17 Oct UAE’s Landmark Bankruptcy Law
The reasons to start a business is Dubai are known to all. A tax-free milieu, world-class infrastructure, 0% capital, lucrative foreign ownership and trading laws and access to human capital from across the world.
Get set for yet another reason to set up or continue to operate your business in Dubai. UAE’s new landmark bankruptcy law, based on modern legislative principles, aims to reduce the risks of doing business and increase the setup of small to medium businesses in the country.
Expected to take effect by the beginning of 2017, this law will establish a regulatory body, the Committee of Financial Restructuring, which will stipulate principles to allow businessmen to avoid time in jail if their companies fail to pay debts. Adding to the ease of investment and doing business in the country, the new law will decriminalise debt and give protection to businesses facing financial distress and fearing the risk of being jailed. Such a situation in the past has forced many to flee the country and leave behind huge unpaid debts.
Does the law cover all companies?
It will cover state-owned and private companies with few exceptions, such as firms based in the UAE’s special Free Zones.
What are the exceptions?
While the new law will spell relief for businesses, it will not apply to businessmen who are already facing criminal cases due to unpaid debt. Also, businessmen will face a prison sentence of up to five years and a fine of up to 1 million dirhams if their companies fail to pay debts and deliberately avoid filing for bankruptcy. Further, the law will be applicable to commercial companies, not individuals.
The bankruptcy law will also allow businesses the possibility of getting fresh loans under terms set by it.
As a business solutions advisory firm, we at BSC, we help you explore the myriad company formation and UAE residency options available. A team of passionate and professional consultants, we offer the most optimum experience through knowledge of UAE’s free zones, expertise and understanding your objectives.