What Role Do Court Experts Play in UAE Bankruptcy and Insolvency Proceedings?

The Legal Framework Governing Bankruptcy in the UAE

Bankruptcy and financial restructuring in the UAE are now governed by Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy, published on 31 October 2023 and effective from 1 May 2024. This law repealed Federal Law No. 9 of 2016 on Bankruptcy in its entirety, and any matter filed after 1 May 2024 is governed entirely by the new framework. Cases pending under the 2016 law before that date were transferred to the newly established Bankruptcy Court upon the new law’s entry into force.

The 2023 law introduced three principal proceedings: preventive settlement (a lighter-touch, debtor-in-possession restructuring for companies facing financial difficulty before insolvency), financial restructuring (a more complex procedure supervised by a court-appointed trustee), and bankruptcy (formal insolvency leading to liquidation and asset distribution). Each proceeding uses expert evidence differently, and understanding how court experts function across all three is essential for any business or creditor involved in UAE insolvency proceedings.

One point of scope worth noting upfront: the 2023 Bankruptcy Law applies to onshore UAE companies. The Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) operate their own standalone insolvency frameworks and courts, which are not governed by this law.

What Is a Court Expert in the Bankruptcy Context?

A court expert in bankruptcy proceedings is a specialist — typically a financial analyst, accountant, auditor, valuer, or sector-specific technical professional — appointed by the Bankruptcy Court to provide independent technical evidence on matters the court cannot assess on its own. The 2023 Bankruptcy Law expressly provides for the appointment of experts and auditors to assist the Bankruptcy Court in its decision-making, reflecting the central role technical evidence plays in insolvency proceedings where the financial facts are complex, contested, or both.

Court experts in bankruptcy matters are governed by the broader UAE expert witness framework under Federal Decree-Law No. 21 of 2022 and Cabinet Decision No. 17 of 2024, which regulate the registration, qualifications, and conduct of experts before UAE judicial authorities generally. An expert appearing before the Bankruptcy Court must be registered with the Ministry of Justice’s official expert roster, hold genuine academic and technical qualification in their field, carry professional indemnity insurance, and demonstrate independence and impartiality — the same conditions that apply to court experts across all judicial proceedings in the UAE.

The Three Main Proceedings and How Court Experts Are Used in Each

Preventive Settlement

Preventive settlement is the mechanism available to a debtor company that is experiencing financial difficulty but has not yet ceased payments — the functional equivalent of what other jurisdictions call a voluntary arrangement or pre-insolvency rescue procedure. The debtor company retains management control during the proceeding (debtor-in-possession), while a three-month moratorium suspends creditor enforcement actions, extendable to six months in total with court approval.

During a preventive settlement, court experts may be appointed to assess the accuracy of the debtor’s financial position as presented to the court, the commercial viability of the proposed settlement plan, and whether the plan’s terms are fair to the relevant creditor classes. Where creditors contest the debtor’s financial projections or dispute the valuation of assets to be transferred under a settlement proposal, expert evidence provides the factual basis the Bankruptcy Court needs to determine whether to approve the plan.

Financial Restructuring

Financial restructuring is available to a debtor that has defaulted on payment obligations or is insolvent. Unlike preventive settlement, a restructuring proceeding is supervised by a court-appointed trustee, who assumes oversight of the business’s management and guides the preparation of a restructuring plan for creditor approval. The moratorium during restructuring lasts until the plan is ratified by the court — meaning the proceeding can extend for as long as the restructuring itself takes to complete, subject to the plan being submitted within six months of the proceeding’s commencement.

Court experts have a broader and more central role in restructuring proceedings. Financial analysts may be called to produce an independent assessment of the business’s ongoing viability, which directly informs whether the court approves the restructuring proceeding in the first place. Business valuers assess the value of the enterprise as a going concern versus its liquidation value — a comparison that is critical for determining whether the restructuring plan gives creditors a better outcome than immediate bankruptcy would. Asset valuers assess specific assets that may be sold or transferred under the plan. Where management’s conduct before insolvency is under examination — the 2023 law extends liability for pre-insolvency acts to any person responsible for actual management, not just board members — forensic experts may be called to trace the decisions and transactions that led to the financial deterioration.

Bankruptcy and Liquidation

In formal bankruptcy proceedings, the Bankruptcy Court appoints a trustee who assumes control of the business, manages the liquidation of its assets, and oversees distribution to creditors in the correct statutory order. Court experts are essential at several distinct points in this process:

• Asset valuation — an independent valuation of the company’s physical assets, financial instruments, intellectual property, and real estate is required to ensure assets are realized at their proper value during sale
• Financial analysis — a comprehensive review of the company’s financial statements, accounting records, and transaction history to determine the exact extent of the estate available for distribution
• Creditor claims assessment — expert review of the validity, quantum, and priority of creditor claims, which can involve complex questions about the enforceability of security interests, the treatment of related-party debts, and the ranking of employee claims versus commercial creditors
• Trustee support — the court-appointed trustee may specifically request expert analysis on complex transactions or assets where technical knowledge outside the trustee’s own expertise is needed
• Claw-back and antecedent transaction analysis — the 2023 law includes provisions for challenging transactions made in the period before bankruptcy to recover assets improperly transferred or paid to connected parties

The Five Specific Roles of Court Experts in UAE Insolvency Matters

1. Financial Analysis and Verification

Court experts conduct an independent analysis of the distressed company’s financial position — reviewing financial statements, cash flow projections, management accounts, and underlying accounting records — to provide the court with an accurate, independently verified picture of what the business owes, what it owns, and whether its difficulties are temporary or structural. The quality of this analysis directly shapes every subsequent decision in the proceeding, from whether to accept the case to how assets are ultimately distributed.

