This Decree-Law on the Insolvency of Natural Persons which has been issued on 29 August 2019

and supposed to come into effect in the beginning of 2020, aims at enhancing the competitiveness

of the UAE by ensuring the ease of doing business, creating favourable conditions for individuals

facing financial difficulties and protecting those who are unable to pay their debts because of

their bankruptcy.

Most of us know that in any ‘new legislation’ there are terms that are not always interpreted

accurately, so to start off with definitions of those terms is imperative. Click on the below

link to download the summary of Federal Decree-Law No. 19/2019 On Insolvency, which may be

complicated but contains information you or your attorney need to know.

Definitions

State: The United Arab Emirates.

Ministry: The Ministry of Finance.

Minister: The Minister of Finance.

Court: The competent court in accordance with the rules of jurisdiction

contained in the Federal Law No. 11/1992 herein mentioned.

Debtor: The insolvent physical person.

Debtor's Debt: Debts due by the debtor and arising from an obligation

thereof prior to the date of the Court's

decision to open the Insolvency proceedings.

Debtors' Funds: Movable and immovable

properties owned by the Debtor on the date of the decision to open the

Insolvency proceedings or during any of the proceedings provided for in this

Decree-Law.

Debtor's Business: The activities wherein the Debtor has been engaged

or is still engaged while taking any of the

proceedings provided for in this Decree-Law.

Cessation of Payment: The Debtor's

inability to pay any outstanding debt.

Interested Party: A physical or

juristic person who has a right or interest in any

proceedings provided for in this Decree-Law.

Exchange Rate: The exchange rate of the AED against foreign

currencies declared by the Central Bank of the United Arab Emirates.

Measures: Necessary measures taken by

the Court with a view to the safekeeping or management of the Debtor's Funds in

accordance with the provisions of this Decree-Law.

Roster of Experts: The Roster of Experts accredited in accordance

with the provisions of the Federal Law No.

9/2016.

Expert: The Expert registered in the Roster

of Experts.

Trustee: The Trustee appointed by the

Court from among the Experts on the Roster of Experts.

Plan: The plan for the settlement of

the Debtor's financial obligations, prepared in accordance with the provisions

of this Decree-Law.

Insolvency: Facing current or anticipated financial

difficulties that render the Debtor unable to pay his debts

Scope of Application

Scope of this Decree applies to Debtors

not subject to the provisions of Federal Decree-Law No. 9.

Settlement of Financial Obligations

Debtors may file with the Court, excluding any litigants to settle

financial obligations. Some of the reasoning for any filing can be a memorandum

setting forth the financial position, data

relating to his income, inside or outside the State, professional, vocational

or craft status, liquidity, and projections for the previous twelve (12) months

of any filing. In addition, any filing

must contain names and addresses of creditors whose debts are not paid or are

not expected to be paid by the Debtor, the amount of each debt, the dates of

maturity, and the securities provided to the creditors, if any. It must also

include Debtor's movable and immovable

property inside and outside the State and the approximate value of each, the

jurisdiction and specific actions taken against the Debtor, must submit a

statement explaining current or anticipated financial difficulties and that is

unable or is expected to not be able to pay all of his debts, whether due at the

time of submission of memorandum or any application in the future. Debtor must

reveal any funds necessary to support Debtor, his family and dependents. Also,

any statement by Debtor projecting intent settle his financial obligations and

choosing an Expert. Debtor must also disclose any financial transfers outside

the State for the previous twelve (12) month, and documents supporting the

application or requested by the Court.

Failure to Complete the Required Data

If the Debtor is unable to provide any

of the documents or data required in accordance with this Decree-Law, a

statement of reasoning is required.

Also, may deem documents submitted are not enough to decide on the

application, it may grant the debtor a time-limit to submit additional data or

documents.

Payment of Fees, Expert Fees and Expenses

The Debtor shall pay the judicial fees

which the court will determine an estimate of

expertise fees, expenses expected for the financial settlement,

proceedings and notify

the Debtor thereof no later than the

day following the submission of the application. It is required of Debtor to

deposit with the Court's treasury, cash or a bank guarantee on the date determined

by the Court to cover expert fees and any fees paid in preference to all other

creditors. The Debtor can request of the Debtor, postpone the deposit of the

cash or bank guarantee provided, the Debtor has no money to cover the said

expenses and fees on the date of submission of the application, provided that

such expenses and fees be paid in preference to all other creditors. The Court

shall one or more Experts to assist the Debtor therein and any Expert shall

perform their duties jointly and the decisions shall be taken by majority. The

Court may divide the tasks among the Experts and determine their mode of work,

whether jointly or individually. The Court shall notify the Expert any decision

of his appointment the day following the issuance of its decision to open the

proceedings and shall provide him with all the information available thereto on

the application. Any Expert shall not be a creditor of the Debtor or associated

in any interest or kinship up to the fourth degree. Within five (5) working

days from the date of Experts notification of the appointment, the Expert shall

publish the summary of the decision to two widely circulated local daily

newspapers, one in Arabic and the other in English.

The publication shall include an invitation to creditors to submit

their claims and be delivered to the Expert within twenty (20) working

days from the date of publication. The Expert may

request data or information from the Debtor, or any related parties. The Debtor

shall provide the Expert any additional details on creditors or the debt's

amounts. The Expert may request the Court to assist him in the performance of

Experts duties, as required.

