Struggling companies should soon be offered a helping hand as officials push for a new bankruptcy law to come into force by the end of the year.
Bankruptcy law may be in place by end of the year
Struggling companies should soon be offered a helping hand as officials push for a new bankruptcy law by the end of the year.
The law is seen a vital cornerstone in the UAE's efforts to drive the economy by giving a fresh start to cash-strapped businesses unable to pay their bills.
"We hope and are working for the end of the year," said Dr Hadef Al Dhaheri, Minister of Justice. "It is in the final stages as far as the Ministry of Justice is concerned, but it's also a long process as far as others are involved."
The Ministry of Justice was still in discussions with the Ministry of Finance, which was the government entity overseeing the draft law, he said. After the Ministry of Justice, the draft would then be passed to the Cabinet for approval before the Federal National Council gives it the go-ahead, he said.
Under existing law, firms that encounter financial troubles and are unable to pay creditors run the risk of having criminal action taken against them. Decree 57 was created by the Dubai Government to give breathing room to Dubai World and its subsidiaries to help them restructure debt.
Now the Government plans to overhaul federal rules to allow more firms and creditors to be treated in a similar way.
The proposals are inspired by international best practice.
"The principal law it is derived from is French law but they are then modified to fit with contemporary UAE law and culture and certain elements of UK and US Chapter 11 law," said Adrian Cohen, a partner at the law firm Clifford Chance, which has advised on the draft law.
The French conciliation process requires creditors of a firm to agree on a settlement, said Mr Cohen. Another part of the UAE proposal is similar to US bankruptcy rules, which enables a debtor to submit a repayment plan to creditors to vote on.
"If you want a vibrant economy then taking a risk, failing, starting again and taking another risk is how you will encourage entrepreneurship," said James Filpi, the senior counsel at the US department of commerce and an adviser to the Dubai Economic Council on the law.
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