Sunday, Jan 20, 2013

Abu Dhabi: Since its inception in 2009, there has been a lot of talk about the proposed Federal bankruptcy law. The law has recently passed from the Ministry of Finance to the Ministry of Justice for final review before it is presented to local governments.

According to sources at the Ministry of Finance, the proposal is expected to receive final approvals and then move to become law by the end of the first quarter of 2013.

“We have received the draft law from the ministry of justice and we are discussing it with local governments to reach an agreement. After that, we will send it to the cabinet which will refer it to the Federal National Council which will in turn deliver it to the president for ratification. This is expected in the first quarter of 2013,” Younis Haji Al Khouri, undersecretary of the Ministry of Finance, told Gulf News on Sunday.

Al Khouri pointed out that the new law will allow those in financial hardship to work on restructuring and paying back their debt. “Our collective efforts had led to this draft law based on modern and advanced economic principles, and it is distinguished from previous laws in its efficiency and effectiveness. The law will protect the rights of debtors and creditors owed money,” he explained.

The aim of the new law is to rescue listed and family-owned companies struggling with low asset-to-liability ratios in the UAE without forcing them through the lengthy liquidation process. According Al Khouri, undersecretary of the Ministry of Finance, the new law will create a modern and more debtor-friendly environment that would give distressed debtors room to breathe.

Comparative studies

According to sources, Hadef and Partners had teamed up with the international law firm Clifford Chance to draft the new bankruptcy law, after conducting comparative studies on insolvency laws used in England and Wales, France and Germany. The new law helps stimulate the flow of credit and rewards the UAE with confidence that it is on track to setting international standards of regulation with regard to bankruptcy. Waddah Taha, chief analyst and economist at Zaarouni Group, told Gulf News that the new draft law will overhaul procedures of handling debt burdened businesses and individuals.

“The new law is very detailed and in 274 pages. For the first time, the bankruptcy law will be independent, instead of it being part of the civil law, as it stood before,” Taha said. The bankruptcy law is guided by the US bankruptcy and solvency law chapter 11; and it also incorporates laws which would cover many angles, including restructuring of commercial and non-commercial debts and debtor liabilities.

According to Taha, the government of the UAE has been sending trainees to Europe and the US to specialise in bankruptcy laws to help in handling the new law. “Amongst the provisions of the new bankruptcy law is the change of the Securities and Commodities Authority to the Financial Services Authority,” Taha said.

He also added that a new investment law is in the pipeline which will help attract investments and boost foreign investors’ confidence in the UAE economy. The new law will not be applicable to government entities or entities operating in a financial free zone such as the Dubai International Financial Centre, which has its own insolvency laws, experts have said.

By Shehab Al Makahleh Staff Reporter

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