Improving social mobility will mean allowing rich
children to move down as well as helping poor ones to move up. Does
the government have the stomach for it?
The bankruptcy law provides a comprehensive legal framework to help distressed companies in the UAE avoid bankruptcy and liquidation. Andrew Parsons / The National
Sheikh Khalifa,
the President, on Monday issued the long-awaited new federal bankruptcy law by
decree, according to the state news agency Wam.
The law, which
contains elements of bankruptcy protection laws from jurisdictions including
France, Germany and the Netherlands, provides, for the first time, a comprehensive legal framework to help
distressed companies avoid bankruptcy and liquidation.
Under the terms of
the federal constitution, the new law will come into effect three months from
its publication in the country’s official legal gazette.
A senior official
at the Ministry of Finance, who asked to remain anonymous, said that the new
law had already been published in the gazette, and would come into effect in
late December or early January.
A copy of the new
law seen by The National dates the law’s approval by the president
from September 20.
The new law
contains provisions to safeguard the rights of both creditors and debtors in
insolvency situations, including measures that prioritise secured creditor
rights and enable companies to restructure without unanimous creditor approval.
The law applies to
companies established under the commercial companies law, companies that are
partly or fully owned by the federal or the local government, and companies and
institutions established in free zones that are not governed by existing
bankruptcy provisions. It does not apply to companies registered in the DIFC
and the Abu Dhabi Global Market, or to private individuals.
The law will
establish the Committee of Financial Restructuring (CFR), a new regulatory body
which will oversee the procedures of financial restructuring outside the scope
of the courts, have responsibility for the appointment of experts in the field
of financial restructuring, and establish and maintain a national electronic
database of individuals who have had bankruptcy rulings against them.
Creditors will be
able to initiate insolvency proceedings against companies or traders in cases
where debts of Dh100,000 or more are unpaid for more than 30 days.
Insolvent
companies will be able to avoid liquidation via four pathways set out in the
new law, namely financial reorganisation, a pre-emptive settlement, financial
restructuring and the raising of new funds.
The law also
contains provisions blocking creditors from applying criminal charges against
executive of insolvent companies for bounced cheques, when the company is
undergoing a court-mandated restructuring process.
The approval of
the new law drew praise from the country’s legal community.
"The law is a
very important step for the creation of a healthy, transparent commercial
environment in the UAE," said Essam Al Tamimi, senior partner at Al Tamimi
and Company.
"In a
nutshell it says that companies and traders have to pay what they owe or face
consequences, while also giving them options for rescue and restructure where
there is a realistic and constructive plan in place."
Mark Beer, chief
executive of the DIFC Dispute Resolution Authority, said the approval of the
new law was evidence of the efforts and commitment of the leadership of the UAE
in ensuring that the country’s laws reflected the needs of a dynamic business
environment.
"Working with
the DIFC Courts and the Dubai World Tribunal, which also have the benefit of
excellent restructuring regimes, I have seen first hand the benefits of a
trusted and effective restructuring law in ensuring creditors are paid, jobs
are protected and a business has the protection it needs to thrive," Mr
Beer told The National.
"May I
applaud all those who have worked so hard to bring the new federal law to this
stage."
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