Factoring is one of the oldest forms of financing and is still relevant to almost all businesses across the globe.

It is a financing arrangement that enables a business to sell its account receivables (ie. outstanding monies owed to that business) to third parties at a discounted price. These third parties are typically banks or financial institutions, also known as factors. A company would agree to sell and assign its receivables to the factor, prior to their due date, at an agreed discounted rate. The discount accounts for the risk of non-payment. 

The United Arab Emirates (UAE) appears to be finally in the process of issuing a long-awaited new federal insolvency law. Described by some as a game-changer, the government announced in July that its Cabinet has approved a draft of the new law replacing the old (and largely unused) insolvency regime. The highly anticipated law is now pending the approval and ratification of the Federal National Council and Supreme Council before it receives final approval by Sheikh Khalifa bin Zayed bin Sultan Al Nahyan, the UAE President.

Enforcement of a judgment should be the crown jewel of every successful claim.

However, the picture is not always as rosy. Sometimes the successful litigant is faced with the realisation that the judgment debtor has no substantial assets for the enforcement and recovery of the awarded sums. What is left is an ‘empty’ judgment.

This article will attempt to discuss the situation of empty judgments, what brings them about, ways to prevent them, as well as some practical recommendation and suggestions from our practice and experience.

UAE Law No. 18 of 1993 ‘Concerning Commercial Transactions’ (the “Commercial Transactions Law”) provides a framework for the bankruptcy of persons engaged in trade.

Part Five of the Commercial Transactions Law sets out provisions dealing with the bankruptcy procedure for traders who cease to pay their debts. This article will take a look at the bankruptcy provisions of the Commercial Transactions Law.

Definition of Bankruptcy

Section 1 of Article 645 of the Commercial Transactions Law provides:

The duties and obligations of directors in the United Arab Emirates (UAE) are drawn from various legislative sources; there is no consolidated legislative framework dealing with the duties and obligations of directors under UAE Law. Squire Patton Boggs’ Dubai office have published a summary of the principal duties and liabilities of a director in the  UAE, both generally and in the event of insolvency.

On 29 March 2016, Abdul Aziz Al Ghurair, Chairman of the UAE Banks Federation (UBF), announced a new “rescue initiative” in relation to SME debt in the United Arab Emirates, under which UBF member banks might impose a 90-day “standstill” on use of judicial means to enforce the payment of SME debts.

The UAE is in the process of implementing a new bankruptcy law.

The new bankruptcy law is intended to create a more modern, debtor-friendly regime, with particular emphasis on the rescue of a distressed debtor’s existing business or the restructuring of the debtor’s liabilities, rather than formal liquidation or bankruptcy. The new law will be equivalent of Chapter 11 of US bankruptcy laws. Read more about the UAE’s new bankruptcy law.

The onset of the global financial crisis brought into focus the extent to which the UAE’s business and economic landscape had changed. In order to continue to grow and protect existing investment, whilst also continuing to encourage new investment, the UAE Government recognised that various steps would need to be taken. In particular, legislative reform would be required in certain key areas.

On August 28, 2012, the Special Tribunal related to Dubai World (the “Tribunal”) formally approved the restructuring of more than US$2 billion of debt of Drydocks World LLC and Drydocks World – Dubai LLC (together, “Drydocks”) under a syndicated term loan facility and separate hedging agreements, in the first restructuring approved under Dubai Decree No.

Employees’ rights in bankruptcy in the UAE On the face of it, employees’ rights in the UAE seem to be well protected by the bankruptcy laws. Under Article 713(1) of Federal Law No. 18 of 1993 (Commercial Transactions Law), the wages and salaries of workers that have become due 30 days prior to the adjudication of bankruptcy may be paid on a super-priority level (“regardless of any other debt”) by the bankruptcy trustee. However, there is some uncertainty as to whether employees would be paid before secured creditors as the bankruptcy laws remain largely untested in the UAE courts.