UAE Close to finalising Federal Bankruptcy Law – Justice Minister Hadef bin Juan

The United Arab Emirates is close to finalising an updated federal bankruptcy law and a draft of the legislation should be ready by the end of this year, Justice Minister Hadef bin Juan al-Dhaheri said on Monday.

The draft, which has been in the works since 2009, should enable both listed and family-owned companies in the UAE to be rescued rather than having to go through lengthy bankruptcy or liquidation proceedings.

"The ministry is studying a set of laws," Dhaheri told a conference on financial restructuring and bankruptcy in Dubai.

"Among them is a federal law on foreign investment, another one on SMEs (small and medium-sized enterprises) and also another law on arbitration in commercial transactions and another one on bankruptcy and restructuring," he said.

Asked whether the government was going to clear the long-awaited bankruptcy legislation this year, Dhaheri later told reporters: "Hopefully, God willing."

Dubai's debt crisis in 2009-2010 put company restructuring firmly in focus for both the government and investors. However, existing federal bankruptcy laws remain untested in UAE courts as distressed companies prefer to settle creditor claims privately because the existing legislation is opaque and complex.

In 2009, Dubai, one of seven UAE members, issued a special decree to deal with a $25 billion debt restructuring at its flagship conglomerate Dubai World.

Dhaheri also said another draft, on foreign investment, was still being discussed by the ministry's legal committee but declined to give details and timing: "I can't give a framework for it."

The new UAE bankruptcy law may ease debt restructurings with greater provision for out-of-court negotiations and the government hopes it would help attract more foreign investors.

In addition, it contains provisions that can force a minority of creditors to accept a restructuring agreement if it is acceptable to the majority, a process known as a cramdown.

However, it will still be difficult to seize assets - even if they are pledged as collateral - since land ownership in the UAE is on the whole restricted to citizens, with some provisions for nationals of other countries in the Gulf Cooperation Council.

So international banks involved in a state-linked corporate restructuring would not be able to take control of assets and sell them on to realise their dues, as would happen in the West.

The new law will not apply to government entities or entities operating in a financial free zone such as the Dubai International Financial Centre, which has its own insolvency laws, experts have said.

It takes just over five years to resolve insolvency in the UAE, one of the world's top five oil exporters, with a recovery rate of only 11 cents on the dollar, which puts the country at 151st place globally, according to a World Bank survey. (Reporting by Martin Dokoupil and David French; Editing by Susan Fenton)

How much rent be hiked in Dubai- Rent hike slabs as per law

Rents are going up in Dubai and are likely to go up further by the end of the year. Many residents in Dubai, who were breathing easy as rents came down, fear a repeat of 2008, when greedy landlords would jack up the rents arbitrarily.

However, this should not be the case as there are legal clauses in place for rent hikes in the city. According to legal experts with top firms in Dubai, landlords are allowed hikes which are set out as per government guidelines.

For those tenants who can foresee rent hikes on the property they are living in, this is what they should consider. First, they need to look at the time when they signed the lease of the property.

According to Andrew Thomson, Senior Associate at Clyde & Co, the hikes will depend on when the tenant moved into the property and there are two slabs for this.

“For properties leased prior to January 2011, no increases will be permitted if the rent is less than 25 per cent of the average rent for similar property in the same area. If it is more than 25 per cent, then there is a staggered permitted increase ranging from 5 per cent to 15 per cent.

“For those leased after January 2011, if a landlord wants to increase the rent, he has to inform the tenant at least 90 days before expiry of the current tenancy period (unless the parties agree otherwise).

“The increase of rent in Dubai is governed by Amiri Decree 2 of 2011,” Mohammed Kawasmi, Head of Property, Northern Emirates at Al Tamimi & Company told this website.

However, in case of a dispute, the parties should approach the Rent Committee, which has been set up to resolve such cases.

“If the landlord requests an increase in violation to the said Decree, then the tenant has the right to file a case at the Rent Committee which will decide on this based on the said Decree,” added Kawasmi.

“If the parties do not reach agreement on this, the Rent Committee may decide a fair rent and have consideration to the RERA rental index calculator.  The RERA rental index calculator currently states that no increases will be permitted if the rent is less than 25 per cent of average rent for similar property in the same area. If it is more than 25 per cent, then there is a staggered permitted increase ranging from 5 per cent to 15 per cent. Ultimately, however, the Rent Committee is not bound by the RERA rental index, and can make awards on the basis of the particular circumstances of each case,” said the Clyde & Co expert.

Rent hike slabs as per law

According to Decree No. 2 of 2011 on rentals in the Emirate of Dubai, the landlords can increase the rent as below.

Article (1)

The maximum rent increase percentage of property units in the Emirate of Dubai leased before the enforcement of this Decree shall be as follows:

A - There should not be any rent increase, if the rent for the real estate unit is up to 25% below the average similar rent.

B - If the rent value was 26% to 35% less than the average similar rent; the maximum rent increase shall be equal to 5% of such value.

C -If the rent value was 36% to 45% less than the average similar rent; the maximum rent increase shall be equal to 10% of such value.

D - If the rent value was 46% to 55% less than the average similar rent; the maximum rent increase shall be equal to 15% of such value.

E - If the rent value was less than 55% of the average similar rent; the maximum rent increase shall be equal to 20% of such value.

Article (2)

For the purpose of this Decree the similar rent value of the property unit means pursuant to “The Rent Index of the Emirate of Dubai” approved by RERA.

Article (3)

This Decree shall be enforced from the date of its issuance and shall be published in the Gazette.

Issued in Dubai on 10 January 2011.

Ramadan may start on July 21 and Eid Al Fitr holidays from August 19 UAE Astronomer

A UAE astronomer has forecast the Muslim's fasting month of Ramadan might start on Saturday, July 21, and the Eid Al Fitr would be on August 19.