Making Measures, and Deciding the Disposition of

Your Application

The Court or Interested Party may take

the necessary Measures to preserve the Debtor's Funds until determination of

the application, or during the settlement of financial obligations. And while

that decision is being pondered, the Court shall decide on the application

without notice or pleading, within a period of five (5) working days from the

date of submission. If the application is accepted the proceedings are open for

settlement, and the Court's decision to accept the Debtor's application for the

settlement of financial obligations shall result in the estoppel or termination

of creditor's right to to proceed against the Debtor's Funds, or the opening of

his Insolvency and liquidation proceedings. Such suspension continues for the

duration of the proceedings. With permission from the Court, any Creditor with

a secured debt, may execute against securities, when the debt is due. Within

ten (10) working days of application submission date, without litigation the

Court can grant permission to verify no collusion between the Debtor and all

secured creditors, has occurred. The Court's decision can be challenged by the

Court of Appeal. The appeal shall not result in the stay of the proceedings for

the settlement of financial obligations. The decision issued in the appeal

shall be considered final. At that point, the Court suspends Debtor's

obligation to apply for his Insolvency and liquidation of his funds. Stay of

execution shall continue during the period of settlement of financial

obligations unless Debtor breaches his obligations as set out in the Plan,

pursuant to the provisions of the Decree. Debtor's application for settlement

of financial obligations shall not result in the maturity of deferred debts on

the date of submission of the application.

Submission and Rejection of Expert Documents, Debt Documents,

Debtors Documents and Report Audits

Creditors with debts not urgent or

secured shall hand over the Expert their debt documents accompanied by the

statements and collaterals, dates of maturity and amount in AED Exchange Rate

on the date of issuance of Court's decision to open the proceedings. Expert may

request clarification of the creditor(s) claims have been submitted, to provide

clarifications on the debt or to complete the documents relating thereto, or to

have any of his claims certified by the creditor's auditor or an independent

auditor. The Expert shall prepare a list of all the Debtor's creditors with the

address, amount, maturity date of the debt, a statement of the holders of the

secured debts, securities prescribed for each of them, the estimated value of

such securities. The Expert shall prepare a report on the Debtor's Funds and

indebtedness and all circumstances relating to his default or Cessation of

Payment and shall submit the same to the Court within twenty (20) working days

of submission of Debt documents. The Expert's report is subjected to audit by

the Court to verify the Debtor's Debt. If the Court deems necessary to complete

the proceedings to settle any financial obligations, it shall issue a decision

instructing the Expert to prepare the Plan. The Court shall rule rejection on

application for settlement of financial obligations, if the Debtor has carried

out any action or refrained from view or concealing or destroying any part of

its funds. Also, that the Debtor has provided false statements on his debts,

rights or funds or the Debtor has ceased to pay any of his debts on the

maturity date for more than fifty (50) consecutive working days, as a result of

inability to pay debts.

The Expert prepares the Plan in cooperation with the Debtor, provides

a copy to creditors, posit a copy with the Court within twenty-two (22) working

days from the date of the Court's decision to instruct the Expert to prepare

the Plan. The Court may authorize any Plan extension period if necessary while

considering the Plan, Debtor and creditors may have one or more meetings, at a

specified place and date, to discuss and vote on the Plan. The first meeting

shall be held within a period not exceeding ten (10) working days from the

date of providing creditors with a copy of the Plan in accordance with clause

(1) of this article. The Expert may send an invitation to attend the meeting

provided for in and by any possible means of communication. Expert may invite

creditors to other meetings during the preparation of the Plan, or postpone the

date of the meeting of creditors, taking into account the number of creditors

known and any other significant circumstances to hold the meeting.

Debtor and creditor shall attend the

meeting in person or through a representative. Implementation of the Plan may

not exceed three years from the date of its approval by the Court which may be

extended subject to the approval of a majority of creditors who own two-thirds

of the debts that have not been paid in accordance with the Plan. The Expert

offers an alternative security to any secured creditor, provided that it is in

the best interest of the Plan's implementation and that the value of the

alternative security is not less than the value of the secured debt. If the

secured creditor does not accept the proposed offer, the Expert may refer the

matter to the Court. The Court may order the replacement of the security if it

is in the best interest of the Plan's implementation and does not prejudice

the interest of the secured creditor.

Voting on the Plan

The Expert shall administer the creditors' meeting and verify during such

meeting the eligibility of those entitled to vote. The creditors' meeting

shall not be valid unless attended by majority exceeding half of the total creditors,

provided that they represent at least two thirds of the total verified Debts. If

Quorum is not met at the first meeting, creditors shall set a new date for a

second meeting within ten (10) working days from the date of the first meeting.

The meeting shall be valid regardless of the number of creditors present, provided

that the attendees represent at least two thirds of the total debts; otherwise, the

Expert shall refer the matter to the Court so as to determine the possibility of

terminating the Debtor's financial settlement proceeding. The right to vote shall be

restricted to creditors whose claims have been accepted by the Court, and the

other creditors may not vote unless authorized by the Court.

Persons not Entitled to Vote Rejection of the Application, Presentation of

the Creditors Plan, and Replacement of Securities

Debtor's spouse, any person financially

supported by the Debtor, relatives of the Debtor up to the second degree are

not allowed any Vote, and the Expert shall administer the creditors' meeting

and verify during such meeting the eligibility of those entitled to vote.

