Published: Jun 17, 2019

DIFC Introduces Enhanced Insolvency Regime

The DIFC has enacted the DIFC Insolvency Law 2019 which repeals and replaces the Insolvency Law 2009. Together with the expanded and restated Insolvency Regulations 2019, the new insolvency regime will take full effect on 13 June 2019.

The law applies in the jurisdiction of the DIFC, which means that it applies to all DIFC incorporated companies and to all DIFC limited liability partnerships. It restates with certain modifications the existing provisions relating to voluntary arrangements, to receivership and to winding up whilst at the same time, in line with best international practice, introducing important new ‘rehabilitation’ and ‘administration’ insolvency mechanisms.

More specifically the new law introduces a debtor in possession rehabilitation procedure supervised by the court. During the rehabilitation process, an insolvent company is protected against its creditors and any insolvency steps against it during a 120 day moratorium period, and can emerge at the end of the moratorium, if possible, with a court approved arrangement with creditors (rehabilitation plan).

In addition, the 2019 law introduces a new administration process which can be triggered where the conditions for rehabilitation exist and there is, additionally, evidence of mismanagement or misconduct. In such cases creditors may apply for the appointment of an administrator who will manage the business and assets of the company for the 120 moratorium or such other period as directed, during which the company is similarly protected against its creditors. At the end of the period, the court may approve a rehabilitation plan or a voluntary arrangement with creditors or other specific scheme of arrangement. As part of the administration process the court may also order the investigation of potential fraud or other defined wrongdoing including suspected transactions at an undervalue or unlawful preferences.

Other changes introduced by the new law include enhancements to voluntary and compulsory winding up procedures; additional provisions governing wrongful trading and the re-use of company names; the creation of an offence of misconduct in the course of winding up; the incorporation into DIFC law of the UNCITRAL Model Law on cross border insolvency proceedings (with certain modifications for application in the DIFC); and additional provisions relating to the enforcement of financial collateral.

The new DIFC insolvency regime represents an important step in the evolution of protective and remedial mechanisms available to clients who may be impacted by insolvency in the DIFC, whether as creditors or debtors, and by wider debtor/creditor and insolvency issues in the UAE and further afield.

Key Contacts:

Rita Jaballah
Partner, Head of
DIFC Litigation

Patrick Dillon-Malone
Senior Associate,

Peter Smith
Senior Associate,