UAE Law and Practice Contributed by: Abdelhak Attalah and Ghassan Hidar, Attalah Legal Consultancy
excluded by Article 4 of the same law, the pledgees must file a mortgage foreclosure case before the com - petent court. However, once bankruptcy proceedings have com - menced, secured creditors cannot enforce their rights outside of these proceedings. Creditors with security rights over the debtor’s assets must provide detailed information before the Bankruptcy Court or before the appointed trustee within the statutory time limit. Special Procedural Protections and Rights The New Bankruptcy Law outlines the payment prior - ity for various debts in bankruptcy proceedings. The trustee in bankruptcy is responsible for selling secured assets and depositing the proceeds into a separate account, to pay creditors’ debts based on the priority of their security. Wages and salaries due before the issuance of the decision to open the proceedings take precedence over any other debt, as stated in Article 146; priority shall then be given to new financing over any existing ordinary debt owed by the debtor on the date of the decision to initiate proceedings, under Arti - cle 257 (1). Overall, secured creditors and tax debts are prioritised over unsecured creditors, as stated in Articles 138 and 139, respectively. In practice, if multiple secured creditors hold claims on the same real estate asset, the creditor with the higher ranking mortgage takes precedence. Priority is determined by the serial num - ber assigned by the land registry at the time of reg - istration, ensuring the first registered mortgage has priority over subsequent ones on the same property. When multiple secured parties register their mortgag - es simultaneously, they share equal rank in distribu - Articles 169–185 of the New Bankruptcy Law out - line the rights and priorities of creditors. The trustee is responsible for developing a plan to liquidate the debtor’s assets and distribute proceeds to creditors. This plan must be prepared within 30 days of the creditors’ meeting and communicated to relevant par - ties, including the creditors’ committee, Bankruptcy Administration and regulatory bodies, if applicable. tion upon the property’s sale. 2.4 Unsecured Creditors
The Bankruptcy Court may extend this period to up to three months upon the trustee’s request. During creditors’ meetings, the trustee presides and, if necessary, a creditor or another party may be appoint - ed to chair the meeting with the required majority’s approval. Approval of meeting issues is contingent upon more than half of the total debts being repre - sented by attending creditors and at least two-thirds of represented debts voting in favour. Unsecured Trade Creditors The New Bankruptcy Law does not explicitly require trade creditors to be classified into a separate class, but the trustee has the authority to classify creditors based on the similarity of their rights, distinguishing between secured creditors and those with ordinary debts. However, the trustee is mandated to promptly pay the obligations of suppliers of goods and services that are essential for the debtor’s ongoing business operations, provided that the debtor’s assets are ade - quate for such payments on the agreed-upon dates. Rights and Remedies for Unsecured Creditors Prior to the proceedings, creditors with ordinary debts can apply to initiate restructuring or bankruptcy if the debtor fails to pay one or more of their debts. The debt must be unconditional, undisputed and due for pay - ment, and the creditor must have previously warned the debtor to pay within 30 days. If the debtor does not comply, the creditor can proceed with the appli - cation. During the proceedings, pursuant to Article 70 (1), ordinary creditors whose debts have been finally accepted have an exclusive right to vote on the pre - ventative settlement proposal. However, the Bank - ruptcy Court may permit creditors with temporarily accepted debts to vote on the proposal, and may set conditions and limits for granting this authorisation. However, in the case of bankruptcy proceedings, this class of unsecured creditors is often overruled by higher ranking affected classes, commonly being deemed as “out of the money”.
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