, the court will appoint a trustee. Based on his/her assessment of the debtor’s affairs (including detailed investigations into the asset and liability position), the trustee will report on whether a restructuring might be possible, or whether the debtor should be declared bankrupt instead. In the former case, the trustee will devise a plan and it will be put to creditors in a similar way to the preventive composition procedures. In the latter case, the debtor’s assets are liquidated and distributed amongst creditors.

Amendments to the Bankruptcy Law made by Law No. 21 of 2020 (the “Amendments”)

The catalyst for the Amendments was the Covid-19 pandemic and its very serious impact on a number of business sectors in the UAE. The Amendments modify and supplement the 2016 Law. Specifically, they;

  • (i) Extend the moratorium or ‘stay’ on judicial proceedings where a commencement order has been made against the debtor under either (i) protective composition proceedings; or (ii) restructuring-in-bankruptcy proceedings (subject, in either case, to the overriding right of creditors to make application to the court to lift the stay);
  • (ii) Clarify the position of preferential creditors where distributions are made under formal bankruptcy procedures; and
  • (iii) Introduce a new procedure in circumstances where the debtor’s obligation to file for bankruptcy under Part 4 of the 2016 Law (restructuring in bankruptcy or formal bankruptcy) is deferred by reason of an ‘Emergency Financial Crisis’.

The Amendments introduce a new chapter (Chapter 15) to Part Four of the 2016 version of the Bankruptcy Law entitled “Bankruptcy Proceedings during the Emergency Financial Crisis”.

An Emergency Financial Crisis is defined as:

“A public situation that affects trade or investment in the state, such as the outbreak of epidemic, natural or environmental disaster, war, or other which case and duration shall be determined by a cabinet resolution, based on the Minister’s proposal”.

Offshore Insolvency Legislation - DIFC

From 13 June 2019, DIFC Insolvency Law, Law No. 1 of 2019 (and its supporting regulations) has governed companies operating in the DIFC, repealing and replacing DIFC Law No. 3 of 2009. From a restructuring perspective, the DIFC has looked to identify restructuring best practice across the globe and then improve upon it. The changes introduce English style administration, receiverships and voluntary arrangements (with the option to apply for a stay of proceedings akin to Article 362, Chapter 11 US Code) but in each case modified alongside;

  • (a) A process for rehabilitation of debtors, akin to a US Chapter 11 procedure (for example administration can only be entered via a proposed rehabilitation plan); and
  • (b) A comprehensive framework for the recognition of foreign insolvency proceedings by the DIFC Courts.

The DIFC Insolvency Law also prescribes three types of liquidation in addition to schemes of arrangement under the DIFC Companies Act. These multiple options means that there are numerous tools for a business’s management and/or appointed insolvency professionals to use.

The 2019 changes go further than merely the introduction of Chapter 11 inspired rehabilitation plans and do more to protect creditors from incompetent or untrustworthy company management. For example:

  • An insolvency practitioner must sign off on a rehabilitation plan before it goes to creditors;
  • Creditors can replace management with an administrator;
  • The introduction of an English style wrongful trading offence; and
  • An enhanced ability to investigate and challenge pre insolvency transactions and conduct.

However, the primary change in the 2019 law is the introduction and adoption of a rehabilitation or reorganization chapter (Part 3) which appears to be heavily influenced by US Chapter 11 procedures.


One major benefit of rehabilitation is the automatic moratorium that comes into effect automatically upon the filing of the rehabilitation plan with the court. The effect is global. The moratorium applies to all creditors, secured unsecured and applies without their consent. The period of the automatic moratorium is 120 days (this can be extended or shortened by the court). It specifically prohibits most actions by creditors without the permission of the court such as:

  • No winding up petition may be presented;
  • No landlord to whom rent is payable may exercise any right of forfeiture in relation to premises let to the company;
  • No other steps may be taken to enforce any security interest in the company's property, or to repossess goods in the company's possession under any hire-purchase agreement;
  • No other proceedings and no execution or other legal process may be commenced or continued, and no distress may be levied, against the company or its property.

Another benefit of rehabilitation is the ability to assume, assign or reject executory contracts and obtain priority funding. During the moratorium period but before the sanctioning of the rehabilitation plan, the company may assume, assign, or reject an executory contract or unexpired lease. This allows the debtor to retain valuable contracts while discarding onerous or unfavourable obligations.

In terms of priority funding it is often the case that reorganisations require additional capital to be injected but corporate debtors in need of reorganization usually have few unencumbered assets to offer as security.

