The United Arab Emirates’ (UAE) desperately
needed insolvency framework – which has been in
gestation since 2010 – still faces several roadblocks
"It is not a lender-friendly piece of legislation," said
Gary Watts, partner and regional head of the corporate practice
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.