The UAE Cabinet has approved a federal law to regulate cases of insolvency for individuals, which will enter into force in January 2020.
This was done to enhance the “competitiveness of the UAE” by ensuring the ease of doing business, creating favourable conditions for individuals facing financial difficulties and protecting those who are unable to pay their debts from going bankrupt, according to the Emirates News Agency.
The law will support individuals who are facing existing or anticipated financial difficulties, rendering them unable to settle their debts.
It will help them reschedule their debts and provide them with the opportunity to be granted new concessional loans.
In addition, it will protect the debtors from legal prosecution, decriminalise the financial obligations of insolvent persons, and offer them an opportunity to work, be productive and provide for their families.
Capital Economics’ Jason Tuvey said in its latest Middle East Economics Weekly: “A new insolvency in the UAE will, at the margin, make households more willing to take out credit and adds to the evidence that the authorities want to ensure the country remains an attractive destination for expatriate workers and international business.
“The new law should prevent a repeat of the 2009 debt crisis when several expats fled the country in fear of being incarcerated for defaulting on their debts.
“This follows the passing of a similar law for businesses in 2016 and a relaxation of restrictions on permanent residency. With competition for foreign investment from the rest of the Gulf increasing recently, the UAE is trying to stay ahead of the pack.”
Details
A statement on the Emirates News Agency (WAM) website, said: “The law will assist debtors in settling their financial obligations through one or more experts, to be appointed by the court.
“The experts will coordinate with the debtor and creditors to come up with a plan, lasting no longer than three years, to settle the financial liabilities and fulfil all obligations stipulated in the plan.
“During this period, the debtor will be prevented from taking any loans until the court decides, upon the request of the expert, the debtor or any of the creditors, that the implementation of the plan has been accomplished.
“The law also contains special provisions that contribute to the swift completion of legal procedures and reduces the fees charged for rescheduling and restructuring the debts, with a view towards finding a fair compromise for both creditors and debtors.
“It will contribute to increased transparency, in terms of civil debt repayment transactions, and will ultimately strengthen the UAE’s position as an ideal hub for investment, where the rights of all parties are guaranteed.”
