The long-awaited insolvency law is expected to contain provisions for corporate bankruptcy modelled on Chapter 11 proceedings in the US, a government official said yesterday.
Fahad Al Raqbani, director general of Abu Dhabi Council for Economic Development, said that the upcoming insolvency law will introduce a corporate bankruptcy procedure similar to the US Chapter 11 bankruptcy process. Chapter 11 proceedings allow companies to renegotiate the terms of their debts with creditors.
“It is a very important law, [and will] encourage people to declare the insolvency of their companies,” Mr Raqbani said. “It will cover investors’ rights … and support the economy.”
“Many companies in the US undergo Chapter 11 bankruptcy and then gain in momentum,” he said. “A given project may be successful, but also need restructuring.”
The insolvency law was passed by the Cabinet in July. It now needs the ratification of the consultative Federal National Council and of the Supreme Council, the country’s seniormost legislative body.
It is expected to contain provisions to decriminalise bouncing cheques, as well as facilitating large corporate bankruptcies.
“The draft law aims to regulate accumulated debts, eases restructuring of companies as well as support troubled businesses,” Sheikh Mohammed bin Rashid said, after the Cabinet passed the law.
“The draft law aims to mitigate risk of bankruptcy and ensure a safe and attractive business environment in the UAE that nurtures and supports investments.”
The UAE is ranked 92nd in the world in terms of its legal framework for insolvency, according to the World Bank’s annual ease of doing business report.
Mr Al Raqbani also said that the Abu Dhabi government would not cut spending or projects in response to the low oil price.
“People should not [expect] the slump in oil prices … to lead to a drop in government spending or that projects will be cancelled,” he said. “This is a temporary situation.”
Mr Al Raqbani spoke on the sidelines of the Akoun entrepreneurship awards, a government scheme to recognise new business ideas.
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