The UAE cabinet has approved the final draft of the federal bankruptcy law, Sheikh Mohammed bin Rashid, the country’s Vice President and Prime Minister and Dubai’s ruler announced on Sunday.
The law aims to help the country improve the ease of doing business, Sheikh Mohammed said on Twitter.
We also passed the final version of the new Federal Law on bankruptcy, which aims to promote both investment and ease of doing business.
— HH Sheikh Mohammed (@HHShkMohd) September 4, 2016
Last week, the UAE’s economy minister Sultan Saeed al-Mansouri had confirmed that the long-pending law would be finalised by the end of this year.
“The need for a bankruptcy law is there, as soon as possible,” he told reporters.
Existing legislation in the country means a bounced cheque landing the issuer in jail, causing many business owners to flee the country with unpaid debts.
UAE Banks Federation chairman Abdul Aziz Al Ghurair told reporters in November that small business owners had fled the country with around Dhs5bn ($1.4bn) in debt last year.
The severity of the problem forced the country’s banks to halt prosecution of bounced cheques for SMEs under a rescue initiative, announced in March.
Experts say the new law is anticipated to decriminalise bounced cheques and facilitate corporate bankruptcies.
Speaking recently to Gulf Business, Wamda Capital chairman and Aramex co-founder and vice chairman Fadi Ghandour said that changes to the country’s bankruptcy legislation were “essential”.
“I don’t know of any country in MENA that has a proper bankruptcy law but its time to do it, just because that box needs to be ticked,” he said.
“You need to give the entrepreneur the confidence that you are not going to go to jail if you go bankrupt,” Ghandour added.