Offshore Insolvency Legislation - ADGM

The insolvency regime in the ADGM is governed by the Financial Services and Markets Regulations 2015 but these have been regularly amended, most recently by the Companies Regulations 2020 (the “Amendments”). The Amendments brought in similar provisions to those for onshore and DIFC companies, particularly in terms of priority funding.

The types of procedures set out in the regulations include:

  • Administrative receivership;
  • Receivership;
  • Administration; and
  • The so called deeds of company arrangement.

The appointment of liquidators and provisional liquidators is also contemplated by the Regulations.

In addition to the various forms of insolvency processes, the Regulations include provisions intended to prevent the directors of companies from carrying out various forms of disposition, which may be detrimental to creditors, including but not limited to wrongful and fraudulent trading. These are substantially based on English law provisions and are largely mirrored in the applicable DIFC regulations.

Insolvency Legislation- Bahrain

Like many other GCC countries, Bahrain has made its pitch to become a principal player in investment, banking and commerce. Its Economic Vision 2030 focuses on shaping the government’s vision for Bahrain’s society and the economy, based around three guiding principles: sustainability, fairness, and competitiveness. From a restructuring perspective, the clear pre-requisites for a successful and competitive economy are having a clear and comprehensive system for restructuring distressed businesses that provides certainty of process and outcome, and an effective court system.

On 30 May 2018 Bahrain adopted its new Reorganisation and Bankruptcy Law (Bahrain Law No. 22/2018 or the “New Bahrain Bankruptcy Law”), with the objective of maximising the value of insolvent estates, creating a safety net for fledgling businesses and promoting corporate rescue and reorganisation over or instead of liquidation. The New Bahrain Bankruptcy Law replaced the insolvency provisions contained in the previous Bankruptcy and Composition Law No. 11 of 1987 and the Commercial Companies Law No. 21 of 2001.

Interestingly, the New Bahrain Bankruptcy Law does not apply to banking and other financial institutions regulated by the Central Bank of Bahrain. The restructuring of such institutions remains under the purview of the Central Bank of Bahrain and Financial Institutions Law 2006 (“CBBFIL”). The CBBFIL does not provide any mechanism for any form of debtor in possession or preventive restructuring of its licensed institutions. Insolvency procedures under the CBBFIL are limited to administration, where the Central Bank will act as administrator (with the ability to appoint an external firm or individual as its external administrator, who is deemed to act as agent of the Central Bank), and liquidation upon the petition of the debtor, a creditor or the Central Bank as administrator.

It remains to be seen whether the law relating to financial institutions will be brought into line with the new law applicable to other companies and traders, or whether those Bahraini banking institutions seeking to restructure without intervention from the Central Bank will continue to have to avail themselves of foreign procedures, just as Bahraini bank, Arcapita Bank B.S.C. did in 2012, when it filed for Chapter 11 in 2012 in the New York Court (Southern District Case No. 12-11076 (SHL)).

The new Bahrain Bankruptcy Law introduces a purpose-built tool for commercial companies and merchants (with respect to their trade liabilities) that borrows restructuring concepts from the U.S. Bankruptcy Code’s Chapter 11 and the U.K.’s pre-packaged insolvency procedures. It includes twin-track processes for debt restructuring or liquidation.

Some important highlights include:

  • The ability to cram down across classes where the court is satisfied that the dissenting class(es) will be better off under the plan, than in a liquidation scenario;
  • The ability to sell assets out of the bankrupt estate free of liens;
  • A moratorium/stay on enforcement proceedings;
  • The ability to obtain debtor in possession financing; and
  • The right of the debtor to continue to manage its business in the ordinary course.

The debtor also has the option to submit a pre-packaged reorganisation plan for ratification by the court, substantially similar to the English law pre-pack procedure, although in the UK, the onus is (usually) on the insolvency professional selling the business to satisfy him/herself that the sale will achieve the stated purpose of the administration process, whereas in Bahrain, the specific sanction of the Bahrain Civil High Court is required.

In-Court Reorganisation

Similarly to the UK (in the case of administration), the debtor must be deemed to be insolvent (or facing the risk of insolvency) before they can avail themselves of the New Bahrain Bankruptcy Law. An in-court reorganisation can be commenced either by the debtor or by one or more of its creditors where:

  • (i) The debtor has failed to pay its debts for a period of 30 days from             their due date or will become incapable of paying its financial                   liabilities as they fall due; and/or
  • (ii) The value of the debtor’s liabilities exceeds the value of its assets.

