ABU DHABI, Sept 6 A new bankruptcy law in the
United Arab Emirates promises to reduce the risks of doing
business in the country by allowing businessmen and executives
to avoid time in jail if their companies fail to pay debts.
The long-awaited law, approved by the cabinet this week, is
expected to take effect by the beginning of 2017 after it is
promulgated, Obaid Humaid al-Tayer, Minister of State for
Financial Affairs, told reporters on Tuesday.
"This law will add value to the business community and will
be positive for both foreign and local investors. This is an
important step for the UAE," he said.
At present the UAE does not have modern bankruptcy
regulations, making it difficult for companies to restructure or
wind themselves up. Under existing legislation, unpaid debt or
the issue of a bounced cheque can land businessmen in jail.
That has proved problematic for smaller companies in
particular as some executives of troubled firms have fled the
country, leaving behind bad debts. Such debts, known as "skips",
totalled over $1.4 billion last year, bankers estimated.
The new law will establish a regulatory body, the Committee
of Financial Restructuring, that will oversee restructuring
cases and appoint experts to handle them. It provides for
companies to receive new loans under terms set by the law.
However, businessmen will face a prison sentence of up to
five years and a fine of up to 1 million dirhams ($272,000) if
their companies fail to pay debts and deliberately avoid filing
for bankruptcy, Tayer said.
The new law will not apply retroactively to businessmen who
are already facing criminal cases over unpaid debt. It will
cover both state-owned and private companies with some
exceptions, such as firms based in special free zones.
Tayer said the UAE was also working on a new personal
insolvency law that would apply to individuals. "It will take
around 12 months to draft the law," he said.
(Reporting by Maha El Dahan; Writing by Andrew Torchia; Editing
by Richard Balmforth)