Bankruptcy law plods forward. We think
The renewed promise that a new UAE bankruptcy law is in the works is welcome, but we need to move much further beyond talk, thinks Kipp.
March 1, 2011 4:50 by Eva Fernandes
‘UAE Bankruptcy Law in Early Draft Stage‘ read an article on Emirates 24|7, and Kipp rolled its eyes; where have we heard this one before? (Don’t answer that, we’ll tell you in just a bit.) But first, more on the recent developments (or lack of).
Lubna Qassim, director of economic legislations department at the UAE ministry of economy, is reported to have said on the sidelines of a conference in Dubai that though the new legislation is still in the early stages there has been significant progress since news broke of the plan to alter the current law, which emerged about two years ago now.
She is reported as saying: “There is a draft -yes, it’s in the initial stages but now it’s more than dialogue. It is time that effort is put in for the exit of companies.” More than dialogue? Good thing. Initial stages? Not so good.
Qassim has not really commented on the estimated timeframe for when the shiny new law will be unveiled, and unfortunately Kipp isn’t too surprised with the ambiguity. After all, as we just said, there have been talks about creating a new bankruptcy for nearly two years. Gulf News reported early in December 2009 that Hamad Bu Amim, director-general of the Dubai Chamber of Commerce and Industry, said “The government is working on issuing a comprehensive bankruptcy-insolvency law that will protect businesses under financial stress… This is in final shape and could come anytime soon.”
That news of the new law came in the heart of the recession, around the time the billions of dollars of Dubai World debt was revealed. That was a time when companies preferred to up and leave when they went bankrupt rather than go through the legal system.
“In most cases in the past, the courts have not been in favour of applying the bankruptcy law – the tendency has been to go around the bankruptcy law and go straight for liquidation,” said Essam Al Tamimi, senior partner at Al Tamimi & Co.
So of course, a valid and appropriate bankruptcy law in place would come as a relief to the many investors, creditors and stakeholders in the region. Kipp is all in favour, too. But with the new and improved law remaining no more than talk and promises of distant delivery, Kipp will not hold its breath until something substantial happens.