The UAE Justice Minister Hadef bin Juan al-Dhaheri announced on Monday the government is close to finalise an updated federal bankruptcy law and a draft of the legislation which should be ready by the end of this year.
The draft, which has been under review since 2009, should enable both listed and family-owned companies in the UAE to be rescued rather than having to go through lengthy bankruptcy or liquidation proceedings.
“The ministry is studying a set of laws,” Dhaheri told a conference on financial restructuring and bankruptcy in Dubai.
“Among them is a federal law on foreign investment, another one on SMEs (small and medium-sized enterprises) and also another law on arbitration in commercial transactions and another one on bankruptcy and restructuring,” he said.
The minister also hoped that the government will clear the long-awaited bankruptcy legislation this year.
Existing federal bankruptcy laws remain untested in the UAE courts as distressed companies prefer to settle creditor claims privately because the existing legislation is opaque and complex.
In 2009, Dubai, one of seven UAE members, issued a special decree to deal with a $25bn debt restructuring at its flagship conglomerate Dubai World.
Dhaheri hinted that another draft on foreign investment was still under consideration by the ministry’s legal committee. However, he declined to give details and timing: “I can’t give a framework for it.”
The government hopes that the new UAE bankruptcy law may ease debt restructuring with greater provision for out-of-court negotiations and attract more foreign investors.
The new law will not apply to government entities or entities operating in a financial free zone such as the Dubai International Financial Centre, which has its own insolvency laws, experts have said.
According to a World Bank survey, it takes just over five years to resolve insolvency in the UAE, with a recovery rate of only 11 cents on the dollar, which puts the country at 151st place globally.