The Court shall rule the completion of

the proceedings for the settlement of financial obligations and the rejection

of the application for settlement of financial obligations as established to

the Court that the Debtor has carried out any action or refrained a view to

concealing or destroying any part of funds. Debtor has provided false

statements on his debts, rights or funds. Debtor has ceased to pay any of his

debts on the maturity date for more than fifty (50) consecutive working days,

as a result of inability to pay.

The Expert shall prepare the Plan in cooperation with the Debtor, provide the

creditors with a copy thereof and deposit a copy with the Court within twenty-two

(22) working days from the date of the Court's decision to instruct the Expert

to prepare the Plan. The Court

may authorize the extension of the Plan.

The Expert shall meet the Debtor and creditors at one or more meetings,

to discuss and vote on the Plan. First meeting within a period not exceeding

ten (10) working days from the date of providing creditors with a copy of the

Plan. The Expert may send the invitation to attend the meeting provided for in

this article by any possible means of communication. The Expert may invite

creditors to other meetings during the preparation of the Plan, or postpone the

date of the meeting of creditors, taking into account the number of creditors

and significant circumstances to hold the meeting, Debtor and creditor shall

attend the meeting in person or through their representative the proposed

period for the implementation of the Plan may not exceed three years from the

date of its approval by the Court. This may be extended subject to the approval

of a majority of creditors who own two-thirds of the debts that have not been

paid in accordance with the Plan.

The Expert may offer an alternative

security to any secured creditor, provided that it is in the best interest of

the Plan's implementation and that the value of the alternative security is not

less than the value of the secured debt, if the secured creditor does not

accept the proposed offer, the Expert may refer the matter to the Court. The

Court may order the replacement of the security if it is in the best interest

of the Plan's implementation and does not prejudice the interest of the secured

creditor.

Voting, Amendment, Approval and Extension of the Plan

The creditors' meeting provided under

this Decree shall not be valid unless, attended by a numerical majority

exceeding half of the total creditors, provided that they represent at least

two thirds of the total verified debts. If the quorum is not met at the first

meeting, the creditors shall be invited to a second meeting within ten (10)

working days from the date of the first meeting.

The meeting shall be valid regardless

of the number of creditors present, provided attendees represent at least two

thirds of the total debts; otherwise, the Expert shall refer the matter to the

Court so as to determine the possibility of terminating the Debtor's financial

settlement proceeding. The Debtor or any creditor may propose any amendments to

the Plan during the meeting, and creditors shall vote at the meeting on any

amendments to the Plan. The Expert may convene a second creditors' meeting to

vote on any proposed amendments. The Plan shall be approved by a majority vote

of the creditors present and whose debts are not less than two thirds of the

value of the debts verified. The Expert shall grant creditors who have not

approved the Plan, abstained from voting or failed to participate, a deadline

not exceeding fifteen (15) working days from the date of ratification of the

Plan, to join such Plan. A creditor who has not attended meetings

scheduled to vote on the Plan shall be deemed as having approved said Plan if

he provided the Expert with his claims and included the same without change in

the Plan before the meeting. If the Debtor agrees with a creditor to grant him

special privileges in exchange for voting on the Plan and in such a manner as

to prejudice the rest of the creditors, the Court may cancel this agreement on

its own initiative or at the request of a creditor. The Court may, at the

request of the Expert, in the absence of the required approval of the Plan,

grant the Debtor a period not exceeding ten (10) working days to set a new date

for voting on the Plan or amend the same so as to present it to creditors. The

Court shall verify that the Plan ensures that all creditors affected receive at

least the amount they would have received if the Debtor's Funds had been

liquidated on the date of voting on the Plan, at the discretion of the Court.

The Court shall issue a decision approving and binding the Plan if all the

conditions set forth in have been complied with to Debtor and on all creditors.

If the Court decides to refuse to approve the Plan, it shall rule to commence

the Insolvency and liquidation proceedings in accordance with the provisions of

Book 3 of this Decree-Law. Within five (5) working days following the decision

of the Court to approve or reject the Plan, the Expert shall notify creditors

of the Court's decision.

Plan Implementation, Sale of Debtor's Property, Amendments, Termination

and Expiration of Settlement Proceedings, Nullity and Effect of the Plan

The Expert shall act as supervisor and

follow up of the Plan for its implementation, shall inform the Court of any

failure to implement it. He may access any data necessary to carry out his

duties. The Expert's appointment shall not affect the Debtor's ability to

conduct his business directly, during the implementation of the Plan for the settlement

of financial obligations, nor shall it relieve him of any legal or contractual

obligations arising from the conduct of his business. The Expert shall sell the

Debtor's property decided to be sold in accordance with the implementation of

the Plan at the best price obtained under the prevailing circumstances in the

market on the date of sale. The proceeds of the sale or any income arising from

the implementation of the Plan shall be deposited in the Court's treasury. The

Expert shall prepare a report on the progress of the implementation of the

Plan, every three (3) months and shall submit a copy to the Court. Any creditor

may obtain a copy of the report. The proceedings for the settlement of

financial obligations shall be confidential. No person who has participated in

the settlement of financial obligations or is aware by virtue of his profession

or function, shall disclose such proceedings to third parties except in

accordance with the legislation in force.

