The UAE is close to approving a new bankruptcy law which will allow companies in difficulty to restructure their debts and work their way back to financial health. The new law makes it possible for companies that are in financial difficulty to continue operating, allowing them to service their debts and pay their employees. Key aspects of the proposed legislation are provisions for their debt to be restructured and for companies to access finance, like bank loans, which is essential for them to continue operating.
The lack of a proper bankruptcy law has been a drag on entrepreneurship and foreign direct investment in the UAE, both of which are essential for economic growth and job creation.
In many ways, business is about owners and investors taking carefully considered risks with their financial — and other — resources, to make a profit. Without a proper bankruptcy law, these entrepreneurs also run the risk of civil and criminal legal action if their enterprises fail.
The proposed legislation, based on international best practice, will give entrepreneurs who run into difficulties — despite managing their companies in a responsible manner — the opportunity to pay their debts and work their way back to financial health. This will limit the impact of their difficulties on other companies, the rest of the economy and help secure jobs.
The proposed legislation, the Bankruptcy and Financial Restructuring Law Initiative, has been referred to the technical committee of the Ministry of Justice. Once approved by the Ministry it must be sent to the Cabinet and then the Federal National Council before finally being signed into law by the President His Highness Shaikh Khalifa Bin Zayed Al Nahyan. While this is necessary to ensure that legislation is properly scrutinised by all interested parties and has the necessary support, the sooner it is enacted into law, the better.
