The UAE’s decision to amend its Bankruptcy Law is an important step to boost investor confidence in the country, according to Hamad Buamim, the president and CEO of Dubai Chamber of Commerce.
The amendments, which were announced by the UAE Cabinet last week, enable individuals and businesses to overcome credit challenges in “emergency situations”, including the current one brought on by coronavirus.
“The decision to amend the UAE Bankruptcy Law is an important development that will ensure business continuity, boost investor confidence and enhance economic competitiveness,” said Buamim.
“The move complements the latest AED500 million ($136 million) economic stimulus package introduced by the Dubai government, which expands on ongoing efforts to help businesses overcome new challenges created by the pandemic,” he said.
Dubai announced the extra stimulus package late on Sunday in support of the coronavirus-hit businesses.
Hamad Buamim, the president and CEO of Dubai Chamber of Commerce
“The updated law reflects the government’s pro-activeness and swiftness in responding to the changing needs of businesses in the country,” added Buamim.
Under the original law, companies were obliged to file for bankruptcy when they were insolvent and would be fined if they continued to trade.
“This amendment is a swift reaction to the current pandemic and may represent a vital lifeline to some companies struggling under the financial impact of the pandemic,” said Scott Hutton, partner at EKP Legal, a regional law firm.
“It effectively offers these companies protection,” he added.
“Under the new amendment, and in ’emergency situations’, a company can defer that application and seek up to 12 months to reach a settlement with its creditors. During this time, the company’s funds are protected and creditors cannot interfere with funds that are required to keep the business operational,” explained Hutton.
Last week, the UAE Cabinet approved amendments to the Bankruptcy Law to protect companies in “emergency situations” that impinge on trade or investment.
Scott Hutton, partner at EKP Legal, a regional law firm
They aim to enable individuals and businesses to overcome credit challenges in times of pandemics, natural and environmental disasters and wars.
The amendments are also aimed at ensuring fulfilment of obligations, and mitigating loss given default without prejudice to bankruptcy law, while enabling creditors to secure their rights.
They stipulate that the debtor shall be exempted from commencing procedures to declare bankruptcy. The changes give businesses the possibility of finding new financing in order to secure the liquidity needed to survive challenges in time of emergencies.
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