If the Expert finds it necessary to

make amendments to the Plan during its implementation phase and such amendments

would cause a change in the rights or obligations of any party, he shall

request the Court to approve such amendments. Before deciding on the

application, the Court shall notify all creditors who may be affected by such

amendments and any creditors it deems necessary to notify, within five (5)

working days from the date of submission of the Expert's request, in order to

make any observations on the required amendments, and within ten (10) working

days from the date of the notification. The Court may issue a decision

approving the amendment in whole or in part or rejecting the same, taking into

the Decree notification.

The Court may issue a decision approving the amendment in whole or

in part or rejecting the same, taking into

account the interest of creditors.

The Court shall decide to terminate the

Debtor's financial obligations cannot be settled. If the implementation of the

Plan is impossible due to the Debtor's Cessation of Payment of any of his debts

on the maturity date, for more than fifty (50) consecutive working days as a

result of his inability to pay these debts. If the Debtor requests the Court to

terminate the implementation of the Plan before the settlement of the financial

obligations with the creditors. If the period specified for the implementation

of the Plan expires without being able to complete the settlement of the

financial obligations of the Debtor. If the Debtor fails to implement the Plan.

If all the obligations provided for in the Plan are fulfilled, the Court shall,

at the request of the Expert, the Debtor or any of the creditors, issue a

decision on the completion of the implementation of the Plan, and such decision

shall be published in two widely circulated local daily newspapers, one in

Arabic and the other in English. To the

Nullity of the Plan, the Court shall issue a decision to invalidate the approved

Plan if it finds that the Debtor has evaded or attempted to evade the

fulfilment of his obligations, such as concealing or destroying any part of his

funds, or submitting false statements as to his debts, rights, or funds or

disposing of any of his rights or funds. Any Interested Party may file a

nullity claim in accordance with the provisions of clause (1) of this article,

within six (6) months from the date of discovery of the act. In all cases, the

lawsuit shall not be accepted if it is filed after two (2) years from the date

of the Court's decision to approve the Plan. If the Court rules the nullity of

the Plan, any guarantor who guaranteed the implementation of the Plan shall be

discharged. Creditors shall not be obliged to return any amounts received from

the Debtor in return for debts owed thereto before the plan being ruled null.

In any Courts decision to nullify or terminate the Plan in accordance with the

provisions of Decree, the Court shall rule to commence the Insolvency and

liquidation proceedings, in accordance with the provisions of Decree, if it is

proved that this has resulted in the Debtor's failure to pay the debts due on

the date of the decision nullifying or terminating the Plan, for more than

forty (40) consecutive working days due to his inability to pay those debts.

Debtor's Insolvency and Liquidation of his Funds, Appointment of

the Trustee, Publication of the Appointment Decision, Submission and Audit

of Claims, Acceptance of Claims and

Granting of Deadlines

If the Court decides to commence the Insolvency and liquidation proceedings, during

the settlement of the financial obligations, a deposit, additional cash or bank guarantee to cover the

Trustee's fees and expenses is required. If the Court decides to open the

Insolvency and liquidation proceedings, the Court shall appoint a Trustee to

undertake such proceedings. If the Debtor has previously been subject to the

proceedings for the settlement of financial obligations, the Court may appoint

the Expert assigned in accordance with the provisions of this Decree as an

Insolvency Trustee. The Trustee shall, within five (5) working days from the

date of the Court's decision to open the Insolvency and liquidation

proceedings, publish the Court's decision in two widely circulated local daily

newspapers, one publishing in Arabic and the other in English. The Trustee

shall require creditors to submit their claims within twenty (20) working days

from the date of publication of the Court's decision in the two newspapers. Any

claims filed after this date shall be disregarded, unless an excuse accepted by

the Trustee. The Trustee shall undertake the final audit of the creditors'

claims and prepare a report on the Debtor's financial position and submit the

same to the Court within ten (10) working days from the date of the end of the

period specified in clause (1) of this article. The Court may extend such

period for a similar period and for one time. If the value of the claims is

determined in a foreign currency, it shall be converted into the national

currency at the Exchange Rate on the date of the decision to open the

Insolvency proceedings, unless the creditor, and the Debtor agree otherwise.

At the request of the Trustee, the Court may assist him in the performance of his task, including the disbursement

of funds to cover expenses necessary for the conduct of the proceedings. Upon

review of the report submitted by the Trustee, the Court shall determine the

claims it accepts and approves. The Court shall decide on the Debtor's

Insolvency and liquidation of his assets within fifteen (15) days from the date

of receipt of the report of the Trustee. Upon the commencement of the

liquidation of the Debtor's Funds, the Court may, upon the recommendation of

the Trustee and at the request of the Debtor, decide to grant the Debtor a

deadline not exceeding three (3) months, extendable for a similar period to

reach an amicable settlement with his creditors, provided that this does not

prejudice the interest of creditors. Any of the creditors may challenge the Court's decision granting the debtor a

deadline for amicable settlement before the Court of Appeal. The appeal shall

not result in the stay of any proceedings. The decision issued in the appeal shall

be final. If the Court decides to open the Insolvency and liquidation

proceedings, all the Debtor's debts, whether ordinary or secured. If the Court

decides to open the Insolvency and liquidation proceedings, all the Debtor's

debts, whether ordinary or secured or preferential, shall become payable.

