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Leading Dubai-based maritime law firm, Fichte & Co, says it believes the UAE’s implementation of its relatively new bankruptcy law is a huge step forward in improving the country’s economic and regulatory environment. However it has suggested that there are a few key things to keep in mind prior to filing a bankruptcy petition in the UAE.
First and perhaps foremost, the UAE bankruptcy law is untested in Court, so there is no guarantee that you will get what you want. “The law states one thing but what pans out in practice may be different given that the implementation of the law is unchartered territory for the Courts as well,” says Fichte Associate, Priyasha Corrie.
Although a company may be bankrupt there will still be significant costs associated with filing a petition. These include a court deposit of AED 20,000; translation costs; and lawyers fees.
In addition a company manager will need to issue a notarised, or legalised, power of attorney in favour of lawyers and may also need to represent the company before government authorities. “If the manager is out of the country, which sometimes tends to be the case when a company is in financial trouble, then the company needs to ensure that the manager issues a comprehensive power of attorney in favour of a person in the UAE who may be able to carry out some of the responsibilities on their behalf,” says Ms Corrie.
The shareholders of the company will also have to issue a notarised or legalised resolution approving the filing of a bankruptcy petition. If the shareholders are located outside the UAE, Fichte’s advice is to ensure that they also delegate authority to persons in the UAE.
Filing a bankruptcy petition involves collating various supporting documents and this takes time – at least two to four weeks. “Don’t expect overnight wonders,” is Fichte’s advice.
Ms Corrie concludes, “Prior to filing your bankruptcy petition, consult with a trusted lawyer as to the company’s options, rights, and protections under the law. Bear in mind that the bankruptcy law offers protection only for corporate entities and not individuals. So if you are a shareholder of the company and have provided a personal guarantee which the bank seeks to enforce, you could be in a sticky situation.”