Ibrahim Al Jarwan, Astronomy Researcher and Supervisor of Sharjah Planetarium, said that the birth of the crescent moon will be on Thursday, 19th July 2012, at 8:24 am (UAE time), and the sunset will be at 5:09 pm, while the moon will set two minutes after sunset.

''The crescent moon of Shawwal 1433 will born on Friday 17th August 2012, at 5:54 pm local time, and the sunset will be at 6:49 pm same day," he added.

Al Jarwan said sighting the crescent would be impossible on Thursday night, but it would be visible on Friday night.

Therefore Saturday, 21st of July would be the first day of Ramadan, he anticipated.

Checking tyres could save your life

Faulty tyres and hot weather are a deadly combination for road users and police and experts say worn out tyres are a leading cause of accidents in the country.

A little attention can save lives and make the road safe for all, according to the police who reported some 31 deaths were caused by tyres bursting last year. These accidents mostly occur on highways.

"An expert checks the tyres' health just once a year when a vehicle comes for registration renewal. And then nobody bothers to check them again,". It is a technical matter and a tyre safety expert must be consulted regularly.

Tyre safety depends on various factors including weather, use of brakes, wheel balance, the vehicle's load, air pressure, age of the tyres, and the original quality of the tyres. They must be inspected thoroughly at least once a month, he said.

Air pressure in tyres is very important in hot weather. This pressure must be in accordance with the vehicle's specification mentioned in the manual

Rakaish Khurana, another tyre safety expert in Al Ain, said people normally go for cheaper options when it comes to buying new tyres. The market is full of substandard tyres. "I have noticed that people are more concerned about price rather than quality and safety," he said.

Quality tyres should be used in the vehicles instead of buying cheap, low-quality tyres. A good quality tyre can withstand temperatures of 250 degrees Centigrade, providing enhanced safety against tyre bursts, he said.

He said most drivers do not understand the importance of tread depth. This depth must be at least 1.6mm. "I recommend tyres be changed when this depth reaches 3mm depending on weather conditions, the use of the vehicle, road conditions, and a car's fitness including wheel balancing and alignment," said Khurana. People need to be very careful when they buy a used vehicle as they are not aware of the condition of the tyres. "They must be replaced immediately even if their age is less than three years in some cases." he added.

A traffic police officer said tyres are a major concern when it comes to road safety. The Ministry of Interior has recently released statistics saying 720 people lost their lives on UAE roads last year of which 31 deaths were associated with tyre- related accidents. Though this number is slightly less than the previous year much still needs to be done.

Main areas: Safety aspects

    Air pressure: Do not neglect air pressure. Low pressure damages the tyres and high pressure could lead to a blown tyre. Air pressure must also be maintained in accordance with a particular vehicle's specifications. Tyres must also be correctly inflated.

    Tread depth: It is vital for tyres to keep grip on the road. Low tread depth compromises the effectiveness of brakes and steering ability of vehicles. The minimum legal depth is 1.6mm, but don't wait for it and replace the tyres even before it gets to this level.

    Wheel alignment: This helps in reducing wear and tear and stress on the tyres. It also enhances balance and steering ability of a car.

    Wheel balancing: The health of all of the tyres is important for a safe road trip and wheel balancing is also critical for this. An out of balance tyre increases wear and tear and compromises safety. It can cause annoying shakes and dangerous mechanical damage in the vehicle.

    Tyre rotation: Good health of tyres demands routine rotation. After every five to seven thousand kilometres, experts suggest tyre rotation to maintain equal use of centre and shoulders of the rear and front tyres.

UAE banks enforce new cheque rules and Landlords ask UAE tenants for new cheques

Landlords have put up notices in their buildings, asking tenants to replace the old rent cheques issued last year, as banks have stopped accepting them.

“Kindly bring new cheques as old cheques are no longer being accepted by our bank,” said a notice posted in one building.
An owner of a building in Bur Dubai told this website: “We deposited a couple of rent cheques last month, but they still haven’t been cleared. Our bank told us that they are processing the cheques, but it will take a lot more time. So we have asked our tenants for replacement of the cheques.”

M Dimitre, who deposited a rent cheque early this April, still hasn’t got the amount credited to his account.

“I deposited a rent cheque in April. Even after a month, it hasn’t got cleared. I cannot get the cheque back as the bank says it is processing it. I have asked my tenant to pay me the rent for the next quarter in cash, or provide me with a new cheque.”

Property management companies, however, have taken the requisite precaution beforehand by not accepting any old cheques from tenants on renewal or for a new lease.

Zubin Firozi, Head of Property Management, Head Office, Better Homes, mentions: “In the beginning of 2010 we had notified most of our tenants of Central Banks’ regulations of the cheques, and the tenants on their renewals provided us with their new cheques.

“For new leases we had only a couple of cases where we faced this issue of the old cheque taking time to be processed by the bank, but since then we have been quite vigilant and only accept the new cheques from tenants,” he adds.

It was reported in January last year, UAE banks had started enforcing rules by the Central Bank to turn down old cheques and accept only those with high security standards within a drive to combat forgery and ensure monetary stability. Banks, nevertheless, continued to accept old cheques.

In a circular to banks in late 2009, the UAE Central Bank asked banks to switch to the new money tools in a bid to prevent fraud and set a deadline at the end of 2010. It told the banks to ensure that the new cheques to be issued are thermo-chromic sensitive and chemical sensitive.

While being thermo-chromic sensitive will prevent fraudsters from using the colour photocopy of cheques to cheat unsuspecting people, the chemical sensitivity will render it impossible for anyone to tamper with the signature or remove or alter the content on the cheque leaf.