Protective Composition Against Bankruptcy in the UAE offers debtors a chance to deal with their financial difficulties. It gives them a grace period to reorganize their financial affairs according to a well-studied plan under judicial supervision, without having to enter liquidation procedures.

What is Protective Composition Against Bankruptcy in the UAE?

Protective composition against bankruptcy in the UAE is a legal procedure that takes place in cases of potential bankruptcy or financial distress. Through this process, the debtor seeks to reach a settlement with their creditors before reaching a state of full bankruptcy. Protective composition in the UAE involves creating a financial plan to reschedule debts and restructure the debtor’s financial situation. This gives the debtor a chance to continue their business or recover their financial position under judicial supervision without the need for full liquidation or declaring bankruptcy.

In UAE law, protective composition aims to help the debtor reach an agreement with creditors to settle debts according to a financial plan.

This plan is supervised by the competent court with the involvement of a composition trustee who helps prepare the necessary plan and ensures its fair implementation.

The protective composition procedure prevents the debtor from declaring bankruptcy and helps them maintain their commercial activity and business continuity, provided they fully execute the plan with the majority of creditors’ approval. Who is Entitled to Apply for Protective Composition Against Bankruptcy in the UAE?

In cases of financial distress for a trader, financial institution, or company, a request for protective composition can be filed with the bankruptcy administration to avoid full liquidation of the debtor’s assets. Article 192 of the UAE Federal Law, which regulates financial and bankruptcy provisions, addresses this.

The request for protective composition can be submitted by the debtor or a composition trustee appointed by the court.
The request is the first step in the composition process and must include several essential details that help the court fully study the situation and make appropriate decisions.

The request must include the terms of the debtor or the trustee regarding the method of debt settlement and financial reorganization.
It should also include a flexible repayment plan with a clear schedule to ensure financial obligations are met. A recent list of creditors and the exact amounts of their debts must also be attached to avoid any confusion.

Providing these documents greatly helps in assessing the debtor’s ability to meet their financial obligations and assists the court in determining the feasibility and practicality of the plan.

What are the Steps to Apply for Protective Composition Against Bankruptcy ?

UAE bankruptcy law is based on organizatio,  Articles 193 to 196 detail the legal procedures for requesting a protective composition, from submitting the application to the court to the final approval and implementation stage.

These steps include:

1. Submitting the Request to the Bankruptcy Administration: The request must include the proposed composition terms, a report on the bankruptcy case and its procedures, and comprehensive information about the creditors and their outstanding balances.
2. Notification of Parties: The bankruptcy administration notifies all relevant parties about the request within ten days of its submission.
3. Meeting of Creditors: Within ten days of notifying the creditors, the trustee calls a meeting to discuss the proposed composition terms.
4. Submission of the Trustee’s Report: If the request comes from the debtor, it must be accompanied by a report from the trustee containing their observations on the settlement terms, which is attached to the invitation.
5. Court Approval: After the meeting, the trustee must notify the bankruptcy administration of the creditors’ approval or rejection of the terms within ten days. If approved by the creditors, the court ratifies the composition ten days after the notification and records the decision in its official records.
6. Enforcement of the Settlement: The resulting settlement becomes binding on all creditors who approved it, as well as those who rejected it or did not attend the meeting. This ensures that the terms agreed upon by the majority of creditors are implemented.

You can handle the procedures for this protective composition in a legal, fast, and organized way by contacting the Samaha Law Firm for Legal Consultations.

What is the Role of a Lawyer in the Protective Composition Process in the UAE?

A lawyer plays a fundamental role in the protective composition procedures, for both the debtor and the creditors. A specialized lawyer, such as one from the Samaha Law Firm, helps ensure that the procedures are carried out legally and effectively.

Here is a breakdown of a specialized lawyer’s role:

• Drafting and Filing the Request: A lawyer drafts the request for protective composition and submits it to the bankruptcy administration, along with all the required documents. The Samaha Law Firm provides very effective assistance in completing these procedures.
• Providing Legal Consultation: A lawyer gives legal advice to the debtor about their available legal options and oversees the drafting of the composition terms to protect their client’s rights. The Samaha Law Firm provides all necessary and appropriate legal consultations.
• Negotiating with Creditors: The lawyer negotiates with creditors to present settlement terms that are suitable for all parties.
• Following Up on Procedures: The lawyer provides complete follow-up on all legal procedures to ensure that all parties comply with the decision.
• Ensuring Rights are Protected: A specialized lawyer, like those at the Samaha Law Firm, ensures that all parties, both the debtor and creditors, have their full legal rights in the composition process.
• Preparing Legal Reports: The lawyer prepares the necessary legal reports for submission to the court or the bankruptcy administration.
• Coordinating with the Trustee: The lawyer coordinates with the composition trustee to ensure that the terms of the settlement are implemented correctly.
• Managing Negotiations: The lawyer manages negotiations with the relevant parties to ensure a satisfactory agreement is reached, preventing liquidation.
• Guiding the Debtor: The lawyer advises the debtor on future steps that may be necessary to avoid returning to bankruptcy.
• Monitoring Plan Execution: A specialized lawyer follows up on the execution of the agreed-upon composition plan to ensure the debtor adheres to the payment schedule and that funds are distributed to creditors as previously agreed.

With the help of the Samaha Law Firm for Legal Consultations, you can complete all the procedures for requesting a protective composition in a clear and legally sound manner. Contact Us.