+971 (0)4 551 0677 | enquiries@cbddubai.com | Office #307, Building 6 Bay Square, Business Bay

  • About Us
  • Business in UAE
  • Our Services
  • CBD Insights
  • Contact Us

Courts ‘key to success’ of UAE’s new bankruptcy laws - Arabian Business


Wednesday, January 4th, 2017News, Regulation updateCBD Corporate Services


Published 20 December 2016

The ability of the UAE courts to interpret the country’s new bankruptcy law and handle proceedings will be key to its effective implementation, according to Fitch Ratings.  The law, which is due to come into effect at the end of this month, aims to create a clear framework for court-based bankruptcy proceedings as an alternative to liquidation.  The UAE’s existing insolvency law does not provide for the rehabilitation of distressed companies through creditor agreements.  There are many recent examples of ‘skip’ cases, where SME owners have fled the UAE when they could not repay their bank loans because, as under domestic personal criminal law, expatriate borrowers can be jailed if they bounce a cheque or fall behind on their financial obligations.

“We think the new law could benefit banks and corporates, by allowing for going-concern restructuring,” said the ratings agency in a research note.

Existing UAE law defines how a court can declare a company bankrupt, appoint a trustee, realise assets and settle debts. But there has been no legal provision for the rehabilitation of distressed companies through creditor agreement, and the regime is largely untested.  So far debt restructurings have been informal, out-of-court arrangements, partly due to creditor perceptions that local courts lack judicial expertise and that court proceedings will be lengthy and expensive, Fitch said.  It added that when economically significant entities have experienced financial difficulties, the government has intervened, for example by introducing bespoke legislation when Dubai World rescheduled debt repayments in 2009.  Fitch said this has left some issues unclear, such as whether courts can annul certain transactions by a borrower in the run-up to a declaration of bankruptcy.

“We therefore think the potential benefits of the new law will only be fully felt once the courts have established a track record of interpretation and implementation. It may take time to establish whether giving distressed companies the chance to embark on consensual debt restructuring before the start of liquidation proceedings, will increase and speed up recoveries, which could improve the theoretical position of creditors,” the research note added.

The law will apply to all companies established under the UAE’s commercial companies’ law. Companies established in the UAE’s free zones are not included because these areas have their own insolvency and bankruptcy laws.


Wednesday, January 4th, 2017News, Regulation updateCBD Corporate Services
  1. Home
  2. Blog
  3. Courts ‘key to succe ...

Categories

  • Article
  • Insight
  • News
  • Regulation update
  • Testimonial

Latest posts

  • CBD client secures historic investment from Israel November 25, 2020
  • Major reform in the UAE foreign ownership Laws November 25, 2020
  • Revised Economic Substance Regulations November 25, 2020
  • Tips, opportunities and potential pitfalls November 25, 2020
  • UAE Businesses to Disclose UBO November 25, 2020
  • Celebrating our client’s success – Nomad Homes November 10, 2020
  • CBD appoints Wayne Merrick October 1, 2020
  • Celebrating our client’s success – Arena September 28, 2020
  • Celebrating our client’s success – Vital Certificates September 7, 2020
  • Celebrating our client’s success – Protein Bakeshop August 24, 2020

Tag Cloud

Abu Dhabi ADDED AGM Attestation Bank guarantee Bankruptcy business client Clients Covid-19 DED Dubai Economic Substance Education Emiratisation Employment EOSB events F&B GCC General Manager Health Healthcare Intellectual Property investment israel Labour Law Maternity Medical Insurance MOE MOF MoHRE MOL real estate residency Tawteen Testimonial Tourism Trade mark Trading UAE UAE law VAT Visa WPS


Office #307, Building 6
Bay Square, Business Bay
PO Box 75633 Dubai, UAE

+971 (0)4 551 0677

LinkedIn
map
Home
About us
Business in the UAE
Our Services
CBD News & Blog
Contact us
Cookie Policy | Privacy Policy | T&C
© 2021 CBD Corporate Services | developed by ECHT.ME