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UAE Bankruptcy Trials and Tribulations: Moratorium Period Extendable Beyond Limits

January 24, 2023

Abu Dhabi Bankruptcy Court finds that the moratorium under Article 162 can stretch beyond 14 months.

In Brief

Until recently, the common understanding and interpretation of Article 162 of the Bankruptcy Code was that the moratorium period suspending any civil and commercial lawsuits pending against a debtor expires at either of the following events, whichever earlier:

  1. The approval of the restructuring plan; OR
  2. The lapse of ten months from the decision to accept the application seeking to initiate restructuring/liquidation proceedings (extendable for an additional period not exceeding four months after consulting the Trustee)

In a high-profile restructuring matter, the Abu Dhabi Bankruptcy Court has ruled that the judicial suspension/moratorium can be extended further when the Court see justification to do so.
The Court’s elaboration behind this decision was that, although Article 162 states that an extension of the moratorium is permissible for up to four months (after the expiration of the initial ten-month period), “the legislator does not prohibit the Court from once again issuing another extension decision after consulting with the Trustee if it sees justification do so”.


Subject to this decision’s rescission, the key takeaways for creditors, debtors and insolvency practitioners should be as follows:

  • Prior to this decision, the common understanding of Article 162 was that the suspension period would certainly not exceed 14 months. This interpretation is no longer unanimous.
  • Debtors can now factor in the possibility of being able to benefit from the moratorium beyond 14 months.
  • Creditors, especially those with securities that had adopted the strategy of awaiting the expiry of the moratorium period to enforce on their collateral should take into account the possibility of the moratorium being extended further. And hence, while knowing that this period could be further extended, creditors may prefer to instead exercise their right to seek permission from the Bankruptcy Court to exclude them from the suspension rule and allow them to immediately enforce on their collateral.
  • Insolvency practitioners should be mindful that the same interpretive approach may be taken by Bankruptcy Courts to stretch or to extend other statutory timeframes prescribed in the Federal Bankruptcy Code, as the Courts seem receptive to the idea of extending the procedural time limits where they see there is no express prohibition to do so.
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