Prohibiting compound interest.. and considering “virtual assets” as a business
A new law lowers the age of legal capacity to do business to 18
Al Saleh stressed during the briefing that the law aims to support the commercial interests of the state.
From the source
The Ministry of Economy reviewed, in a briefing organized yesterday, the new Commercial Transactions Law, and its role in supporting and developing the business environment, and raising it to more developed levels.
The new law allowed new age groups to practice business, by reducing the age of legal capacity from 21 years to 18 Gregorian years, and it also created a legal reference for commercial transactions for banking institutions, by reducing the upper limit of interest on a commercial loan, when it was not stipulated in the contract. To 9% instead of 12%, and the prohibition of compound interest, while obligating banks to obtain sufficient guarantees or guarantees in exchange for the loans they provide, in a precedent that is the first of its kind, contrary to what was the case in the canceled law of “permissibility” to obtain appropriate guarantees in exchange for loans.
The new law considers the business of virtual assets to be among the commercial businesses, while giving authenticity to the virtual business, so that the same established provisions apply to them regarding their realistically presented counterparts.
Legislative updates
In detail, the Undersecretary of the Ministry of Economy, Abdullah Al Saleh, confirmed during the media briefing, to introduce Federal Decree Law No. 50 of 2022 regarding commercial transactions in the country, that the issuance of the new decree, to replace the previous legislation that spanned nearly 30 years, comes within the framework of legislative updates. integrated projects led by the UAE government, to advance the process of transformation in the economic model, and to achieve higher levels of flexibility and competitiveness in the business climate in the country.
He emphasized that the Federal Decree-Law in the matter of commercial transactions is a new pivotal step in the legislative system to protect and develop the business environment in the country, especially as it works to facilitate the conduct of business in the country, facilitate commercial transactions and contracts, enhance their efficiency, reduce the cost of doing business activities, and raise the level of commercial stability.
He explained that it provides a dynamic and fertile investment environment that encourages domestic and foreign investment, raises investor confidence in the country's business climate, and enhances attracting investments to it, which contributes to increasing the number of companies, business establishments, traders, investors, and entrepreneurs in the country.
Competitiveness indicators
Al Saleh stressed that the law aims to support the commercial interests of the state, comply more with the requirements of international trade, strengthen the UAE's position on the global trade map, keep abreast of international best practices in commercial transactions, ensure principles of transparency and clarity in them, as well as raise the country's classification on competitiveness indicators. related economic activities, accelerating the transformation of digital applications further in the business sector in the country, and strengthening the position of the UAE as a center for business activities in the areas of technology, innovation and sectors of the new economy.
General themes
Al Saleh reviewed the most prominent provisions and outputs of the new law, as he defined the general axes of commercial business, while the specialized commercial federal laws enacted the detailed provisions that apply in this regard in accordance with the specificity of the activities and businesses regulating them.
The law also allowed new age groups to practice business, by reducing the age of legal capacity from 21 to 18 Gregorian years to practice business, which supports the expansion of youth participation in the business sector.
The law enhanced opportunities for women to participate in economic and commercial activities.
virtual business
Al Saleh stated that the decree-law targets a large segment of society members, merchants, investors, owners of foreign companies, owners of commercial projects and companies, banks and financial institutions, and those dealing in commercial papers, such as checks within the state, and contractors in commercial contracts, such as transportation and storage activities.
He said that he is creating a legal reference that is the first in the Arab region, as the UAE is one of the pioneering countries in the world regarding the legislation of commercial activities through the means of modern technology and those that take place in the technical circles, with the aim of supporting the state’s goals in moving towards the sectors of the new economy through the development of the business system. Virtual commercial, commercial store and commercial transactions through the means of modern technology, and those that take place in virtual environments, in addition to those provided in realistic standard ways, and considering the provision of services and conducting business and activities related to virtual assets as virtual business, as well as giving authenticity to virtual business, So that the same established provisions apply to them regarding similar ones presented realistically, giving legitimacy and authenticity to real and virtual commercial books, auctioning movables, instead of used movables, and making bids available through a platform or hall.Licensed electronic or through multiple modern technology means.
Al Saleh revealed that the law also witnessed the addition of an article on some international sales, allowing the parties to agree on the validity of the rules regulating international commercial sales issued by the International Chamber of Commerce, instead of the texts contained in the law.
Banking institutions
For his part, Ibrahim Al Zaabi, Assistant Governor of the UAE Central Bank for Monetary Policy and Financial Stability, indicated that the law has created a legal reference for commercial transactions for banking institutions, which stimulates the investment movement and gives businesses a wider margin for growth and competition.
He stressed that this enhances the flexibility of the national economy and supports its competitiveness by reducing the maximum interest rate on a commercial loan, when it is not stipulated in the contract, to 9% instead of 12%, prohibiting compound interest, and obliging banks to obtain sufficient insurances or guarantees in exchange for loans that they make. It presents a precedent that is the first of its kind, in contrast to what was the case in the canceled law, which allowed obtaining appropriate guarantees in exchange for loans.
He explained that this ruling comes to reduce the phenomenon of defaulting of natural persons and individual institutions, as a result of burdening them with installments that are not commensurate with their income levels, and exceed their ability to repay.
Islamic banking
Al Zaabi stressed that the law supports Islamic banking in the country by creating a section for commercial transactions for Islamic financial institutions, as the first commercial codification of Islamic financial transactions that contributes to regulating the contractual relations between its parties, and enhances the stability of its transactions and the protection of its dealers, and regulates Islamic commercial transactions with legislative texts, not An agreement governed by fatwas and rulings issued by specialized authorities, in addition to considering commercial transactions, in addition to any transaction stipulated by any legislation in force that it is subject to the provisions of Islamic Sharia, subject to the provisions of Islamic Sharia, as long as it is conducted through an Islamic financial institution.
He also revealed the introduction of special provisions for some types of contracts and obligations to which Islamic financial institutions are a party, such as the promise of contracting, Murabaha, and Istisna’a financing.
• In a precedent that is the first of its kind.. Obliging banks to obtain sufficient insurances or guarantees in return for the loans they offer.
Regulating and establishing financial markets
The CEO of the Securities and Commodities Authority, Dr. Maryam Al-Suwaidi, said that the new Commercial Transactions Law was keen to amend the provisions related to the issue of organizing and establishing financial markets, as a major supporter of the national economy, by obligating the necessity to obtain the necessary licenses in accordance with the legislation regulating securities in force in the country.
She explained that the most noteworthy provisions presented by the new law to the securities sector and the Authority is to consider virtual assets business as a business.
She indicated that the new law guarantees emphasis on the provisions regulating stock market operations, operations of investment companies and trust funds, financial institutions, and all other financial intermediation operations, brokerage in securities and commodities markets, lending with securities, and the deposit of securities with the bank.
Follow our latest local and sports news and the latest political and economic developments via Google news