By Staff writer
Draft law aims to regulate "accumulated debts... as well as support troubled businesses,” says Dubai ruler Sheikh Mohammed
The UAE’s new law on financial regulation and bankruptcy, which is expected to decriminalise the bouncing of cheques, moved a step closer to being enacted after a draft proposal was approved by the country’s cabinet.
In a statement on news agency WAM, Sheikh Mohammed, UAE Prime Minister and Ruler of Dubai, said the proposed draft law presents flexible strategies to bailout businesses faced with financial troubles that might lead to bankruptcy.
“The draft law aims to regulate accumulated debts, eases restructuring of companies as well as support troubled businesses,” he said.
“The draft law aims to mitigate risk of bankruptcy and ensure a safe and attractive business environment in the UAE that nurtures and supports investments.”
The new law was drawn up following detailed studies locally and with international experts in the field of bankruptcy, and financial restructure.
“In light of its global investment position, the UAE government seeks to provide incentives to investors to invest in the country by ensuring a supporting environment and benefits to develop businesses in the UAE,” he said.
The law is also expected to include measures that will decriminalise the issuing of bounced cheques.
Deloitte Corporate Finance Limited, in a report issued in January this year, urged authorities in Dubai to relax the criminal implications of bankruptcy and bounced cheques as part of a strategy to enable the emirate, as a financial and trading hub, to reach the next level in terms of sustainability and competitiveness.
The draft law will now go to the Federal National Council for approval, and if passed there, it will be referred on to the rulers of the seven emirates, before it gets final approval from UAE President, Sheikh Khalifa bin Zayed bin Sultan Al Nahyan.For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Bankruptcy Laws - Good,
Decriminalise the bouncing of cheques - Not Good unless this is evaluated and decided on case to case basis.
It states bounced checks for business's. What is being done for the personal check that bounces? I thought a big issue with people in jail for bounced checks
This is indeed the best news for Dubai and UAE. It will bring back the confidence of serious international investors to set up their businesses here. Both bankruptcy law and decriminalising bounce checks are the secret of attracting entrepreneurs to the UAE who will bring about a boom and economic growth.
A significant step forward no doubt but the law has yet to be ratified at a federal level, and it does not say when it is to go before the Federal National Council and there is of course a chance that it will be sent back for amendment. However, in the eyes of the world it is essential that decriminalisation of bounced cheques remains in situ and is not an amendment.Realistically for this legislation to have a substantial impact on foreign investment, then it will have to be extended to encompass personal bankruptcy in a very short time. Many SMEs are set up with personal funds which can include loans, which means the founders remain liable, which discourages entrepreneurs. The article about Philippines nationals being arrested based on 10 year old cases is all too pertinent. Defaults leading to criminal charges at a personal level is one of the major reasons behind impromptu departures in the first place, as there is no chance of working for another employer to help pay off debts.
This is a potential tremendous step forward to bring in new investment into UAE. All startup or rapidly expanding businesses have the risk that a shock of some sort (often due to government or other large organisation payment delays, which themselves don't involve cheques ironically!). This will give confidence to the small and medium sized businesses here to expand.
I hope the inevitable lobbying from some of the local banks can be overcome to approve this law finally.
And I hope the law will incorporate a US Bankruptcy Code Chapter 11 type of protection to allow restructuring and re-emergence from Chapter 11. Creditors will do a lot better than than current system where entrepreneurs often lose everything because they have to leave the country very quickly for their personal protection.
Bravo..I fully agree..Decriminalising bounced cheques will hinder confidence in an important serious business vehicle.This is a north American business style, which is not ours, signing a cheque must be a responsible act.
it will lead to so many scams andn bankruptcies in short n medium term, and where is the machinery to evaluate if it's a genuine bankruptcy or cheating.
I seriously doubt if it will ever come into effect, western laws and eastern business culture