Within five days of the case being filed, the court will issue a provisional resolution to commence bankruptcy procedures (Article 7). The court can appoint a provisional bankruptcy trustee (Article 34) if assets are at risk or if other factors necessitate an urgent intervention.

The court will form a creditors’ committee and appoint a debt restructuring trustee (Article 96) (sometimes referred to as an independent reorganisation trustee) (the “Trustee”). As the debtor’s supervisor, the Trustee is responsible for preparing and submitting a reorganisation plan. That plan must be submitted within three months of the commencement of the bankruptcy proceedings and must be accompanied by a ‘Disclosure Statement’ (prepared by the Trustee), setting out the current financial position of the debtor.

During that three month period, a moratorium on claims against the debtor applies, which is activated upon the court approving the opening of the bankruptcy case. The court has the power to extend the duration of the moratorium, either at the request of the Trustee, or where it is satisfied that such an extension is essential for the purpose of maximising the estate’s value. A secured creditor may seek to lift the moratorium in limited cases, for example where the value of their security is at risk or where the Trustee has not provided that secured creditor with “adequate protection” (a term borrowed from US Chapter 11) of its position.

The creditors’ committee, or a group of creditors holding claims of not less than one third of the debtor’s liabilities, can submit their own restructuring plan if six months have passed since the opening of the bankruptcy case and the Trustee is yet to finalise a plan.

Voting on the plan takes place 30 days from its submission to the court and then 20 days from the date of any amendments that are proposed to it. A class of creditors that will be paid in full under the plan is deemed to have accepted the plan. In all other cases, two thirds of each class of creditors who vote on the plan must vote in favour of the plan. The court does have the power to overrule the decisions of dissenting classes of creditors where it is satisfied that the dissenting class of creditors will be better off under the plan than in a liquidation.

The approved plan is then submitted to the court and once ratified, becomes binding on all creditors, wherever located and irrespective of whether they voted or not. Ratification of the plan by the court discharges and releases the debtor from all debts and liabilities covered by the plan.

To date, there are no reports of a reorganisation case having been recognised in any foreign jurisdictions, although the English, New York and Cayman Courts have all been willing to readily recognise the administration cases of two Bahraini banks under the CBBFIL (Awal Bank B.S.C. 10-15518, US Bankruptcy Court, Southern District of New York and The International Banking Corporation B.S.C. (439 B.R. 614 (Bankr. S.D.N.Y. 2010)), notwithstanding the CBBFIL provides for extremely limited creditor involvement. One would fully expect the courts of foreign jurisdictions to look favourably upon a request for recognition for a reorganisation proceeding under the New Bahrain Bankruptcy Law, particularly by those jurisdictions that have adopted UNCITRAL’s Model Law on Cross Border Insolvency Proceedings.

Insolvency Legislation- Saudi Arabia

Historically, Saudi’s restructuring laws were essentially limited to liquidation or requiring the injection of capital in order to return a company to solvency. Faced with claims that exceed assets, a company’s only route to avoid bankruptcy was to seek to agree an out of court settlement with the buy-in of 100% of its creditor base, which predominantly comprised banks. Unsurprisingly, this rarely occurred.

To facilitate a more structured approach and to improve debtors’ chances of securing support for their restructuring plans Saudi Arabia’s Ministry of Commerce and Investment published a new set of investor-friendly rules and regulations in February 2018, including a new bankruptcy law that came into effect in August 2018 (the “Saudi Bankruptcy Law”) and which draws on large swathes of the US Chapter 11 procedure.

Similar to other jurisdictions, the Saudi Bankruptcy Law aims at providing bankrupt or insolvent debtors with an opportunity to reorganise and rescue their businesses, while also providing for a simplified liquidation process and a fairer distribution to creditors upon liquidation. The Saudi Bankruptcy Law introduces the formation of a specialist bankruptcy committee that reports to the Ministry of Commerce and Investment and is an independent administrative and financial legal body. The committee’s responsibilities include managing a bankruptcy register and coordinating the relevant liquidation and bankruptcy procedures.

There are now three processes: In addition to liquidation, Royal Decree No. M/50 introduced two new restructuring procedures for the restructuring and rescue of a debtor’s affairs. A debtor now has two options to reach an agreement with its creditors to settle its debts, both with the involvement of the court: in preventative settlement the debtor maintains the management of its business, while the alternative financial reorganisation procedure is run under the supervision of a bankruptcy trustee.

