Can the attorney settle debts during liquidation?

No, the attorney cannot settle debts during the liquidation process. Only the court-appointed liquidator or trustee has the primary legal power to manage debt settlements and asset distributions during liquidation proceedings.

Does a POA remain valid once the court appoints a liquidator in the UAE?

No, a Power of Attorney (POA) does not remain valid in the UAE once a court initiates proceedings or appoints a liquidator for a company. All powers previously granted to agents under the POA are suspended, and unauthorized actions are legally invalid.

Can a POA be used to sell company assets during liquidation in the UAE?

No, a POA generally cannot be used to sell company assets during the liquidation period in the UAE. Once a company enters liquidation, the powers of the directors and any existing POAs issued by the company are restricted.

What Happens to a POA in UAE Bankruptcy or Liquidation?

You have granted a company power of attorney to manage your UAE company. Now you face bankruptcy proceedings. Will your POA remain valid?

Under Federal Decree-Law No. (51) of 2023 (the UAE Financial Restructuring and Bankruptcy Law), the authority of agents and managers is significantly restricted, and often terminated, once formal bankruptcy proceedings begin, though the “moment” and extent depend on the specific court order.

This guide explains how power of attorney in the UAE is affected during bankruptcy, what agents can and cannot do, and the legal risks involved.

How Bankruptcy or Liquidation Affects a Company POA

1. Your Company Maintains Limited Legal Capacity

Corporate incapacity is not absolute; your company maintains its legal personality solely for the liquidation process. During this time, the company cannot issue new general POAs, and control shifts to the liquidator or trustee.

According to Article 315 of Federal Decree-Law No. (32) of 2021, once liquidation begins, the company’s powers are restricted strictly to activities necessary for winding up. Consequently, the authority of the board or managers, and any agents they appointed via POA, is restricted or effectively terminated.

2. The Liquidator Replaces All Previous Authorities

The power shifts from board authority to the court-appointed liquidator or trustee. They become the primary legal representative with power over:

Company assets and property
Banking and financial transactions
Legal proceedings and court representation
Contract negotiations and signatures

As a result, existing company POA holders generally lose authority for new actions, except where the liquidator specifically allows limited actions to complete the liquidation process.

3. Your Agent Can No Longer Act on Company Matters

Agents under a terminated power of attorney in the UAE cannot perform these actions:

Sign new contracts or agreements
Access or operate company bank accounts without the liquidator’s approval
File documents with authorities on behalf of the company
Represent the company in meetings or negotiations
Sell, transfer, or pledge company assets

The liquidator has the primary authority to manage all company matters during this period, and unauthorized actions may expose your agent to personal liability and potential legal consequences.

4. Actions After Initiation Can Be Challenged

Certain transactions after initiation can be cancelled by the liquidator or trustee. The trustee or liquidator can challenge and potentially undo actions if:

The agent acted after the proceedings commenced
Transactions harmed creditor interests
Asset transfers appear fraudulent

Any attempt by the agent to act after bankruptcy starts can be reversed, and such actions hold no legal effect.

Exceptions When Your POA Might Still Be Valid

While power of attorney in the UAE generally is affected by bankruptcy or liquidation, limited scenarios offer some protection:

1. Third-Party or Agent Good Faith Transactions

Article 157 of Law 51/2023 provides that the POA does not terminate if the attorney of the POA or a third party has an interest therein. This protects ongoing interests, not strictly limited to “good faith” without knowledge.

2. POA Specifically for Initiating Liquidation

A POA granted to file dissolution or petition proceedings can remain valid for that purpose.

Shareholders can grant a company power of attorney to a representative to file petitions with courts and submit the required dissolution documents. However, this authority is limited and ends once liquidation formally begins and the liquidator is appointed.

3. Restructuring May Preserve Limited POA Rights

If your company is restructuring (instead of full liquidation), the debtor may retain some management role under court and trustee supervision. However, existing POAs no longer take priority, and all major decisions require court or trustee approval.

Protect Your Business with the Right POA

Whether you are granting a power of attorney in the UAE or acting as an authorized agent, the most important thing is that you understand how bankruptcy or liquidation affects your authority. This knowledge protects you from legal liability and helps you make better-informed decisions.