Management of Liquidation Proceedings, Request for Information, Right of Recover Funds

Excluded from Liquidation, Sale of Debtor's Residence, Priority of Debtor's

Funds, Distribution of Sale Proceeds, Procedures in Special Cases, and

Liquidation Proceedings Progress

If the decision of the Court to open

Insolvency and liquidation proceedings is issued, the Trustee shall liquidate

all Debtor's Funds, except those that the Debtor may keep in accordance with

the provisions of this Decree. The Debtor shall disclose any property acquired

thereby or devolving thereto for any reason after the Court's decision to open

the Insolvency and liquidation proceedings, and the Trustee shall add the same

to the Debtor's Funds subject to liquidation.

The Trustee shall take legal

jurisdiction to or judicial action

to claim any property in the Debtor's financial liability. The Trustee may

authorize the Debtor to achieve or complete any works or activities with a view

to selling his property at the best possible price, providing (6) months has

not elapsed. The Trustee may extend such period for a term not exceeding two

(2) months, if such continuation serves the interests of the creditors. The

Court shall, at the request of the Debtor or the Trustee, authorize the Debtor

to retain any of its property if the Court considers that such funds are

necessary to enable the Debtor to pursue his occupation, profession or craft.

The Trustee shall sell the Debtor's property in a public auction, with the

approval of the Court and under its supervision and control. The Court may

authorize the Trustee to sell some or all of the Debtor's assets other than by

public auction in accordance with the conditions specified by it. The Trustee

shall use the proceeds of the liquidation of the Debtor's Funds to settle any

claims against the Debtor under the supervision of the Court, and any excess

shall be refunded to the Debtor. The proceeds of sale shall be distributed to

creditors in accordance with the priority specified in this Decree. Where a

creditor has a security over an asset sold, the Trustee shall distribute the

proceeds of sale thereof to creditors, as per their order of preference.

Request for Information,

Right of Recovery, Funds Excluded from Liquidation Proceedings, Sale of the

Debtor's Place of Residence, and Persons Prohibited from Purchasing the

Debtor's Funds

The Trustee may request any person with

information relating to Insolvency and liquidation proceedings, including the

spouse of the current or former Debtor, or any person who holds the property or

funds owned by the Debtor or any person owing funds to the Debtor, to provide

such information. Also, he may instruct such person to determine the funds owed

to the debtor. The Expert shall ensure that the decision to open the

proceedings, includes an invitation to any Interested Person having a right in

any of the Debtor's Funds, to apply for the recovery of movable or immovable

property owned thereby from among the Debtor's Funds.

The application shall be submitted

within two months from the date of publication of the decision and shall state

the type and nature of the specifications of such funds and the nature of the

right attached, The Expert may, upon a

Court order, return the funds in the possession of the Debtor to their owners

after verification of their ownership. The following funds are excluded in the

Debtor's Funds subject to Insolvency or liquidation proceedings: Pension or

social benefit provided to the Debtor, the Debtor's Funds prescribed by the

Court to meet the necessary needs of the Debtor and his dependents. The Court's

decision may be challenged within five (5) working days from the date of its

issuance. The Court shall decide on the objection within five (5) working days

and its decision shall not be subject to challenge in any methods of appeal.

Without prejudice to the legislation in force in the State, the Trustee may

apply to the Court after the judgment of the Debtor's Insolvency and the

liquidation of his funds, seeking the issuance of a decision to sell the house

wherein the Debtor resides, and which may be disposed of by law.

Upon hearing the application, the Court

shall take the following into consideration: The interest of the Debtor's

creditors, if the Debtor has another place suitable for housing., the number of

family members of the Debtor living with him and depending on him. The price

derived from the sale of the Debtor's house will be for the purchase of a house

suitable for the Debtor's housing with his dependents, in accordance with the

prevailing social conditions at the time of this Decree. Any other humanitarian

or social aspects related to the Debtor. Absence of legal or obstacles to the

disposition of the Debtor's place of residence. Persons are prohibited from

purchasing the Debtor's Funds. The Debtor may not directly or through an agent

buy or make an offer to buy all or part of the Debtor's Funds offered for sale.

The following persons may purchase the Debtor's Funds only with the consent of

the Court if it is in the interest of the creditors: The Debtor's spouse, or a

relative, by birth or kinship until the second degree. Any other person who,

during the two years preceding the date of the issuance of the decision to open

the proceedings of Insolvency and liquidation of funds, was a partner,

employee, accountant or agent of the Debtor.

Priority of Debtor's Funds,

Distribution of Sale Proceeds of Debtor's Funds, Special Case Procedures,

Determination of Liquidation Proceedings Progress, Closure of Insolvency and

Liquidation Procedures

If approved by the Court, Trustee

shall, distribute the proceeds of liquidation as per the priority order,

provided that the secured creditors take precedence over other preferential or

ordinary creditors, to the extent of their collateral. The following categories

of debt shall be deemed preferential debts and shall have priority over

ordinary debts; a- Fees and judicial expenses, and the fees and expenses of the

Expert and the Trustee; b- Expenses disbursed by a Court order to serve the

creditors' common interest in the preservation and liquidation of the Debtor's

Funds; c- End-of-service gratuity and wages owed to the Debtor's workers and

employees; d- Alimony and maintenance imposed on the Debtor by an order issued

by a competent court; and e- Amounts due to government agencies.

The Trustee may distribute the

liquidation revenues after each sale or after accumulating the funds resulting

from the total sale operations in accordance with this Decree, The Trustee

shall, after each sale, submit a distribution list to the Court for approval.

