Business | Economy
Is amending the existing law a better option?
In addition to many other articles regarding bankruptcy, Federal Law No 18 of 1993 of the UAE stipulate that, subject to the other provisions, any trader who suspends payment of his commercial debts at its maturity dates due to instability of his financial position and insufficiency of his credit may be declared bankrupt.
- By P.V. Saleem, Special to Gulf News
- Published: 23:58 January 6, 2009
Dubai: In addition to many other articles regarding bankruptcy, Federal Law No 18 of 1993 of the UAE stipulate that, subject to the other provisions, any trader who suspends payment of his commercial debts at its maturity dates due to instability of his financial position and insufficiency of his credit may be declared bankrupt.
Bankruptcy shall be declared by a judgment issued to this effect by a competent civil court.
The court shall, in the judgment of bankruptcy, fix a provisional date for suspension of payment and shall order the selling of the debtors trading premises and appoint a trustee for the bankrupt.
The court shall send to the public prosecution a transcript of the judgment declaring bankruptcy immediately after issue thereof and also to the trustee, Ministry of Economy and Commerce, Association of Chamber of Commerce and Industry office of the concerned commercial register and the Central Bank.
After passing a judgment on declaration of bankruptcy, a bankrupt shall neither be permitted to honour his debts nor receive any dues.
If an inheritance passes to a bankrupt, his creditors shall have no title to the properties of such inheritance, except after creditors of the bequeather receive their dues from such properties.
A bankrupt may, by permission from the judge of the bankruptcy, engage in new trade with money other than the bankruptcy and creditors whose debts arise from such trade shall have priority to receive their dues from there.
The judgment declaring the bankruptcy shall cancel the dates of all deferred cash debts owed by the bankrupt whether they are ordinary or secured by general or special lien.
The properties of the bankrupt may not be sold during the period of the preliminary proceedings. However, the trustee judge can permit the selling of items that are prone to quick damage or fast deterioration in value or those whose maintenance involves excessive expenses.
Federal Law No 18 of 1993 further stipulates elaborately on bankruptcy of companies.
Except for joint-stock companies, any other trading company may be declared bankrupt if it suspends payment of its commercial debts at its maturity dates due to disruption of its financial activities.
Bankruptcy of a company may be declared, even if it is in a state of liquidation. However, if a company has been liquidated, no judgment declaring its bankruptcy may be issued.
If a declaration of bankruptcy of a limited liability company has been requested, a decision on any such request pertaining to liquidation or placement of a company under receivership shall be suspended.
If the declaration of the bankruptcy of a company has been adjudicated, it may not be liquidated or placed under receivership before the end of the bankruptcy.
Neither the manager of the company nor the liquidator, as the case may be, shall apply for declaration of bankruptcy of the company, except after obtaining permission to this effect, from the majority of the partners in joint liability companies and limited partnership companies and from the general assembly in an extra ordinary meeting in other companies.
A creditor of a company may apply for declaration of its bankruptcy, even if he is a partner therein, however, partners who are not creditors shall not be permitted, in their individual capacity, to request declaration of bankruptcy of the company.
The court may, of its own accord, or at the request of the company, postpone declaration of the bankruptcy of the company, for a period not exceeding one year, if its financial position is likely to be enhanced, or if it is in the interest of the national company, in which case, the court shall order whatever measures which it sees appropriate to be taken for the reservation of the assets of the company.
If the bankruptcy of a company has been declared, all partners jointly liable therein shall be declared bankrupt including declaration of a jointly liable partner who has withdrawn from the company after it has suspended payment, provided that a period not exceeding a year must not have elapsed since the date of the declaration of his withdrawal from the company in the commercial register.
The court shall pass one judgment declaring bankruptcy of the jointly liable partners, even if it does not have jurisdiction to declare the bankruptcy of such partners.
The court shall, for the purpose of the bankruptcy of the company and the bankruptcies of the jointly liable partners, appoint a single judge. However, each bankruptcy shall be independent from the other bankruptcies with regard to its management, verification of its debts and the manner of its conclusion.
If the declaration of the bankruptcy of a company has been requested, the court may order the declaration of bankruptcy of each person who has carried out, in its name, commercial business for his own benefit and has disposed of its properties as if they were his own.
If it is discovered that the assets of the company are insufficient to honour at least 20% of its debts, the court, declaring the bankruptcy, may order the members of the board of directors, or all of the directors, jointly or severally, to pay the debts of the company, in whole or in part, in cases where their responsibility is proved in accordance with the provisions of the trading companies Law.
The representative of a company, whose bankruptcy has been declared, shall act on its behalf in any matter where the law calls for the opinion of the bankrupt.
The representative of the company shall appear before the judge of the bankruptcy or its trustee, whenever he is required to do so.
The trustee of the bankruptcy may, after taking the permission of its judge, order the partners to pay the balance of their shares, even if their maturity has not fallen due. The judge of the bankruptcy may order that such claim should be restricted to the amount required for the payment of the debts of the company.
This Law elaborately lays down the rules to follow in declaration of bankruptcy, its consequences with respect to debtors, creditors, holders of debts secured by a mortgage or a lien on a movable property, with respect to holders of debts secured by a mortgage or a lien on a real estate, effects on valid contracts concluded before its declaration, redemption, administration of assets, ascertaining of debts, conclusion of bankruptcy, judicial composition etc.
For these reasons, I feel that instead of demanding a bankruptcy law, we may suggest amendments, if required, to the existing law after perusing the same.
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