Preventive Composition or Settlement process

This is a voluntary court-supervised process that may only be commenced by the debtor. It leaves the debtor’s existing management in control of the debtor’s business. Upon submitting a preventative settlement request to the court, the court may impose a moratorium on creditor action. This procedure is available to debtors with expected as well as actual financial distress and also to debtors who are already bankrupt (but not to debtors who have been granted settlement within the previous 12 months). Qualifying debtors may submit a preventative settlement request to the court and the court will then determine a hearing date, which must occur within 40 days of the debtor submitting the request. The debtor is given 40 days to submit the plan for settlement. Assuming the court opens the preventative settlement process, the court will then set a date for creditors to vote on the proposals usually within a period not exceeding 40 days from the date of opening the proceedings. In order to pass, the settlement proposal must be approved by two thirds (in value) of creditors in each class of creditors, of whom at least 50% must be unconnected to the debtor.

The proposal is then ratified by the court and even if the creditors fail to vote on it, the court may still rule in its favour if it deems it appropriate. The debtor may request that the court suspend any claims or requests to execute on the debtor’s assets for a period not exceeding 180 days. In order to make such a request, however, it must be accompanied by a report prepared by a bankruptcy licensed trustee and the court will be unable to accept a request if the trustee’s report does not confirm that the majority of the concerned creditors are likely to approve the settlement proposal

Financial Reorganisation process

A debtor, competent authority or creditor may submit a request for reorganisation, and the court will then appoint a bankruptcy trustee and notify creditors. The trustee will assume responsibility for the management of the debtor’s business. A moratorium on creditors’ actions will apply upon the filing of the petition to request financial reorganisation.

Once appointed the trustee will prepare a proposal for financial reorganisation and file it with the court. The proposal shall include a description of the debtor’s financial situation and the effects of the economic situation upon it. The trustee must also give the court an indication of the likelihood of the creditors’ approval of the proposal. Once the proposal has been filed with the court, the court shall set a date upon which the proposal will be put before the creditors. As with the preventative settlement process, a proposal shall be approved by creditors whose claims represent two thirds of the value of the claims in the same class, including creditors whose claims represent more than half of the value of the claims of non-related parties (if any). The proposal is then ratified by the court and even if the creditors fail to vote on it, the court may still rule in its favour if it deems it appropriate. The registration of the petition to open the financial reorganisation proceeding results in a suspension of claims. The suspension period will remain in effect until the date on which the court either rejects or ratifies the petition, or the financial reorganisation proceeding terminates.


The Saudi Bankruptcy Law sets out new liquidation procedures and details the ranking of debt in the Kingdom of Saudi Arabia (with the basic ranking being: secured debts, certain priority debts (e.g., employee’s wages; continuing business expenses during liquidation process); unsecured debts and, unusually, last ranking - taxes), so that any proceeds obtained from a liquidation process will be distributed in accordance with a clear order of priority.

Before a debtor or creditor can seek an order for liquidation the following conditions need to be met: (i) the debt must have matured and be of a fixed amount; (ii) the debt must not be below the amount stipulated by the bankruptcy committee; and (iii) the creditor must prove that it has requested the debtor to pay its claim 28 days before the date of registration of the liquidation petition with the court.

The liquidation process is supervised by a court appointed trustee and is completed when the trustee applies to the court to terminate the liquidation proceeding. The trustee may only make such an application upon completion of: (i) the procedure for the sale of bankruptcy assets; (ii) the end of the legal proceedings to which the debtor is a party; and (iii) the final distribution to creditors.

The trustee must provide final accounts and financial reports with its petition and notify the creditors before filing the petition. An interested party may object to the trustee’s petition before the court within 14 days of its filing. Upon the registration of a liquidation proceeding or of the court’s judgment to open such proceedings, there is a period of suspension of all claims until the date of the court’s judgment dismissing the petition or terminating the proceeding. The court also has the ability (at the request of the relevant interested party) to suspend the time limit for suspension of specific claims for which an action has been taken prior to the suspension, if it is found to be in the interests both of the debtor and the majority of creditors.


The shift in thinking in the GCC has manifested itself in significant changes to insolvency regimes in the region. The fundamental shift away from liquidation as being the aim of such regimes is now embedded in many GCC insolvency regimes, with the three-tiered approach of:

  1. Consensual reorganisation (with or without court assistance); and
  2. The restructuring in bankruptcy or rehabilitation approach; and
  3. Liquidation as a last resort approach.

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