UAE cabinet approves draft law on bankruptcy

The UAE cabinet has approved the issuing of a much-awaited law on financial regulation and bankruptcy, official news agency WAM reported.

The proposed draft law presents “flexible strategies” to bailout businesses if faced with financial troubles that might lead to bankruptcy, the report said.

“It aims to regulate accumulated debts, ease restructuring of companies and support troubled businesses,” the report quoted UAE VP and PM and Dubai’s ruler Sheikh Mohammed Bin Rashid Al Maktoum as saying.

The law also seeks to mitigate the risk of bankruptcy and ensure a safe and attractive business environment in the UAE that nurtures and supports investments, he added.

The draft law was prepared after detailed studies with federal and local entities and international consultancies.

“In light of its global investment position, the UAE government seeks to provide incentives to investors to invest in the country by ensuring a supporting environment and benefits to develop businesses in the UAE,” Sheikh Mohammed added.

Experts say the new law, which has been in the pipeline since 2009, will have a major impact on easing the business ecosystem in the country.

It is expected to enable both listed and privately-owned companies that get into difficulties the option of restructure and rescue rather than being forced to wind up.

“Ideally it will also remove some of the stigma attached to insolvency or bankruptcy, which has historically been seen as a disincentive to become involved in insolvency proceedings at an early stage,” according to the regional director of ICAEW Middle East Peter Beynon.

The draft law will now be sent to the Federal National Council for approval, and if passed, it will then require approval from the rulers of the seven emirates before being presented to UAE President Sheikh Khalifa bin Zayed Al Nahyan for the final sign-off.