Abu Dhabi: The new UAE bankruptcy law approved by the UAE Cabinet this week is likely to come into effect early next year, a senior official said on Tuesday.
Obaid Humaid Al Tayer, Minister of State for Financial Affairs, told a press conference that the law is likely to take effect early in 2017 after its publication in the official gazette which will be issued in the coming weeks.
“The law is based on modern legislative and economic principles, while taking into consideration the global developments and changes taking place in the economic and business sectors,” said Al Tayer.
The UAE Cabinet approved the much-awaited bankruptcy law on Sunday.
We also passed the final version of the new Federal Law on bankruptcy, which aims to promote both investment and ease of doing business. — HH Sheikh Mohammed (@HHShkMohd) September 4, 2016
Experts say the new law will help boost the economy as it improves business confidence and enhance the attractiveness of the UAE to investors.
It will also facilitate the work of commercial companies, by paving the way for companies in financial distress to restructure.
The law is expected to facilitate liquidation of debtors’ assets in the event of bankruptcy — and allow the possibility of getting fresh loans under terms set by the law, it was revealed on Tuesday.
The law will also prevent individuals from bypassing the law as there is a punishment, including five years prison sentence, as well as fines up to Dh1 million dirhams.
The bankruptcy law will be applicable to companies established under commercial company laws, semi- or fully-owned companies by the federal or local government, companies in free zones which do not have provisions to regulate composition procedures or restructuring bankruptcy, according to the Federal Law No. 8 of 2004 concerning financial free zones, and any trade and licensed company.
Experts said that with the bankruptcy law in place, lenders will be forced to do their due diligence when dealing with small to medium enterprises.
However, the law will greatly help struggling firms coming to an agreement with their lenders to find solutions to the problems — instead of taking the case to court or jailing the debtor.
