We have set out below some of the key characteristics of the New Insolvency Law:
1. In terms of definitions, the new law has clarified definitions that were somehow unclear or unfortunate in the previous law, by removing for instance the concept of “negative financial position” which restricts the jurisprudential role of the courts.
2. In terms of application, the new law applies to traders, whether physical persons or corporate entities, and civil professional companies.
3. In terms of exclusion to the scope of the law, the following entities are still excluded: (i) government related entities unless their decree of incorporation or articles of association provide for their submission to the insolvency law; and (ii) free zone companies that have distinct legislation and here we assume DIFC and ADGM companies and individuals that would be governed by the Personal Insolvency Law No. 19 of 2019.
4. Interestingly, the new law has carved out a new exclusion in relation to banks and insurance companies licensed by the Central Bank that are subject to specific legislations that govern their financial distress.
5. The new law resumes with the practice of the possibility of a preventive composition before or after insolvency proceedings
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