190313 Younis Haji Al Khouri
Younis Haji Al Khouri Image Credit: Ahmed Ramzan/Gulf News

Abu Dhabi: The UAE is beginning to see the positive effects of its new bankruptcy law, a top official of the Ministry of Finance told Gulf News.

“The law is being used through requests to the competent courts to save businesses, prevent them from reaching bankruptcy and selling their assets at the lowest prices,” said Younis Haji Al Khouri, Undersecretary in the Ministry of Finance.

“The courts are working on the application of clear and transparent legal rules that balance the interests of the creditor and the debtor, taking into account the priority of creditors with collateral over any other debts,” he added.

The comments come after the case of a UAE company that successfully restructured its debt to resume business under Chapter 4 of Federal Law No 9 of 2016 — a first for the country.

The firm, which was not named, is a limited liability company founded in 2008 to carry out contracting work. With debt more than 18 times its available capital, the company sought the restructuring, a WAM statement revealed last week.

Under the provisions of the law, the court appointed a secretary and relevant experts to oversee the company during the bankruptcy proceedings.

According to the statement: “The secretary conducted his duties until the restructuring process was successfully completed, by paying off the company’s debts, renewing its commercial licence, and achieving liquidity at a level of five times the company’s capital, enabling it to resume its business.”

Al Khouri said the law relies on a methodology and a plan of action that enable financial defaulters to reorganise their financial and commercial affairs, overcome difficulties and increase their ability to repay debts and obligations without disrupting production.

“The Ministry of Finance put in place all the necessary resources to establish legislation that is accurate and balanced between the interests of both debtors and creditors of all types.”

“The goal of Decree Law No. (9) of 2016 is to raise the level of credit and financial security as a legislative priority, which enhances confidence among investors and boosts the economy.”

One of the features of the law authorises the court to form one or more creditors with ordinary debts, one or more holders of debt secured by a pledge or concession, as well as one or more bondholders and sukuk for the purpose of discussing and proposing amendments to the financial restructuring plan. Additionally, the committees formed under those provisions should be treated equally.

Additionally, the law allows a creditor who applies for proceedings against the debtor to determine the bankruptcy trustee — the expert appointed by the court to handle the restructuring of the debtor’s funds under the supervision of the court.

The law also specifically regulates the issue of money essential for the continuation of its business.