The new Bankruptcy Law (Federal Law Number 9 of 2016) is seen as a strategically improved law in comparison with previous insolvency laws. Having said that the Bankruptcy Law so far covers the following:

i. Permits organizations in money related issues and provides the chance to rearrange their issues so as to stay suitable;

ii. Companies failing to stay financially viable, offers them a chance to seek liquidation;

The GCC Quarterly Review briefly summarises a selection of the major developments in the laws of the Gulf Cooperation Council (GCC) region (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates) in the third quarter of 2018, with links to further reading, where available.

A declaration of bankruptcy, according to Article 645 of the Commercial Transactions Law, can be imposed on any trader who ceases to pay some or all of its commercial debts. While a debtor’s cessation of payment is a presumption against him, the trader might not be considered bankrupt if the failure to pay is due to a dispute regarding the debt. In other words, it is important to prove that the debtor ceased to pay a certain commercial debt due to financial distress and credit issues.

This article is a case study on how the UAE, a country with two cities which are significant international financial and business centres (namely Dubai and Abu Dhabi), functions without effective insolvency laws; and why this state of affairs is likely to continue for some time.

Whilst it is not strictly true that the UAE has no insolvency laws at all, it is fair to say that no one (debtors or creditors) makes use of the existing laws. A new UAE insolvency law has been drafted, but in the writer’s view it will be years before it sees the light.

On 10 October, the Dubai Court of First Instance issued a potentially ground-breaking judgment in respect of directors’ liability in the context of corporate insolvency.

In particular, in the matter of the liquidation of the public company Marka PJSC (“Marka”), the Court held the company’s board of directors and managers personally and jointly liable for the company’s outstanding debts, totalling close to AED 450 million.

As announced this week, the UAE Cabinet has approved a further amendment (Amendment Law) to Federal Law No 9 of 2016 (the Corporate Bankruptcy Law). The Amendment Law follows the previous amendment of the Corporate Bankruptcy Law in 2019 (pursuant to Federal Law No 23 of 2019).

The Amendment Law is yet to published in the official gazette, and therefore its effective date is yet to be confirmed. However, in this alert we look at the anticipated content of the Amendment Law.

Primary Change – Emergency Financial Crisis

Insolvency Law No. 9 of 2019 enters into force from January 2020, which is the year of economic and social betting on development and aspiration for a happier and more stable country.

What is the role of the insolvency law in this context?

The UAE Cabinet issued Resolution (“Resolution”) no. 4 of 2018 Forming the Financial Restructuring Committee (“FRC”) pursuant to UAE Federal Law No. 9 of 2016 (“Bankruptcy Law”).

In this article, we will highlight the important developments brought by the Resolution, especially in respect of Financial Restructuring of Financial Institutions and the introduction of bankruptcy searches to the UAE.

The proposed changes to the Saudi Arabian bankruptcy regime will provide the judiciary the right to obligate creditors to accept a settlement proposed by the debtor (the “new Law”).

The Ministry of Commerce and Investment is currently in the latter stages of reforming the Kingdom’s bankruptcy laws and regulations. The new Law is intended to replace certain sections in the Commercial Court Law and the Bankruptcy Protecting Settlement Law dealing with bankruptcy.

Global FDSI Briefing

Welcome to our latest quarterly briefing on legal developments across our global network. I hope you find the articles insightful and thought provoking. Highlights this quarter include recent developments in Italian derivatives case law, an overview of the amendments made to Spain’s insolvency regulation and the UK’s FCA issuing first warning notices against individuals.

If you have any questions or would like further information please do not hesitate to contact me, or one of our global key contacts.

[Matthew Allen]

Matthew Allen