The creditor shall receive his share of the distribution proceeds at the place

where the Trustee performs his functions, unless otherwise agreed between the

Trustee and the creditor. The shares of debts that have not been finally

accepted and those which are subject to objection in accordance with the

provisions of this Decree-Law shall be set aside and kept at the Court's

treasury until a final judgment is issued thereon. The secured creditor shall

be paid the sale proceeds of the funds securing its debt; if the value of the

secured assets is insufficient to pay off the entire secured or preferential

debt, the remaining outstanding debt shall be deemed to be the ordinary debt.

The Trustee shall deliver to the Debtor any surplus amounts upon liquidation

after fulfilling all his obligations. If one of the creditors refuses to

receive his debt, is absent or his residence is unknown, the debt shall be

deposited at the Court's treasury and the deposit receipt shall be deemed as a

clearance.

If the Debtor obstructs the Insolvency

and the liquidation proceedings in such a way as to prevent the Trustee from

performing his duties in accordance with the provisions of this Decree-Law, the

Trustee may request the Court to issue an order on a petition to take any

appropriate action against the Debtor. If, after the issuance of the Insolvency

and liquidation judgment, the Court determines that any of the Debtor's Funds

are not disclosed, it may include such funds in the Debtor's Funds under

liquidation. The Trustee shall notify the Court and the Debtor every month of

the progress of the Insolvency and liquidation proceedings.

After the final distribution of the

Debtor's Funds to creditors, the Court shall issue a decision to close all

liquidation procedures; said decision shall include a list of the names of

creditors whose debts are accepted, the amount thereof and the sums paid off.

The Court shall instruct the Trustee to publish that decision in two widely

circulated local daily newspapers, one in Arabic and the other in English. The

Trustee shall return all documents in his possession to the Debtor after the

completion of the proceedings and the performance of his duties. The Court may,

at any time after the issuance of the decision to open the Insolvency

proceedings and at the request of the Debtor or the Trustee, issue a judgment

on the completion of the Insolvency and liquidation proceedings if it finds

that: the reasons for the opening of the Insolvency proceedings have ceased to

exist; the proceeds of the Debtor's Funds are sufficient to pay off the

creditors' rights. All Insolvency effects provided for in this Decree shall be

eliminated accordingly. After the issuance of the decision to close the

Insolvency and liquidation proceedings, any creditor whose debt has been

accepted by the Court and whose debt has not been fully paid, shall have the

right to execute against the Debtor's Funds to obtain the remainder of his

debt. The acceptance of the debt referred to in this Decree shall be deemed as a

final judgment in relation to said execution. If the proceeds of the Debtor's

Funds are insufficient to pay the rights of the creditors, the Court shall

issue a judgment declaring the Insolvency of the Debtor and the end of the

Insolvency and liquidation proceedings.

Taking Measures Against the Debtor, Insolvency of the Estate of

the Deceased Debtor

The Court may take the necessary

measures against the Debtor if he commits or attempts to commit any of the following

acts: 1- Fleeing outside the State to avoid or delay payment of any of its

debts, or to avoid, defer or disable proceedings of his Insolvency or

liquidation of his funds; 2- Disposing of any of his funds with a view to

preventing the Trustee from acquiring or delaying his possession; 3- Concealing

or destroying any of his funds, documents, or other relevant information that

creditors may benefit from; 4- Transferring ownership of any property exceeding

five thousand (5,000) dirhams in his possession, without the approval of the

Trustee; and 5- Failing to appear before the Court after being summoned or

failing to implement its decisions without an acceptable excuse. The

proceedings for the declaration of the Debtor's Insolvency and liquidation of his

funds provided for in this Decree-Law shall apply to the deceased debtor,

taking into account any application for the declaration of the Debtor's

Insolvency shall be announced in the event of the death of the Debtor in his

last domicile without the need to appoint the heirs; The heirs of the insolvent

Debtor shall take his place in the Insolvency and liquidation proceedings to

the extent of the estate. The Trustee shall notify the heirs of the deceased

Debtor to appoint their representative in the Insolvency and liquidation

proceedings. If they do not agree on a representative within ten (10) working

days from the date of their notification, the Court shall, upon the request of

the Trustee, assign any of them or any other person to this effect. The Court may

dismiss the representative of the heirs and appoint another.

Effects of Insolvency,

Debtor's Acts after Opening Proceedings, Stay of Proceedings, Interests and

Securities Provided, Entry into Force of Contracts, Prohibitions and

Registration

The Court's decision to open the

Insolvency and liquidation proceedings shall result in the maturity of the

Debtor's Debts, unless the Court decides otherwise, the Debtor's disposition of

his funds shall not be enforceable, whether with or without compensation,

unless the Court decides otherwise. The Court may order a third party to return

any amount to the Debtor or any other matter it deems appropriate to preserve

the rights of creditors. In all cases, the Court shall hear statements of the

parties to the disposition, before deciding on the validity or nullity of the

disposition. The Debtor's acknowledgment of any debt shall not be enforceable

against his creditors. The Debtor shall be prohibited from managing his business

and disposing of his funds and property. From the date of the opening of the

proceedings, the Debtor may not make any payments in excess of AED 5,000

without the approval of the Trustee. The Debtor shall not be prohibited from

disposing of his funds in respect of the cost of his living or his dependents

as determined by the Court or from paying by set-off to meet mutual obligations

arising prior to the decision to open the Insolvency and liquidation

proceedings, The Debtor may not provide any personal guarantees or collaterals

on any of his funds, except with the prior consent of the Court.

