By Elizabeth Broomhall
Gulf state likely to roll out new legislation in 2012, says Dubai Chamber chief
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.
This concept will work only in Democratic country. The main reason transperancy and accountability. There is no transperancy
except few companies. All company owners wants to make quick money and run from here.
It is not so much democracy but rule of law. You could have that in Singapore, not the most democratic regime specially in the past, but very careful about the application of law.
About owners wanting "to makquick money and run from here" I would like to kindly point you that we are constantly reminded about the airport and the many roads leading to it, and the many airplanes leaving from it. Are you surprised people have a short term mindset?
A bankruptcy law is long overdue in the UAE. In view of the remarkable growth achieved by the country in a very short span of time it is high time that bankruptcy is recognised as a legitimate business situation and not necessarily one that is conditioned by criminal intent. A propoerly implemented bankruptcy law will go a long way in consolidating UAE as a preferred investment destination.
I will be interested to see as to whether the bankruptcy law will also apply to company's that are 100% foreign owned, such as free zone company's or merely to firm's with majority UAE National ownership aside from state-owned entities.
If the new law does apply to 100% foreign companies, then that will help, but implies that directors' visas need to be longer than what has been cut from 3 to 2 years on the next time round renewal, possibly 5 years. No one in their right mind would wish to be in the country illegally while honourably stewarding a bankruptcy.
While Dubai Nat & Res say they are attempting to revoke this new visa rule, I doubt that there will be change of mind at Federal level. Primarily because the visa rules were amended, as I understand it, to help increase the number of UAE Nationals in work and senior positions available to them as well as reduce the number of foreigners working in the country.
However, if this law does not apply to 100% foreign owned co's?
If this newspaper is a reliable measure of people's feeling I think you should not count on a extended visa. I am sure some sectors in Dubai specially are pushing for this, but I seriously doubt they will get any traction at the Federal level.
In any case this is just an announcement, operational words "is likely to be introduced in 2012"; lets wait to see what (if anything) comes out of this.
All robust and mature economies need some form of a bankruptacy law to allow a legal resolution of unfortunate business eventualities
We have heard about this impending law for quite some time. Like most other announcements, the actual notification and implementation may only happen after a very long gap and the provisions may fall short of what is expected, required and necessary.
Let us see how long it takes for this one to happen