A bankruptcy law designed to help mitigate future financial difficulties of the type experienced by some of Dubai’s largest state-owned firms is likely to be introduced in 2012, the director general of the Dubai Chamber of Commerce and Industry (DCCI) said.
The ruling, modelled in part on US and British practices, will overhaul how companies and individuals unable to pay down their debt are treated by the law, Hamad Buamim said.
“A bankruptcy law will give security to businesses,” he said. “We are working very hard with the government. The law is in the final formal stages and [we expect it to come into effect] very, very shortly. I hope it will be in 2012.”
A draft form of the law has been delivered to the UAE’s Ministry of Justice, it was reported on Thursday.
Bankruptcy laws in the UAE were pulled into the spotlight after some of Dubai’s largest state-owned firms sought to renegotiate borrowings in the wake of the global financial crisis.
Dubai World agreed economic terms with its lenders on $23.5bn of debt in May. State-owned developer Nakheel said in August it is restructuring AED59bn ($16.1bn) of liabilities, including AED32bn to Dubai government, AED19bn to trade creditors and AED8bn to banks.
The company narrowly avoided a 2009 sukuk default after Abu Dhabi stepped in with a last-minute $10bn lifeline for Dubai.
Buamim said the bankruptcy law, which has been two years in the making, would help attract foreign investment to the UAE and cut the number of expatriates absconding over debt obligations.
“[It will allow] challenged businesses to restructure,” he said. “Three years ago, if I was the owner of a business and in a very bad situation, I packed my bags and left. Because I couldn’t restructure my business. This is a major step going forward.”
The law is also expected to map out ways for indebted companies to access finance, in a bid to address a clampdown in lending in the UAE in the wake of the financial crisis.
Dubai established a $20bn bailout fund to help state-owned firms unable to raise cash from banks during the credit crisis. The Gulf emirate said in May the fund would also offer aid to non-government entities as the emirate continued to battle a debt crisis.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.
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