During Insolvency and liquidation

proceedings, no lawsuits or legal or judicial proceedings against the Debtor

may be instituted or pursued in cases other than those authorized by the

Decree. The Court's decision to open Insolvency and liquidation proceedings

shall result in the stay of all judicial execution proceedings against the

Debtor's Funds. Notwithstanding the provisions of this Article, secured or

preferential creditors shall have the right to execute against their collateral

when their debts are due after obtaining the Court's permission. The Court

shall decide on granting the authorization within ten (10) working days from

the date of requesting the authorization. A decision on a request for authorization

does not require memorandum be served or exchanged. The Court's decision to

deny authorization may be appealed before the Court of Appeal. The appeal shall

not result in the stay of the Insolvency and liquidation proceedings. The

decision issued in the appeal shall be final.

The issuance of the decision to open

Insolvency and liquidation proceedings shall result in the Stay of legal or

contractual interest on the Debtor, including accrued interest or compensation

due for late payment; a Stay of any judicial action against any person who has

granted a personal security to the Debtor, or who has transferred his funds to

secure the Debtor's obligations, pending a judgment to liquidate the Debtor's

Funds within the limits of that security. A decision to open Insolvency and

liquidation proceedings shall not result in the termination or rescission of

any contract in force between the Debtor and third parties. The party

contracting with the Debtor shall fulfil its contractual obligations unless the

creditor has pleaded non-execution, before the date of the Court's decision to

open the Insolvency proceedings or requested the rescission of the contract due

to the Debtor's failure to fulfil his obligations, or the Trustee finds that

the Debtor is unable to fulfil his mutual obligations set forth in the

contract. In such case, the Court may, at the request of the Trustee or any

other Interested Person, issue a decision to terminate the contract if

necessary to protect the Debtor's Funds or this is in the interest of all

creditors and does not prejudice the interests of the party contracting with

the Debtor. The Trustee, upon requesting the execution of any contract, shall

ensure that the Debtor has the funds necessary to fulfil his obligations under

that contract and to pay any amount due by the Debtor to the contracting party

under an enforceable contract, unless the contracting party grants the Debtor a

payment term.

Subject to the provisions of this

Decree, the judgment declaring the Debtor's Insolvency and liquidation of his

funds shall result in the preventing the Debtor from obtaining a new loan or

financing for a period of three (3) years from the date of the judgment

declaring his Insolvency; Preventing the Debtor from entering into obligations,

with or without compensation, except as may be necessary to satisfy his

essential needs or those of his dependents for a period of three (3) years from

the date of issuance of the Debtor's Insolvency and liquidation of his funds,

unless the Court authorizes him to do so under an order on a petition submitted

by the Debtor; Recording the names of Debtors against whom a Court decision

declaring their Insolvency and liquidation of funds has been issued in the

special register. The form of the register, the data to be included shall

revert to the competent authority to organize it, and other relevant terms and

conditions shall be determined by a Cabinet decision.

Rehabilitation of Insolvent or Deceased Debtor, Expert and Trustee Replacement, Fees, Penalties

Unless the provisions of this Chapter

provide otherwise, the rights of which the Debtor has been deprived in

accordance with the provisions of this Decree, shall be recovered upon

fulfilment of any of the lapse of three years from the date of completion of

the proceedings for declaring the Debtor's Insolvency and liquidation of his

funds. The lapse of two years from the date of completion of the proceedings

for declaring the Debtor's Insolvency and liquidation of his funds if he has

paid 50% of his debts. The lapse of one year from the date of completion of the

proceedings for declaring the Debtor's Insolvency and liquidation of his funds

if he has paid 75% of the debts.

The Debtor declared insolvent shall be

rehabilitated, even if the period stipulated in this Decree has not lapsed, if

he has paid off all his debts previously accepted by the Court, prior to the

decision to declare the Insolvency and liquidation.

The insolvent Debtor may be

rehabilitated, even if the period provided for in this Decree has not lapsed if

he reaches a settlement with all his creditors and implements it; If he proves

that the creditors have discharged him from all remaining debts after the

Court's decision declaring Insolvency and liquidation.

The insolvent debtor shall be

rehabilitated after his death at the request of the heirs. The periods provided

for in this Decree shall be calculated as of the date of the judgment of

declaration of Insolvency and liquidation. An application for rehabilitation

shall be submitted with the supporting documents to the Court which issued the

Insolvency and liquidation judgment. The Court shall notify creditors whose

debts have been accepted of the application for rehabilitation.

Any creditor whose debts have been

accepted by the Court and whose right has not been paid, may file an objection

for rehabilitation within fifteen (15) working days from the date of its

notification. The objection shall be made by virtue of an application to be

filed with the Court together with the supporting documents. After the

expiration of the period provided for in this summary article, the Court shall

notify the creditors who have filed objections to the application for

rehabilitation of the date of the session set for hearing the application. The

Court shall decide on the application for rehabilitation by a judgment which

may be challenged before the Court of Appeal. If the application for

rehabilitation is rejected, it may not be resubmitted until six months have

elapsed from the date of its rejection.

