UAE insolvency framework faces long road ahead

Author: Lizzie Meager | Published: 17 Feb 2016

The United Arab Emirates’ (UAE) desperately needed insolvency framework – which has been in gestation since 2010 – still faces several roadblocks before implementation.

"It is not a lender-friendly piece of legislation," said Gary Watts, partner and regional head of the corporate practice at Al Tamimi in Dubai. "And as there's already been a squeeze on GCC bank deposits, they’re already reining in their lending – banks are not going to support a law that will further erode their ability to recover assets."

While there are some pieces of legislation that deal with bankruptcy, there is no comprehensive legal framework and few companies make use of the options available. To enter into insolvency proceedings, unanimous creditor support is needed. 

This onerous requirement, absent in many western jurisdictions where companies can often make use of a cram down mechanism or similar, sees companies enter into a stalemate situation with shareholders.

"This explains...