By Staff writer
ICAEW's Middle East chief says new legislation will be 'key part' in UAE's continued economic development
Accountancy and finance body ICAEW has hailed the long-awaited publication of the UAE's bankruptcy law, saying it is a "key part" of the continued development of the country’s economy.
UAE President Sheikh Khalifa bin Zayed al-Nahyan on Monday issued the decree on bankruptcy laws in the country, with the biil expected to come into force in late December or early January.
Responding to the new legislation, which aims to enable businesses to restructure their debt while avoiding liquidation, Michael Armstrong, regional director ICAEW Middle East, Africa and South Asia, said: “These reforms will prove vital for doing business and attracting international investors.
“However, there is still a relatively low level of knowledge regarding insolvency in the UAE, if not the region in general. This is certainly true of the long and sometimes complex legal process, where many businesses are not clear on procedures or what they should be doing.
"Improving understanding of the reformed law will be critical if it is to be effective. One of the most crucial factors in rescuing any business that has got into difficulties is recognising that there is a problem at the earliest possible stage, and seeking help or intervention.”
The new legislation is expected to help smaller companies in particular as the UAE economy slows because of low oil prices.
Last month, Essam Al Tamimi, one of the country’s top lawyer, said the new law, understood to be based on ‘Chapter 11’ bankruptcy legislation in the US, will focus on company restructuring – something that is not currently available in the UAE.
Industry bodies including the UAE Banks Federation have been lobbying for such a law for several years. They claim the absence of formal bankruptcy legislation in the country hinders the growth of small-to-medium-sized businesses in particular – a sector the government is keen to develop.
Under existing legislation, unpaid debt or a bounced cheque can wind businesses in jail.
This has proved problematic for smaller companies in particular as some executives of troubled firms have fled the country, leaving behind bad debts.