Monday, September 5, 2016

UAE Cabinet approves final draft of federal bankruptcy law

The final draft of the federal bankruptcy law has been approved by the UAE Cabinet, Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, said on Sunday.

The legislation aims to "promote our economy’s attractiveness for investments and to facilitate business", according to a tweet from Sheikh Mohammed.

Last week the economy minister said that the law was needed to help owners of small- and medium-sized enterprises weather a slowing economy and rising levels of bad debt.

Sultan Al Mansouri said that he expected the law to be finalised within a matter of months but that it would need to be approved by the Federal National Council before it becomes law.

The law will put a moratorium on sending people to jail for bounced cheques until a restructuring plan for business owners has been agreed with creditors, a senior government official told Over the past two years a number of small business owners in the UAE have fled the country leaving unpaid loans in their wake in fear of being jailed for defaulting on debt and other financial obligations.

For years, observers have urged the government to put in place a raft of legislation to make it easier for SMEs, the lifeblood of the economy, to thrive.

Earlier this year, consultancy firm KPMG recommended in a report on small businesses that the most urgent of those changes is the implementation of a comprehensive bankruptcy law to make it easier for SMEs to cope with insolvency in ways other than fleeing the country.

Abdul Aziz Al Ghurair, the chief executive of Mashreq and head of the UAE Banks Federation, said in November that some small business owners had skipped town, leaving about Dh5 billion of unsettled loans.

In May, however, Mr Al Ghurair said the potential fallout from rising levels of SME bad debt had been contained as banks work with business owners to restructure debt.

No comments: