UAE Law and Practice Contributed by: Abdelhak Attalah and Ghassan Hidar, Attalah Legal Consultancy
8.2 Claims to Set Aside or Annul a Transaction or a Transfer
• excessive spending on speculative transactions beyond what is necessary for the company’s operations. 8. Setting Aside or Annulling a Transaction 8.1 Circumstances for Setting Aside a Transaction or Transfer Historical Transactions The Bankruptcy Court can invalidate and annul any historical transaction if it was conducted with the intent to defraud creditors and transactions made by the debtor that unfairly favour one creditor over oth - ers. Look-Back Period It is not permissible to enforce any of the historical transactions mentioned above against creditors if they were conducted by the debtor during the six months preceding the date of cessation of payment, or up to two years if the debtor ignored the decision to open bankruptcy adjudication procedures. This extended period applies if the actions in question occurred between the debtor and an insider or related party.
In both reorganisation and bankruptcy proceedings, any interested party – such as the trustee, the credi - tors’ committee or a creditor – can seek to set aside or annul certain transactions. These transactions may include: • donations or gifts, except for minor, customary gifts; • transactions where the debtor’s obligations are dis - proportionately high compared to the other party’s obligations, whether in kind or cash; • early payment of debts, regardless of the payment method, or using a different method than usual – creating a commercial paper for an early payment is considered as paying before its due date, unless justified by commercial reasons; • payment of debts with amounts different from the agreed-upon consideration – payments made through commercial papers or bank transfers are treated like cash payments, unless commercially justified; and • providing new guarantees on assets to secure the payment of prior debts, unless there are valid com - mercial reasons for such arrangements.
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