UAE President His Highness Sheikh Khalifa bin Zayed Al Nahyan has issued the country’s new bankruptcy law through a decree.
Sheikh Khalifa issued Law Decree no. 9 on bankruptcy and others relating to the Federal Supreme Court, crimes against the federation, the federal courts and drug trafficking countermeasures.
The long-awaited bankruptcy law will mean executives and businessman will be able to avoid a jail sentence if their company fails to pay debts.
It is expected to take effect in December or early next year, a source at the Ministry of Finance told The National.
A copy of the law seen by the publication contains provisions to safeguard the rights of creditors and debtors in insolvency situations.
It will apply to companies established under the commercial companies law, those partly or fully owned by the federal or local government and those within free zones that are not covered by existing bankruptcy provisions.
This will mean firms registered within Dubai International Financial Centre and Abu Dhabi Global Market will not be subject to the new law, as well as private individuals.
The law states the country will establish the Committee of Financial Restructuring as a regulatory body to oversee bankruptcy procedures outside of the courts.
It will appoint experts in the field and establish a national database of those with bankruptcy rulings against them, according to the publication.
Creditors will be able to begin insolvency proceedings if company debts of Dhs100,000 or more are unpaid for more than 30 days.
According to The National, creditors will be able to avoid liquidation through four pathways in the new law relating to financial reorganisation, a pre-emptive settlement, financial restructuring and the raising of new funds.
The law also blocks creditors from pressing criminal charges against insolvent firms for bounced cheques if they are undergoing a court-mandated restructuring process