Friday, January 31, 2020

How to file the Financial Settlement Proceedings in new U.A.E insolvency Law

The courts in U.AE started taking cases from individuals under the new law from this month. The insolvency law includes civilians who are not merchants whose financial difficulties have prevented them from paying their debts and discharging their financial receivables – the insolvency law has set out clear and easy-to-apply rules for collecting bad debts and rehabilitating the financial position of the debtor

Step 1 - Approach the court
You need to raise the case with a court in the UAE.
Step 2 - Prepare the documents

You would need to provide the following documents as part of your application:

  •     A memorandum containing a brief description of the Debtor’s financial position and any data relating to his sources of income, both inside or outside the State, his professional, vocational or craft status, as the case may be, and his liquidity projections and sources thereof within a period of twelve (12) months following the submission of the application.
  •     A statement of the names and addresses of creditors whose debts are not paid or are not expected to be paid by the Debtor, the amount of each debt, the dates of maturity thereof and the securities provided to the creditors, if any.
  •     A detailed statement of the Debtor's movable and immovable property inside and outside the State and the approximate value of each on the date of submission of the application.
  •     A statement of any legal or judicial proceedings or actions taken against the Debtor.
  •     A statement by the Debtor that he is facing current or anticipated financial difficulties and that he is unable or is expected not to be able to pay all of his debts, whether due at the time of submission of the application or in the future.
  •     The fund necessary to support the Debtor, his family and any dependents thereof.
  •     The Debtor’s proposals to settle his financial obligations.
  •     The Debtor’s nomination of an Expert to undertake the proceedings in accordance with the provisions of this Decree-Law.
  •     A statement of the disclosure of financial transfers outside the State that took place during the last twelve (12) months.
  •     Any other documents supporting the application or requested by the Court.
Failure to Complete the Required Data

According to the law, "If the Debtor is unable to provide any of the documents or data required in accordance with the provisions of Article (3) of this Decree-Law, he shall state the reasons therefor in his application. If the Court deems that the documents submitted are not sufficient to decide on the application, it may grant the debtor a time-limit for the submission of any additional data or documents."
Step 3 - Payment of Fees and Expenses

The exact amount of fees is specified by the court, after assessing the expertise fees and fees of the judicial proceedings. If the debtor is not in a position to make the payment immediately, the law has provisions for delaying the payment.
Step 4 - Measures to preserve debtor's funds
The Court may decide to take the necessary measures to preserve the Debtor's Funds while the case is being processed.
Step 5 - Court decides on the application
Within five days of the application being submitted to the court, the court will decide on whether it will accept the application or not. If the application is accepted to settle the individual's financial obligations.
If the court rejects the application, the individual can take the application to the Court of Appeal. The decision issued in the appeal shall be considered final.
Step 6 - Assigning an expert
The court will then assign an expert, or experts, to the case. The specific regulations related to the selection and assigning of the expert are stated in Article 8 of the law.
Step 7 - Creditors submit their documents
Next, the creditors would need to hand over their debt documents to the expert, along with the necessary statements and collaterals.
Step 10 - Expert completes his report
In 20 days, unless the court grants an extension, the expert will submit a detailed report, clearly laying down the dues and the details provided in the documents of the debtor and creditors.
Step 11 - Court audits the report
The court will then audit the report and if it deems necessary will instruct the expert to create a payment plan to settle the financial obligations of the debtor.
What are the cases in which the application can get rejected?
According to the law, these are the conditions that can lead to the rejection of the application
1- If it is established to the Court that the Debtor has carried out any action or refrained therefrom with a view to concealing or destroying any part of its funds.
2- If the Debtor has provided false statements on his debts, rights or funds.
3- If the Debtor has ceased to pay any of his debts on the maturity date thereof for more than fifty (50) consecutive working days, as a result of his inability to pay such debts.
Step 12 - Preparing the repayment plan
Articles 13 to 20 of the law lay down the detailed process of approval, voting and clearance from all concerned parties to finalise on a repayment plan.
Step 13 - Implementation of the financial settlement plan
Articles 21 to 24 detail how the expert, who is now in a position of supervising the execution of the plan, would implement the plan. This would include the sale of any property held by the debtor and provide regular updates to all parties concerned on the repayment of dues. It is also possible that during the implementation of the plan, the expert finds it necessary to make amendments to the plan. In such a scenario, the process is laid out in Article 24.
Step 14 - Termination, Expiry and Nullity of the Financial Settlement Proceedings Plan
In case the debtor clears all dues as per the plan, the plan shall be completed. However, if the debtor still fails to clear his dues, the law goes on to state how the court and the appointed expert can go on to start insolvency proceedings, which include but are not limited to the sale of assets.

