Insolvency declaration lawsuit

Conditions for Filing an Insolvency Lawsuit in the UAE

A debtor facing financial distress and inability to repay debts must meet three key conditions to file an insolvency lawsuit before the competent courts in the United Arab Emirates:

• The applicant must be a debtor not subject to the provisions of Federal Decree-Law No. (9) of 2016 on Bankruptcy.
• The debtor must have failed to pay any outstanding debts for more than 65 consecutive working days due to financial inability.
• The application must be accompanied by all supporting documents proving insolvency.

How to Prepare for Filing an Insolvency Lawsuit

Once the eligibility conditions for filing an insolvency lawsuit are met, the debtor must prepare a comprehensive set of financial data and documents detailing their financial situation and listing outstanding debts. This process can be complex as it involves financial and accounting information, and any errors due to lack of expertise may hinder the lawsuit.

At Abdullah Al Mazrouei Law Firm, led by Legal Consultant Dr. Alaa Nasr, our specialized consultants provide expert assistance in preparing the required financial statements and legal documents, ensuring an accurate representation of your financial position, a detailed list of creditors, debt amounts, and all necessary supporting documents for the insolvency lawsuit.

Required Documents for Filing an Insolvency Lawsuit

An insolvency lawsuit primarily revolves around assessing the debtor’s financial status and settling their obligations by declaring insolvency and liquidating assets. The required documents include:

Financial Status Report:

• A summary report describing the debtor’s financial situation.
• Information on income sources within and outside the UAE, employment or professional status.
• Cash flow projections and expected income sources for the next 12 months.

Creditors' List & Debt Details:

• Names and addresses of creditors whose debts remain unpaid or are expected to be unpaid.
• The amount of each debt and due dates.
• Any collateral or guarantees provided to creditors.

Asset Declaration & Legal Status:

• A statement of the debtor’s movable and immovable assets, including those inside and outside the UAE, with an estimated value in AED.
• Details of ongoing legal proceedings against the debtor and their latest status.

Personal Declaration & Financial Provisions:

• A statement from the debtor confirming financial difficulties and inability to meet current and future debt obligations.
• A list of funds required for the debtor’s and their family’s sustenance.
• Nomination of an expert to oversee the insolvency procedures.
• A report on financial transfers outside the UAE in the past 12 months, including amounts, recipient countries, and reasons for transfer.

Fees & Costs of Filing an Insolvency Lawsuit

Upon submitting the insolvency lawsuit, the court assesses expert fees and estimated costs for insolvency procedures and asset liquidation. The debtor is notified within five working days, and payment must be made within the court-specified deadline, either as a cash deposit or a bank guarantee in the court treasury.

If the debtor lacks sufficient funds, they may request a postponement of payment, after which the court will recover these costs from the first available funds received from the debtor’s assets.

Can a Creditor File an Insolvency Lawsuit?

Filing an insolvency lawsuit is not limited to the debtor. A creditor or a group of creditors with a total debt of at least AED 250,000 can petition the court to initiate insolvency proceedings and asset liquidation. However, the request is only accepted if the creditor has formally demanded payment, and the debtor failed to settle the debt within 65 consecutive working days.

Required Documents for a Creditor’s Insolvency Petition:

• Debt confirmation documents, including debt amount, due date, and any related guarantees.
• A copy of the payment demand notice sent to the debtor.
• Nomination of a trustee to oversee the insolvency process and asset liquidation.

Do You Have Questions About Filing an Insolvency Lawsuit in the UAE?

For further inquiries regarding insolvency procedures, our legal experts at Abdullah Al Mazrouei Law Firm are here to provide comprehensive legal and financial guidance on all aspects of insolvency cases.

Abdullah Al Mazrouei Law Firm & Legal Consultancy
Sharjah, United Arab Emirates
Email: Consultation@dralaanasr.com
WhatsApp: +971 585 373 400