Bounced cheque fears? Well Dubai is updating its bankruptcy laws
This move will make it less scary to start and run a small business in the UAE…
In another legal step that moves the UAE forward, the country has passed an amendment to its bankruptcy laws that will decriminalise debt and will promote and encourage small to medium businesses.
The new law would put an end to jail time over debt and should be finalised and in action by the end of the year according to the UAE’s economy minister Sultan Saeed Al-Mansouri.
We also passed the final version of the new Federal Law on bankruptcy, which aims to promote both investment and ease of doing business.
— HH Sheikh Mohammed (@HHShkMohd) September 4, 2016
So what does it mean?
The law will mean a bounced cheque is no longer a criminal offence in the UAE. It will also be likely that the law will lay out steps and protocol for corporate bankruptcies.
That said, businessmen will still face a prison sentence of up to five years and a fine of up to Dhs1m ($272,000) if their companies fail to pay debts and deliberately avoid filing for bankruptcy according to Obaid Humaid al-Tayer, Minister of State for Financial Affairs.
The new law will not apply retroactively to businessmen who are already facing criminal cases over unpaid debt. Plus, the UAE is also working on a new personal insolvency law that would apply to individuals. “It will take around 12 months to draft the law,” Al Tayer told Gulf Business.
The new legislation will hopefully stop people from fleeing the UAE when they find themselves in debt. The lack of such a law is thought to be partly responsible for the number of people who left Dubai after the global financial crash of 2008.
The new and updated bankruptcy law is “essential” according to Wamda Capital chairman and Aramex co-founder and vice chairman Fadi Ghandour.
“I don’t know of any country in MENA that has a proper bankruptcy law but its time to do it, just because that box needs to be ticked,” he told Gulf Business.
“You need to give the entrepreneur the confidence that you are not going to go to jail if you go bankrupt.”
As H.H. Sheikh Mohamed, ruler of Dubai and Vice President of the UAE described on his website, the new legislation “will reflect positively on the national economy in terms of the possibility of keep abreast of changes”. He added that it will also “enable enterprises to achieve the highest possible performance and therefore drive growth going forward”.