DIFC's new insolvency law to provide firms better survival chance | ZAWYA MENA Edition:
The new Dubai International Financial Centre (DIFC) insolvency law that came into force on June 13 has many similarities with the 2009 law it is replacing, but also some significant differences that the centre’s leaders hope will provide a better outcome both for financially stressed companies and the companies to which they are indebted.
For instance, companies that secure the support of up to 75 percent of its debtors (by value) can still enter into a company voluntary arrangement (CVA) to reschedule debts. The new law allows for creditors who are owed money to petition to wind a business up, as well as offering formal administration and receivership processes.
The main difference, however, is the adoption of a new ‘debtor in possession’ regime known as rehabilitation. This allows the managers of a business that finds itself facing financial strain to work with a restructuring professional on a turnaround plan which, if approved by a court, allows them to remain in charge to oversee it, as opposed to managers being removed once an administrator or liquidator is appointed.
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