All your questions answered on the insolvency law in the UAE.
The Ministry of Finance has issued comprehensive details about the insolvency law that was approved by the UAE Cabinet earlier this week. During a conference on Tuesday, the ministry explained how the law will be applied; how debtors can settle their dues and what documents they will need to submit.
The new law will protect debtors from legal prosecution, decriminalise the financial obligations of insolvent persons, and offer them an opportunity to work, be productive and provide for their families. The law will be implemented in January 2020.
Here is all you need to know.
1. Will the law help debtors overcome financial difficulties?
The proposed law provides two means to address the insolvency of individuals; first, through the possibility of settling financial obligations, and second through insolvency and liquidation of funds. If the debtor is facing current or anticipated financial difficulties that prevent them from settling all their debts, the debtor can file an application with the court in order to have the opportunity to settle their financial obligations according to easy procedures that provide them with the necessary assistance, with the court appointing one or more experts to assist them during these proceedings.Once a plan to reorganize and settle financial obligations is being prepared, the settlement plan shall be voted on by the creditors in line with pre-ordained mechanism. The plan shall be implemented by the debtor directly, with the assistance and oversight of experts, and the court’s supervision.
The law also provides another way in case of the insolvency of the debtor,where they need to liquidate theirfunds to pay their debts. This is applicable if they have stopped paying any of theirdebts on the due dates for more than 50 consecutive working days due to financial inability.The creditors of the debtor may also request the liquidation of theirfunds under special conditions.In the event of liquidation of funds, a trustee shall be appointed to control and facilitate the liquidation of the debtor’s funds, in accordance with the terms and conditions of the proposed law.
2. How do the debtors settle their obligations?
The debtor shall advance to the court and request opening the procedures for settling their financial obligations without litigating any person therein to settle their financial obligations. This is applicable if they are in insolvency in accordance with the provisions of the insolvency law.
3. What documents must be provided by the debtor to request a settlement of financial obligations?
The debtor shall attach the following documents when applying for the settlement of financial obligations:
* A memorandum containing a brief description of their financial position and any data related to their sources of income, both inside or outside the country.Their professional, vocational or professional status, as the case may be, and the liquidity projections of the debtor, as well as the sources of such liquidity within a period of 12months from the submission of the application.
* A statement of the names and addresses of creditors, whose debts have been defaulted or are expected to be defaulted, the amount of each debt, the dates of maturity and the guarantees provided to the creditors, if any.
* A detailed statement of the debtor’s movable and immovable assets inside and outside the country and the approximate value of each on the date of the application.
* A statement of any legal or judicial proceedings or actions taken against the debtor.
* A statement by the debtor that they are facing current or anticipated financial difficulties and that they are unableto, orare not expected to be able to pay their debts, at the time of application, or in the future.
* The funds necessary to support the debtor, their family and any dependents.
* The debtor’s proposals for the settlement of their financial obligations.
The debtor shall nominate an expert to undertake the proceedings in accordance with the provisions of this law.
* A statement that discloses financial transfers outside the country that took place during the past 12 months.
* Any other documents supporting the application, or as requested by the court.
* What are the procedures for the debtor if they are unable to provide the required information?
* The debtor shall state the reasons for not furnishing the required documents or information in their application.If the court considers that the documents submitted are insufficient to rule on the application, it may grant the debtor time to submit any additional data or documents.
5. How long does the court take to decide on the debtor’s application?
The court shall decide on the application without notice, or pleading, within a period not exceeding five working days from the date of submissionof the application to it fulfillingall required conditions. The court shall, if it accepts the request, decide to open the procedure for settlement of financial obligations.
6. What follows from the court’s decision to open the procedures for settling financial obligations?
The decision of the court shall cease the obligation of the debtor to apply for insolvency and the liquidation of their property. Suspension of execution shall continue during the period of settlement of financial obligations unless the debtor breaches their obligations as set out in accordance with this law.
7. What does the court’s decision to open the settlement of financial obligations entail?
In the decision to open a settlement of financial obligations, the court shall appoint one or more experts to assist the debtor in settling their financial obligations. The expert shall not be a creditor of the debtor, or be associated with them in any interest, or kinship until the fourth degree.
8. When can the court decide to reject the request for settlement of financial obligations?
The court shall decide not to complete the procedures for the settlement of financial obligations and refuse a request for settlement of financial obligations in the following cases:
* If the court determines that the debtor has committed, or refrained from, taking any action with a view to concealing or damaging any part of their property.
* If the debtor provides false statements about their debts, rights or funds.
* If the debtor is in a state of non-payment of any of their debts on maturity for more than 40 consecutive working days as a result of their inability to fulfil these debts.
9. What is the amount that a creditor is entitled to apply for insolvency of the debtor and liquidate their funds?
The amount is Dh200,000.
10. When does the court appoint a secretary to handle the debtor’s insolvency proceedings and liquidate their assets?
The court shall appoint a secretary if it decides to open the procedures of insolvency of the debtor and the liquidation of their funds.The court may appoint the expert that has been appointed in accordance with the provisions of Article (8) of the insolvency law as the insolvency secretary.
Click here to read more news from @khaleejtimes