COVID-19 has affected businesses all over the world. People are facing credit issues due to emergency circumstances because of this pandemic. The UAE cabinet declares the modifications in bankruptcy law in UAE associated with bankruptcy.
Corporations will face a penalty or heavy fines if they keep on continuing to trade in the condition of bankruptcy. People are struggling hard due to the gradual loss of economy in this pandemic, so the government has taken an approach of making amendments in the laws.
According to Hamad Buamin, the decision taken by the government of the UAE to amend the bankruptcy laws is a vital step. He is the CEO and president of the Chamber of Commerce Dubai. Businessmen are following the latest policies because of the changes in the bankruptcy laws.
Need for altering the laws involving bankruptcy
Due to the continuous spread of coronavirus, investors are dealing with a lot of difficult challenges. This decision for making amendments in the laws will further boost the self-confidence of people linked with the business world due to which they will flourish at this time.
This step further complements the economic stimulus package of the UAE government by Dhs500 million or USD$136 million so that businesses to increase the efforts in improving the business environment. Dubai has also announced another stimulus package recently for the same purpose.
The step taken by the government of UAE represents the seriousness towards the economy of the country and its ever-changing requirements. According to the original laws of bankruptcy, all the businesses are bound to file for insolvency right after they are in debt.
Liquidation and bankruptcy in the UAE
It is likely for either the debtor or the creditor to apply for the complete process of bankruptcy by themselves. This rule is for those companies of UAE that are facing liquidation. Debtors are entitled under the observation of a company liquidator by the court.
A liquidator is a professional chosen by the court to help run the business of a debtor until he has been declared completely bankrupt. This professional will further initiate the selling of assets and clear out the business quickly. This will help in settling the liabilities and to pay for liquidation.
A company liquidator has given the authority by the court to terminate all the continued projects and future contracts as soon as possible to pay the planned debts. This will escalate the speed of company liquidation. These laws don’t mention anything related to suspending the lawsuits.
New policies for bankruptcy
According to these policies, a company may apply for insolvency and wait for up to twelve months for the negotiations with the creditors. During this tenure, the business funds are being protected from the interference of the creditors.
By financial experts present in the country, the funds will be sufficient enough to protect the business in situations that can harm investments done by the company. These funds are helpful and necessary to keep the company in function.
The debtors are excused in initiating the procedure of liquidation according to the new rules of bankruptcy. These amendments will guarantee that debtors are bound to fulfil the duties and alleviate the loss from non-payment.
By the pre-existing laws made by the government of UAE, some special debts have priority to be paid first above all others due to the security. In the process of bankruptcy, the business owner is not able to participate or contact the management directly.
The company owner is not allowed to communicate with the management team, even on matters related to securing the remaining assets or debts. A liquidator is assigned to the business that will run the company under the supervision of the court.
During the entire process of company liquidation, a liquidator has the power to run the tasks of the business. Everything is suspended during the process, including legal proceedings except for the debts. Companies going through the restructuring process will consist of bouncing of cheques.
The rules and regulations of bankruptcy and liquidation law in UAE are always changing in the UAE. The company liquidator lawyers will provide their full guidance and support in choosing the best pathway for business to deal with bankruptcy and liquidation issues.