Details of UAE Bankruptcy Law

25 Oct, 2016 - Consumer & Retail


One of the long term barriers to entry for foreign firms wanting to do business in the UAE has been the lack of a Federal bankruptcy law. To date, bouncing a cheque in the UAE is a criminal offence. Earlier in the year statements were made that indicated banks would no longer prosecute SME’s which fail to honour cheques. Today we learn that the official instatement of the long awaited bankruptcy law is eminent.

The National newspaper reports the following:

The law applies to companies established under the commercial companies law, companies that are partly or fully owned by the federal or the local government, and companies and institutions established in free zones that are not governed by existing bankruptcy provisions. It does not apply to companies registered in the DIFC and the Abu Dhabi Global Market, or to private individuals.

‘Companies established under the commercial companies law’ refers to L.L.C’s, which is the most common type of onshore company in the UAE (foreign partner(s) owning 49%, Emirati owning 51%). We see this as a very positive step for the UAE’s business environment as the law will foster more risk reward appetite, and most importantly, offer security to new businesses as they navigate their first few years.

It is important to stress that the implementation of a bankruptcy law does not mean good advice should be ignored. UK firms looking to expand should still follow the same guidelines in 2017 as they have in 2016. Find a reputed local partner (which the BCB acts as), study the market before opening (which the BCB helps with), and create a network of local connections and relationships (which the BCB can support).

If this news has made you feel more confident about Middle East expansion leave a message below or call or message us on social media.

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