2. Asset Valuation

Accurate, independent asset valuation is among the most consequential contributions a court expert makes in insolvency proceedings. Overvalued assets create false expectations among creditors; undervalued assets result in recoveries that are lower than they should be. Expert valuers assess real estate at current market value, equipment and inventory at realizable value, and intangible assets — including trademarks, customer relationships, and proprietary technology — at what a market participant would pay for them in the specific circumstances of a distressed sale.

3. Creditor Claims Review

Where the total of creditor claims exceeds the assets available for distribution — which is the defining condition of bankruptcy — determining the validity and priority of each claim becomes essential. Court experts review the documentation supporting each claim, assess whether claimed amounts are supported by the underlying contractual records, and identify claims that may be disputed, duplicated, or incorrectly classified in terms of priority. This analysis forms the basis for the distribution schedule the trustee implements.

4. Business Operations and Viability Assessment

In restructuring proceedings particularly, the court needs to assess whether the business has genuine prospects of recovery as a going concern, or whether its difficulties are irreversible and liquidation is the only realistic outcome. Court experts with operational and industry expertise assess the business model, the competitive environment, the reasons for the financial deterioration, and whether a credible turnaround path exists — an assessment that combines financial analysis with genuine commercial judgment about the specific sector involved.

5. Oversight of the Liquidation Process

In formal bankruptcy, court experts may be appointed to provide oversight and guidance on specific aspects of the liquidation itself — verifying that assets are properly accounted for, that sale processes achieve appropriate recoveries, and that the distribution to creditors follows the correct statutory priority order. This oversight role is particularly important where the estate involves complex assets, multiple jurisdictions, or related-party transactions that require careful scrutiny.

Why Independent Expert Evidence Matters in Bankruptcy Proceedings

The stakes in bankruptcy proceedings are high for all parties: the debtor company and its principals, its creditors ranging from banks and suppliers to employees and tax authorities, and any shareholders who may receive distributions after debts are settled. Decisions made in these proceedings — about asset values, creditor priorities, and whether a restructuring plan is viable — determine who recovers what, and in what proportion.

In this environment, the independence of expert evidence is not a procedural formality — it is the mechanism through which the court receives technical analysis it can trust. An expert who is genuinely independent of all parties, who has the technical qualifications to analyse the specific facts in question, and who can communicate complex financial findings clearly to a court is contributing directly to the quality and reliability of the eventual judicial decision. Expert evidence that lacks these qualities produces findings that are more likely to be challenged, less likely to be accepted, and therefore less useful to the proceeding as a whole.

Personal Liability for Management Under the 2023 Law

One of the most significant changes in the 2023 Bankruptcy Law compared to its predecessor is the expanded scope of personal liability for individuals connected to a bankrupt company. Under the new framework, the Bankruptcy Court can find liable not only board members and formal managers but also any person responsible for the actual management of the company in the two years before the bankruptcy declaration. Where the company’s assets are insufficient to cover its debts, these individuals may be required to contribute an amount proportional to their actions toward repaying creditors.

This expansion significantly increases the practical importance of expert financial analysis in bankruptcy proceedings — because establishing whether management’s conduct contributed to the company’s financial deterioration, and quantifying the extent of that contribution, requires exactly the kind of documented financial investigation a forensic court expert is equipped to conduct.

Frequently Asked Questions (FAQs)

What law governs bankruptcy proceedings in the UAE?

Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy, effective 1 May 2024, governs bankruptcy matters for onshore UAE companies. It replaced Federal Law No. 9 of 2016. The DIFC and ADGM have their own separate insolvency frameworks.

What are the three main proceedings under UAE bankruptcy law?

The three proceedings are preventive settlement (a lighter-touch debtor-in-possession process for financially distressed companies), financial restructuring (a more complex court-supervised process with a court-appointed trustee), and bankruptcy (formal insolvency leading to liquidation and creditor distribution).

What does a court expert do in UAE bankruptcy cases?

Court experts in bankruptcy proceedings conduct financial analysis of the distressed company’s position, provide independent asset valuations, review and assess creditor claims, evaluate whether the business has genuine restructuring viability, and provide oversight of specific aspects of the liquidation process.

Why is independent expert evidence important in UAE bankruptcy proceedings?

Decisions in bankruptcy proceedings — about asset values, creditor priority, and plan viability — have significant financial consequences for all parties. Independent expert evidence that is technically qualified, genuinely impartial, and clearly communicated gives the court a reliable factual foundation for those decisions, and is more likely to withstand challenge from any party whose interests are affected by the findings.

Does the new bankruptcy law affect personal liability for managers?

Yes. The 2023 law expanded personal liability beyond board members to any person responsible for the actual management of a bankrupt company in the two years before the bankruptcy declaration. Where company assets are insufficient to cover debts and the individual’s actions contributed to the financial deterioration, the Bankruptcy Court may require them to contribute proportionally to creditor repayment.

Do DIFC and ADGM companies follow the same bankruptcy framework?

No. The 2023 Bankruptcy Law applies to onshore UAE companies only. The DIFC and ADGM each operate their own standalone insolvency regimes under their respective legal frameworks.

How Farahat & Co. Can Help

Farahat & Co. provides court expert services in bankruptcy and insolvency proceedings across UAE onshore courts, combining financial analysis expertise with deep knowledge of the current framework under Federal Decree-Law No. 51 of 2023. Our registered experts assist the Bankruptcy Court, trustees, and legal teams with financial investigations, asset valuations, creditor claims assessments, and forensic analysis of pre-insolvency conduct.

Contact Farahat & Co. today to discuss your court expert requirements in bankruptcy or insolvency proceedings.