A draft bankruptcy law designed to support companies in financial difficulties has been delivered to the Ministry of Justice as it reaches its final stages before enactment.
The legislation will overhaul how the law deals with businesses and individuals with debt burdens they cannot pay. It is expected to map out a process for the restructuring of debt owed to creditors.
"The Ministry of Finance expects that the new, untraditional features incorporated in this law will aid in promoting growth in the UAE's economy as it will allow for businesses that are facing financial hardships to work on restructuring frameworks and on repaying their debt without decreasing their productivity," said Younis Haji Al Khouri, the undersecretary of the Ministry of Finance, which has helped draft the law with the Ministry of Economy and the Central Bank.
The draft bankruptcy and financial restructuring law had been referred to the Ministry of Justice, the Ministry of Finance said yesterday.
Bankruptcy laws in the country were scrutinised more closely after Dubai World's US$24.9 billion (Dh91.44bn) debt restructuring, which received final approval in June.
Many firms have been contending with a rising tide of debt built up during the boom years before the financial crisis of 2008.
Lawyers and businesses have long been calling for changes to bankruptcy rules to mitigate financial problems and attract foreign investment.
Guided by bankruptcy laws in the US, the UK and elsewhere, the law will span both the restructuring of commercial and non-commercial debt as well as debtor obligations.
In an effort to help to stimulate the flow of credit, the law will set out rules to enable firms struggling financially to access bank loans.
Many businesses have complained about a difficulty in securing bank funding, a trend showing little sign of ending with the current global economic uncertainty. In addition, the law will move to protect the rights of debtors and creditors owed money.
"The decision to refer this project to the Ministry of Justice, in addition to its reaching this advanced phase, follows the Ministry of Finance's efforts during the past years in the field of bankruptcy and financial restructuring," said Mr Al Khouri.
"These efforts have led to this initiative to develop a new law in this area; one that is built on modern and advanced economic principles, and is distinguished from previous laws in its efficiency and effectiveness."
Once approved by the Ministry of Justice, the draft law will then be submitted to the cabinet, then the Federal National Council and finally Sheikh Khalifa, President of the UAE, before becoming law.