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Sunday, June 19, 2011

Cashflow Crisis in UAE: Insolvency & Bankruptcy Insight - part 2

Current Procedure:

UAE Federal Law No. 18 of 1993 (the Commercial Transactions Code) contains the bankruptcy law. Upon declaration of a debtor as bankrupt and appointment of a trustee in bankruptcy, notice is given to all creditors to register their claims.

Local creditors are required to register their claims within 10 days of publication and creditors resident outside the UAE are required to register their claims within one month. The trustee in bankruptcy would verify the documents submitted by the creditors and prepare a schedule of debts and lodge the same with the court. A copy of the schedule along with a statement of the amounts that the trustee intends to accept as debt owed will be sent to every creditor and the bankrupt. The creditors may file objection to the amounts contained in the schedules. The judge supervising the bankrupt’s estate will decide on these objections and prepare a final schedule of debts with the amounts that have been accepted. The judge supervising the bankrupt’s estate will designate the manner in which the assets are to be sold. The sale proceeds will be deposited with the court cashier or in a bank account designated by the judge supervising the bankrupt’s estate. Fees and expenses incurred towards administration of the bankrupt’s estate will be deducted from the sale proceeds. Thereafter, the amounts due to preferred creditors will be paid and the remainder will be distributed to the unsecured creditors in proportion to debts due to them. 

Rajiv Shah
Head - Life and Pensions
Earnest Insurance Brokers

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