Failure of businesses is a common phenomenon in UAE and winding up the business becomes a viable option to mitigate further losses. In UAE, the Federal Law No. (9) of 2016 (UAE Bankruptcy Law) governs the process of liquidation or bankruptcy within the country. Article 67 of the Law provides that if you are not able to pay the debts of your creditors, you can apply for bankruptcy. Though there is a provision to restructure the debt and revive the company, you can opt for bankruptcy wherein the liquidation would take place at a fair value. During the process, the assets of the companies will be sold out to cover the liabilities of the debtor.

Alternatively, you can approach the court under Article 68 of the Law which provides that if the debtor fails to make the payment for more than 30 days from the due date on account of poor financial condition, he can apply to the court for commencement of bankruptcy proceedings. If the court approves your application, all the execution proceedings against your company shall be suspended a trustee shall be appointed to administer the proceedings. The trustee so appointed needs to prepare a report in accordance with Article 96 of UAE Bankruptcy Law.

If you are a sole proprietor, you can file for individual insolvency as per the provisions of Federal Decree-Law No. (19) of 2019.

The essence of the arbitration is the issuance of a binding arbitral award by the Tribunal. However, there are some grounds on which you can challenge an arbitral award in the country. Article 53(1) of Federal Law No. (06) of 2018 (UAE Arbitration Law) lists the grounds on which you can challenge the award, which is as follows-

• When no valid arbitration agreement exists between the parties or the agreement has become void in accordance with the law chosen by the parties;
• The parties to the arbitration agreement are not legally compatible to enter into such an agreement;
• When an individual does not have the legal capacity to dispose of the disputed right under the law governing his or her capacity;
• The award was not premised on the law chosen by the parties;
• The appointment of the arbitrator or the constitution of the Tribunal was not in accordance with the UAE Arbitration law;
• The award was affected by severe procedural irregularities;
• The award was not issued within a specified time frame;
• The Arbitrator rendered such an award which goes against the scope of the arbitration agreement.

In addition to the aforesaid, Article 53(2) provides that the court can set aside an award when it is against the public policy of the country. It is very important to note that the award cannot be challenged on merits as per UAE Arbitration Law.

Recently, in a ground-breaking move, the UAE government announced a corporate tax in the country from the financial year 2023. This new law applies to all businesses and commercial activities. Further, it applies to the individuals carrying out professional activities in the country. Thus, an important question arises about whether the freelancers would be subject to this new corporate tax?

The corporate tax will be levied on a taxable income above AED 375,000 which means if your annual earning is less than the said amount, you are not required to pay the corporate tax. So, it can be inferred that if a freelancer is earning a taxable income (above AED 375,000) he will be subject to this new law and required to pay the tax. The rate of taxation shall be 9% on the amount exceeding the threshold of AED 375000.  

However, if you are working on a job as a freelancer and earning employment income, you will be exempted from the payment of tax.