We say bankruptcy is the last resort for any company suffering from financial distress, what if we say there are ways you can prevent reaching to a last resort or can avoid filing for bankruptcy to protect your business and simultaneously safeguard the interest of creditors of your company. Corporate Lawyers of Dubai, through this article will discuss certain points a businessman can consider to avoid the filing bankruptcy in UAE.
UAE new bankruptcy law is a positive step in the right direction for companies struggling through financial distress especially during the outbreak of coronavirus. The Law has introduced multiple features for corporations to access whilst undergoing multiple financial issues to recover from the same. Nevertheless, we are here to offer some tips which can assist you and your company to avoid bankruptcy, yet in severe circumstances, it is always advised to approach the Best Lawyers in Dubai to seek appropriate legal advice.
Cautiously Manage the necessities
The primary step any company undergoing financial stress shall carefully consider managing the basic amenities required by the company to run and while trying to crawl out of the debt, it is advised to pay off the basic necessities prior to paying off the creditors. However, if the company is unable to pay off shelter, transportation, food and utilities, it is advised to take care of food and utilities.
Selling the movables
If it is possible for the company to sell off certain movable items which are not in use of the company can assist the shareholders to have certain cash flow with which debts can be paid off.
It is certain that through a financial crunch, the company is unable to pay off the employees, thus, it is advised to terminate the employees by paying off their complete outstanding debts or may even enter into an agreement with employees to settle their debts. This is will prevent the company for incurring any future payments of the employees.
Albeit, we have sufficient reasons to avoid bankruptcy under UAE law, we will herein highlight rationales which will help you understand why it is significantly important to avoid bankruptcy in UAE. Primarily, bankruptcy proceedings tend to sell and dispose of all assets of the company thereby completely dismantling the company unless it is sold to another person or company.
Secondly, the bankruptcy law of UAE penalises by way of imprisonment or fine for those who try to deceive any creditor or consider filing bankruptcy to avoid payment of outstanding debt or to hide company’s assets from sale. It is certain that no jurisdiction would want any company to file for bankruptcy until there is no other option to safeguard the interest of the creditors. As bankruptcy proceedings severely impact the economy of the country. Therefore, the law of UAE for bankruptcy offers an opportunity to the courts to delay the bankruptcy proceedings, if such proceedings are clearly detrimental to the economy of the country. Legal Advisors of Dubai, in past couple of years have assisted multiple companies to wriggle out from the financial distress and helped them either with avoiding bankruptcy or to file it before the relevant courts of Dubai.