The Court may not at any time replace

an Expert or a Trustee or appoint additional Experts or Trustees. The Court may

replace the Expert or the Trustee upon the request of the creditor or the

Debtor if it is proved that the continuation of his appointment may be

detrimental to the interests of the creditors or Debtor. Such request shall not

result in the stay of the proceedings. The Expert or the Trustee may request

the Court to relieve him of his duties. The Court may appoint a replacement and

shall specify to the Expert or Trustee who has been relieved the fees for the

services rendered. The appointment of the replacement Expert or Trustee shall

be in the same appointment procedures prescribed by the provisions of this

Decree within five (5) working days from the date of notification of the

appointment decision, the summary of the appointment decision shall be

published in two widely circulated local daily newspapers, one in Arabic and

the other in English. The replacement Expert or Trustee shall cooperate to the

extent necessary to enable the alternative Expert to be interpreted in Arabic

and other in English. The replacement Expert or Trustee shall cooperate to the

extent necessary to enable the alternative Expert or Trustee to assume his

functions. The Court may evaluate the stage of the proceedings at the time of

replacement of the Expert or Trustee and may grant the new Expert or Trustee

sufficient time before completing the proceedings. The Court shall determine

the fees of the Expert or Trustee who has been appointed and said fees shall be

paid from the amounts or bank guarantee deposited in the Court's treasury. If

these amounts or bank guarantee are not sufficient to pay all the fees, the

remaining amounts shall be paid in accordance with the provisions of this

Decree.

The Expert or Trustee shall collect his

fees and expenses incurred from the Debtor's Funds. A payment of such fees and

expenses may be disbursed by a Court decision. If the Debtor's Funds are

insufficient to pay the fees and expenses, the Expert or Trustee may apply to

the Court for payment of his dues from the Court's treasury. Any dues paid from

the Court's treasury shall be recovered in preference to all creditors from the

first amounts entering into the Debtor's Funds. Any Interested Party may file a

grievance before the Court regarding the assessment of the fees and expenses of

the Expert or Trustee. The grievance shall not result in the stay of the

proceedings. The Court shall decide on the grievance within five (5) working

days from the date of its submission. Its decision in this regard shall not be

subject to any methods of appeal. The penalties provided for in this Decree shall

not prejudice any more severe penalty provided for in any other law.

Any creditor who commits any of the

following acts shall be punished by imprisonment and a fine of not less than

ten thousand (10,000) dirhams and not exceeding one hundred thousand (100,000)

dirhams or either of them: If he makes a claim relating to a fictitious or

simulated debt against the Debtor. If he illegally imposes additional debts on

the Debtor. If, at any meetings, he votes on decisions relating to the

settlement of the Debtor's financial obligations knowing that he is legally

prohibited from doing so. If he knowingly concludes with the Debtor, after the

Court's decision to commence the Insolvency and liquidation proceeding, a

special agreement granting him special benefits to the detriment of the rest of

the creditors. A penalty of imprisonment for a period not exceeding two years

and a fine of not less than twenty thousand (20,000) dirhams and not exceeding

sixty thousand (60,000) dirhams or either of them shall be imposed on anyone

who was declared insolvent and it is proved that such insolvency declaration

has caused a loss to his creditors, such as spending large sums in Mudaraba

although not required by his usual business, or in the purchase of services,

goods or materials for personal or domestic use, that are not commensurate with

his distressed financial situation, or in gambling, knowing that his creditors

may be harmed. Paying the debts of one of the creditors to the detriment of to

the remaining creditors within six (6) months prior to the submission of his

application for settlement of his obligations or the declaration of his

Insolvency.

Disposing of his funds in bad faith for

a price less than the market price or resorting to harmful means, to prejudice

creditors with a view to delay the declaration of his Insolvency and

liquidation of his funds. Paying any debts or disposing of any funds knowing

that such acts violate the terms of the Plan.

Final Provisions

If the Court decides to open the

proceedings for the settlement of financial obligations or the Insolvency and

liquidation proceedings, it shall order on its own initiative or at the request

of the Debtor, to stay any criminal lawsuit if it has arisen from a cheque

without sufficient balance issued by the Debtor before requesting the opening

of proceedings for the settlement of financial obligations or the Insolvency

and liquidation proceedings. If the Court decides to stay the criminal case in

accordance with the provisions of clause (1) of this article, the stay shall

continue until the settlement of the financial obligations, or the issuance of

the Court's decision to declare the Insolvency of the Debtor, as the case may

be. The creditor for whom the cheque without sufficient balance has been issued

shall be deemed the Debtor, as the case may be. The creditor for whom the

cheque without sufficient balance has been issued shall be deemed one of the

creditors and his debt becomes part of the total debt of the Debtor. If the

Debtor obtains a Court decision to settle his obligation against the creditor

payee, during any stage of the proceedings for settlement of financial

obligations or the Insolvency and liquidation proceedings, the Debtor may

request the competent court to hear the criminal case in accordance with the

provisions of Article (401) of the Penal Code, to issue a decision to terminate

the criminal case or stay its execution, as the case may be. No judgment or

decision issued by the Court may be challenged during the proceedings for the

settlement of financial obligations or the Insolvency and liquidation

proceedings, except in cases expressly provided for in this Decree. Any

provision that contravenes or contradicts the provisions of this Decree shall

be abrogated. This Decree shall be published in the Official Gazette and shall

come into force three months after its publication. The present Federal

Decree-Law was published in the Official Gazette, Issue no. 661 (Annex 1), p.

53