Monday, January 20, 2020

U.A.E Civil Verdicts can be Executed in India

U.A.E Civil Verdicts can be Executed in India
India on January 18 issued a gazette notification declaring the UAE as a "reciprocating territory" for the Code of Civil Procedure and identifying the superior courts here, thereby facilitating the execution of UAE civil court orders through Indian courts.

The Indian Ministry of Law and Justice on January 18 published the notification, dated January 17, in the official gazette.

“In exercise of the powers conferred by Explanation 1 to section 44A of the Code of Civil Procedure, 1908 (5 of 1908), the Central Government hereby declares the United Arab Emirates to be a reciprocating territory for the purposes of the said section and the following Courts in the United Arab Emirates to be superior Courts of that territory,” the notification reads.

The UAE had given effect to the treaty by publishing it in the Federal Gazette pursuant to Federal Decree No. 33 of 2000, according to a 2018 Guidance Note signed by DIFC with Nishith Desai Associates, covering enforcement of civil and commercial judgments through DIFC Courts and the Courts of India.

It said though the ratification of the agreement was exchanged in 2000, the treaty could not be fully implemented as the UAE could not be defined as a “reciprocating territory” for the execution of UAE judgments in India without India’s notification in its Official Gazette to give effect to the treaty.

This move would help in the enforcement of civil and commercial court verdicts in financial cases such as loan defaults, bounced cheques as well as verdicts in divorce cases.

This will be a big warning to those who flee to India after taking huge loans from banks. Earlier, most of the banks and individuals found it difficult to recover their money if the accused had fled to India.
Now, the Verdict holder can approach the district courts in India directly seeking execution of the UAE court orders after due process of attestation of documents.

List of UAE courts whose verdicts can be executed in India
  •     Federal Supreme Court
  •     Federal, First Instance and Appeals Courts in the Emirates of Abu Dhabi, Sharjah, Ajman, Umm Al Quwain and Fujairah.
  •     Abu Dhabi Judicial Department
  •     Dubai Courts
  •     Ras Al Khaimah Judicial Department
  •     Courts of Abu Dhabi Global Markets
  •     Courts of Dubai International Financial Centre

Tuesday, January 7, 2020

UAE announced Five-year Multiple-entry Tourist Visa

Image Credit Dubai Media office
On 6th, January 2020, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai announced tourist visas in the UAE will now be issued for five years.

This announcement on his official Twitter account. Officials say the terms and conditions for obtaining the new visa will remain the same. Holders of the new five-year multiple-entry tourist visa may be allowed to stay for six months at a stretch, sources have confirmed.

about the eligibility of getting the new visa sources said that while details of the new five-year validity tourist visa will be announced soon, it is being proposed that the visa will allow visitors to stay for up to six months on every entry within the span of five-year validity.
The business community and ex-pats welcomed the move by the UAE government and expressed this move will help tourism and business.

Thursday, January 2, 2020

UAE Insolvancy Law now in effect

                                                                                                                                                            Image provide by WAM
Under the new Insolvency law, people won’t be jailed for a bounced cheque, instead, a debtor can now approach a civil court in the emirate they reside in and invoke their insolvency status.

Once the court declared insolvent, the civil court will appoint financial experts to come up with a long-term payment plan with the debtor and creditor. Payments can be done through direct payments to the creditor or by assets owned.

When the payment plan in place, debtors will not face any legal prosecution during that period, and will also have the criminal case against them wiped out once all payments have been completed so they won’t have any criminal record against them

Wednesday, November 20, 2019

How the new UAE insolvancy law will help debt-ridden residents

The law addresses debtors' inability to pay their debts due to bankruptcy and debt default.An insolvency law that was approved by the UAE Cabinet will protect debtors' dignity and gives them the opportunity to manage their finances, the Ministry of Finance has said. The ministry explained how the law will be applied; how debtors can settle their dues; and what documents they will need to submit.

Purpose of the law

The Insolvency Law of Natural Persons addresses debtors' inability to pay their debts due to bankruptcy and debt default. This is known as the 'insolvency of the natural person'. The regulation of this case is linked to the Civil Transactions Act, in accordance with a principle called 'Facilitator's View'. The latter is rooted in Islamic jurisprudence, whereby debtors are granted a reasonable period of time to fulfil their financial obligations. However, this is done provided that such a delay does not cause serious harm to the creditor.

Insolvency law vs bankruptcy law

The insolvency law applies to a natural person who is not engaged in economic activity and is not a trader. However, the primary purpose of both laws is the same: Both exist to protect the common interests of the creditor and the debtor in a fair and balanced manner. The risk is divided between them in such a way so as to alleviate the debtors from the cycle of financial difficulties and enable them to pay off their accumulated debt.

