The Ministry of Finance has announced yesterday that it has referred the Bankruptcy and Financial Restructuring Law Initiative to the technical committee at the Ministry of Justice.
According to the press release, the new proposed law is set apart from other similar initiatives through its attempt to forgo traditional theories for dealing with bankruptcy and financial restructuring.
The new bankruptcy and financial restructuring law’s jurisdiction will not be limited to investors and business, but will extend to include individual, civil debt cases, and debt instances concerning certain professionals such as doctors, lawyers and others. This is expected to change the current procedures for punishing cheque defaulters, as it will provide them with options to file for bankruptcy protection and restructure their debt repayments according their possibilities. If so many people, foreigners and Emiratis, soon will be able to escape jail sentences for unpaid cheques. Such practices are common in the the U.S.
How will lenders be affected? Banks and financial institutions will have to calculate risks better and accustom more flexible and cost effective policies, even if this means to reduce their profits.
