What is the new Bankruptcy Law all about?
The new bankruptcy protection law intends to provide adequate legal cover to companies in the UAE that are under financial stress and help them move forward, according to a Dubai government official.
Why does the country need a bankruptcy law in the first place?
As the way of doing business evolves in the UAE, so does the need for an updated law that is equipped to handle bankruptcy/insolvency cases arising out of such situations. Many expatriate businessmen, for example, often leave the country for good, leaving debts behind for banks which are forced to track them down in other countries or give up on recovering the money. Many local banks have pending legal cases against businesses owing them millions in debt. So there is a need for a comprehensive law to cover businesses. The new law will also be timely in light of the current economic situation, where companies need to get legal cover to continue businesses and come back strong when the economy is in a better shape.
When will the law come into effect?
The government is working to put the law in final shape and it could be issued soon, according to officials. While an exact timeframe is not available, experts say the government began working on the draft even before the global financial crisis impacted businesses in the country, and the law could be in place “in a matter of months”.
Isn’t there any provision for insolvency for businesses as per current UAE laws?
The existing Commecial Companies Law has some provision for insolvency in the UAE. But officials and experts say that law is outdated and the UAE now needs a more detailed one to deal with potential bankruptcies/insolvencies in a better way.
Will the new law tackle potential bankruptcy/insolvency of Dubai World entities?
No. The Dubai Government has already announced a legal framework to deal with Dubai World’s debt restructuring by setting up of a court under the Dubai International Financial Centre. This court is mandated with tackling all potential cases if Dubai World entities choose to opt for such a route.
What will be the new law modeled on?
The UAE government is looking at some of the best models of bankruptcy protection laws across the world in various economies, including a model devised by the United Nations. The UAE is looking at taking the best solution for the country.
Will the new law only apply to businesses and corporations or also to individuals?
It is not really clear at this point, but indications are that the new legal framework will apply to businesses and corporate, and not to individual cases of personal insolvency.
Is the UAE’s legal community prepared to handle the big volume of bankruptcy/insolvency cases?
According to Hamad Bu Amim, Director-General of Dubai Chamber of Commerce and Industry, the judicial system is equipped and the legal community is prepared to handle the situation.