How the law will help
Specialised rules governing the insolvency of a natural person are expected to increase transparency on civil debt repayment transactions and increase the general security of financial transactions, thus enhancing financial stability in the country. It is also expected to accelerate growth and make it easier for individuals to obtain loans, as there are clear rules that are easy to apply to collect bad debts and rehabilitate the debtor financially. This enhances creditor banks' confidence in retail lending and encourages individuals to engage in calculated borrowing. In addition to all its economic objectives, the law has another positive aspect to it: It ensures the protection of the debtors' dignity and helps create an opportunity for them to manage their finances and reduce financial burdens.

Will it affect the economy

The law will bolster the economic stability of the nation and provide a secure environment for personal loans to the contentment of both the creditor and the debtor. The law provides the necessary balance to guarantee the rights of creditors and debtors and encourages increased cash flows.

How long will the court take to decide

The court shall decide on the application (without notice or plea) within five working days from the date of submission of the application.

What happens next?

The decision of the court shall cease the obligation of the debtor to apply for insolvency and the liquidation of their property. Suspension of execution shall continue during the period of settlement of financial obligations unless the debtor breaches obligations.

Appointing experts

In the decision to open a settlement of financial obligations, the court shall appoint one or more experts to assist the debtor in settling financial obligations. The expert shall not be a creditor of the debtor or be associated with them in any interest, or kinship until the fourth degree.

Steps experts will take

The expert shall prepare a plan in cooperation with the debtor, provide the creditors with a copy, and deposit a copy with the court within 22 working days, from the date of the court's decision to instruct the expert to prepare the plan. The court may authorise an extension of the submission period if the need arises.

The expert shall invite the debtor and creditors to one or more meetings, specifying the time and place of the meeting, to discuss and vote on the plan.

They shall be invited to attend the meeting by any means of communication as deemed appropriate.

The first meeting shall be held within 10 working days from the date of providing the creditors with a copy of the plan. The debtor and creditor shall attend the meeting in person, or by someone authorised on their behalf.

Who is not eligible to vote on the plan
  • The debtor's spouse
  • Any person financially supported by the debtor
  • Relatives of the debtor up to the second degree.
Duration of executing the plan
The proposed period for the execution of the plan may not exceed three years from the date of the ratification.

Can the plan be amended

Yes, amendments may be made. The expert shall request the court to approve the amendments. The court shall, before deciding on the application, notify all creditors who may be affected by such amendments; and authorise or reject them.

Invalidation of plan

The court shall decide on the termination of the financial settlement of the debtor in the following cases:
  • If it finds that the debtor's financial obligations cannot be settled
  • If it is impossible to implement the plan because the debtor ceases to pay any of their debts on due dates for more than 40 consecutive working days, as a result of their failure to meet these debts
  • If the debtor requests the court to terminate the execution of the plan before the settlement of financial obligations with creditors
  • If the period specified for the implementation of the plan expires without the settlement of financial obligations of the debtor
  • If the debtor fails to follow the plan.
The approved plan will be nullified if the court finds that the debtor is evading, or attempting to evade, fulfilling their obligations.

Secretary to liquidate assets

The court shall appoint a secretary if it decides to open the procedures of insolvency of the debtor and the liquidation of their funds.

Functions of the secretary

The secretary shall finalise the claims of creditors and prepare a report on the financial situation of the debtor and deliver it to the court within 10 working days from the end of the specified period, which is 20 working days. The court may extend it for a similar period once more.

Replacing the expert or secretary

The court may replace the expert or the secretary upon the request of the creditor or the debtor if it is proved that their continued appointment may harm the interests of either the creditors or the debtor or both.

Judicial decision on insolvency

The court shall decide on the insolvency of the debtor and the liquidation of their assets within 15 days from the date of receiving the secretary's report.

Time the debtor gets

The court may, upon the recommendation of the secretary and the debtor's request, before commencing the liquidation of the debtor's funds, decide to grant the debtor a term under the secretary's supervision of no more than three months. This is extendable by a similar period to reach an amicable settlement with the creditors, provided that this does not prejudice the interest of creditors.

Appealing the term

Any of the creditors may appeal the court's decision to grant the debtor a time for amicable settlement before the Court of Appeal. The appeal shall not result in the suspension of the proceedings and the decision issued in the appeal shall be considered final.

Penal provisions

Dh20,000 to Dh60,000 fine, imprisonment for debtors if:
  • They spend large sums of money in a speculative business that is not required
  • They purchase services, goods or materials for personal or domestic use
  • They gamble
Dispose of their funds at less than the market price

Dh10,000 to Dh100,000 fine, jail for creditors if:
  • They make a claim relating to a fake or sham debt against the debtor
  • They increase the debts to the debtor illegally.