The UAE’s insolvency laws have been in force since 1993 but lawyers are hard pressed to come up with a single example of their being used to wind down a struggling company. Untested and widely regarded as unworkable, they are in bad need of replacement.
The juddering impact of the global financial crisis has persuaded the government to draft a new set of regulations, which will hopefully allow companies to conduct orderly wind-downs through the courts.
It won’t be easy. Bankruptcy carries a heavy stigma anywhere but especially in the Gulf, where owners of small businesses can bear personal responsibility and, when businesses fail, often flee the country rather than face public humiliation or, worse, imprisonment. Even then, with nobody seeking the courts’ protection, it takes on average more than five years to wind a company down under the current framework.
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