The "economy": "bankruptcy" and "insolvency" filled a legislative shortage

The Ministry of Economy confirmed that the "bankruptcy" and "insolvency" laws filled a legislative shortage that had been awaited by capital owners looking for a safe environment for investment.

She added to «Emirates Today» that the legislative system in the UAE has witnessed over the past few years a great development that was completed with the issuance of these two laws, as they constitute support for the ability of investors and individuals to manage their financial situations in the face of global crises, considering the two laws among the most important laws in support of attracting foreign investment , As a result of applying clear legal rules and standards that protect the rights of investors and achieve a balance between the "creditor" and the "debtor".

The «Economy» stressed the importance of the laws regulating bankruptcy and insolvency for its role in protecting and reassuring investors, pointing out that the UAE ranks 27 globally in terms of its ability to attract foreign direct investment, as it attracted direct investments in 2018 amounting to $ 10.4 billion (about 38.18) One billion dirhams).

In turn, the Federation of Emirates Banks considered the efforts of the Ministry of Finance to issue the insolvency law a "critical" step to support individuals at this sensitive time, and to facilitate doing business in the country.

He emphasized that the new law will benefit the business community and the banking sector alike, as it gives individuals the opportunity to restructure their financial resources, at a time when local lenders help reduce the cost of bad debts.

And the bankruptcy law records several economic and social benefits, the most prominent of which is attracting new foreign investments, maintaining the existing ones, and reassuring the local investor of the existence of a system that determines the risks that companies may be exposed to, protecting existing companies from collapse, and deliberating in the process of selling assets, which reduces their real market value In addition to improving the world rankings of the UAE in the field of competitiveness, ensuring labor rights, and protecting the family of the bankrupt investor himself, rather than subjecting him to severe damages in the event of bankruptcy or liquidation of his company.

Globally, many countries have witnessed bankruptcies of major companies that have succeeded in continuing their operations under the umbrella of the bankruptcy law and financial restructuring, as is the case in the United States of America.

Examples include the US mortgage specialists Fannie Mae and Freddie Mac in September 2008, and the Lehman Brothers bank, which declared bankruptcy on September 14, 2008 due to the loss that occurred in the mortgage market, and « Kodak, which has been operating for nearly 130 years, has an estimated assets of $ 5.1 billion.

The bankruptcy law, in the United States, for example, allows the bankrupt company to continue its work with the same administration that the bankruptcy occurred under its leadership, while reorganizing its debts, so that the bankruptcy companies will continue to perform their activities under Chapter 11, which provides them (temporarily) with protection from creditors, after declaring bankruptcy. Until she reorganizes her debts.

The bankruptcy of "Lehman Brothers" has been rated as the largest in US history, and is believed to have played a major role in the development of the 2007-2008 financial crisis.

The Undersecretary of the Ministry of Economy, Abdulaziz Al-Shehhi, affirmed that the “bankruptcy” and “insolvency” laws filled a legislative shortage that had been awaited by capital owners looking for a safe environment for investment.

He added to «Emirates Today» that the system of legislation in the UAE has witnessed over the past few years, a great development that was completed with the issuance of these two laws, as they constitute support for the ability of investors and individuals to manage their financial situations in the face of global crises, as they enable troubled companies to change their administrative policies And achieving profitability, in addition to protecting the rights of all parties, in a manner appropriate to the future plans of the state, and its ambition to upgrade its position within the indicators of global competitiveness.

Al-Shehhi stressed that the “bankruptcy” and “insolvency” laws are among the most important laws in support of attracting foreign investment, as a result of applying clear legal rules and standards that protect the rights of investors, achieve a balance between the “creditor” and the “debtor”, and take into account the priority of creditors with guarantees over any other debt. This leads to encouraging them to pump cash without hesitation into this distinguished market, and to provide the necessary liquidity to conduct commercial operations and build the economy in general.

Optimistic expectations

Al-Shehhi said that the two laws have filled a shortage that foreign investors and troubled individuals are watching, so it is expected that the pace of investment flows towards the UAE will increase during the coming period after the application of the insolvency law, along with the bankruptcy law that has already entered into force.

Al-Shehhi indicated that the UAE ranks 27 globally in terms of its ability to attract foreign direct investment, according to the classification followed by the United Nations Conference on Trade and Development (UNCTAD), in the results of the global FDI report issued for 2019.

Direct investments

Al-Shehhi stated that the UAE attracted foreign direct investments in 2018 amounting to $ 10.4 billion (about 38.18 billion dirhams), to top it first in the Arab world, accounting for 36% of the total foreign direct investment flowing into the group of Arab countries, and second in the level West Asia, accounting for 33.4% of total FDI inflows to this region.

He said that all this reflects the importance of the laws regulating bankruptcy and insolvency to protect and reassure investors.

It is noteworthy that the latest data issued by the Ministry of Economy shows that the number of private commercial companies operating in the UAE exceeds 340 thousand companies, which can benefit from the bankruptcy law.

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