Sunday, Sep 04, 2016

Dubai: The UAE cabinet on Sunday approved the final draft of the federal bankruptcy law.

“Today we approved the final draft of the Federal law on Bankruptcy. The law aims to enhance the investment attractiveness of the UAE’s economy and facilitate the work of commercial companies,” said His Highness Shaikh Mohammad bin Rashid Al Maktoum, UAE Vice-President and Prime Minister and Ruler of Dubai, via a tweet.

Shaikh Mohammad instructed the concerned authorities to proceed with the issuance procedures of the law which aims to promote the UAE’s investment atmosphere and legal sustainability as well as facilitate businesses’ operations in a way that reflects positively on the national economy by keeping up to date with the ongoing developments and enabling all facilities to achieve the highest performance levels to drive the country for more prosperity.

Bankers and business leaders welcomed the move and said the new law will improve business confidence in the country and enhance small and medium enterprises’ access to bank funding.

Rashed Al Baloushi, chief executive officer of Abu Dhabi Securities Exchange (ADX), said the approval of the law will also help enhance the regulatory framework for the economy. Al Baloushi added that having a federal bankruptcy law would ensure companies can survive and have the needed flexibility to manage their finances - all of which are factors that help attract more investments into the UAE.

According to sources, in an attempt to be globally competitive, legal experts have drawn heavily from similar laws in the UK, Germany and Japan. The aim is to allow the debtor to retain control of his business and get court protection for a period of time while solutions are sought. For this purpose, the new law also draws heavily from provisions for corporate bankruptcy modelled on Chapter 11 proceedings in the US.Chapter 11 proceedings allow companies to renegotiate the terms of financing, even before it hits rock-bottom.

“This much-awaited legislation will provide further impetus for entrepreneurs and SME owners to think innovatively and take calculated risks while growing their businesses, as well as encourage lenders to be more supportive of newer ventures,” said Suvo Sarkar, Senior EVP & Group Head, Retail Banking Wealth Management.

By Babu Das Augustine Banking Editor

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