MoF reviews the final draft of the federal bankruptcy law

The Ministry of Finance (MoF) reviewed the final draft of the federal bankruptcy law, which was recently approved by the UAE Cabinet on the 4^th of September, during a media round table held today at the Ministry’s premises in Abu Dhabi. 

HE Obaid Humaid Al Tayer, Minister of State for Financial Affairs reviewed the final draft of the federal bankruptcy law, and which falls under the directives of HH Sheikh Khalifa bin Zayed Al Nahyan, UAE President, and HH Sheikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai. This law is considered as an important addition to the UAE legislative system.

The bankruptcy law sets up a new regulatory body the “Committee of Financial Restructuring”. The UAE Cabinet will decide on the number of members and entities that will represent the committee, and will administer the committee’s law and its procedures. The Committee is in charge of: overseeing the procedures of financial restructuring outside the scope of the court, appointing experts in the field of financial restructuring, establishing an electronic record of individuals issued against them a bankruptcy ruling, by either imposing restrictions as ordered by the court or the loss of eligibility under the provisions of the law. The Committee is also responsible for organising and sponsoring initiatives that raise awareness among the public on the specification and objectives of the law, submitting periodical reports on the achievements, suggesting amendments to any provision of the law and determining any fees incurred as well as any other tasks or mandates stated by the law or the UAE Cabinet.

HE Obaid Humaid Al Tayer highlighted that the Ministry sought to implement a law that is based on modern legislative and economic principles, while taking into consideration the global developments and changes taking place in the economic and business sectors. These efforts have led to implementing the bankruptcy law, and distinguishing it from other laws on a regional level as well as in developed countries. The law was set to match various bankruptcy cases, determine all legal tools to restructure the debtor’s business in accordance with specific terms and conditions as well as a legislative framework. 

HE Al Tayer added: “Mature economies have proven the need to implement a bankruptcy law in each country that wishes to strengthen its economic status. The Bankruptcy law is considered as one of the most important pillars for the local economy, as it provides protection for all parties, in addition to its pivotal role in attracting capital, in a safe and attractive investment environment and providing a protection legislation and legal acts.”

The law works on identifying different ways to avoid bankruptcy cases and liquidation of the debtors’ funds, a comprehensive financial restructuring outside the scope of the court, composition procedures and the possibility to get new loans under terms set by the law. The law will also prevent individuals from bypassing the law as there is a number of punishment including five year prison sentence as well as fines up to a million dirhams.

The law includes raising credit levels and financial guarantee within its legislative priority to strengthen the confidence among investors and boost the economy by enabling the financially distressed businesses to restructure, and pay their debts and obligations without disrupting the production process in accordance with transparent legal framework. This makes it the only law which includes those specifications in the Arab region.

The law is implemented on: companies that were established under commercial company laws as well the companies who were not established under the commercial company law, semi or fully owned companies by the federal or the local government where their establishment legislatives are under this law, companies and institutions established in free zones and which do not have provisions to regulate composition procedures or restructuring bankruptcy according to the Federal law No. 8 of 2004 concerning financial free zones, any trader and licensed civil company.

HE added: “We are delighted to adopt the final draft of the bankruptcy law, to encourage entrepreneurs who seek a secure investment environment to direct their investments in the country, while strengthening their trust in the legislative and legal infrastructure in the UAE that implements clear and transparent laws preserving their rights and achieving balance between the creditor and the debtor as well as prioritize creditors with guarantees over the ones without guarantees.”

HE Al Tayer concluded: “The bankruptcy law will contribute in supporting the strategic plans adopted by UAE to develop its economic, financial and legislative structure. The law will also raise the UAE’s competitiveness levels in international reports, which will support the sustainable economic growth and enhance the national economy, which in return support the sustainable economic growth and promote the national economy on a global level.”