Obaid Humaid Al Tayer, the Minister of State for Financial Affairs, said on Tuesday that the government is working on a new personal insolvency law that would apply to individuals.
His comments follow the news that the UAE’s new bankruptcy law, which protects companies that cannot pay their debts from criminal prosecution, has been approved by the Cabinet and could come into effect early next year.
Mr Al Tayer said that the law dealing with personal insolvencies would take about 12 months to draft, giving no indication when it is likely to come into effect.
Such a law cannot come too soon for those that have either been caught out financially by a personal investment that has gone sour, or those who have been sent to prison for being unable to pay back debts as low as a few hundred dirhams.
It is believed that well over half of those behind bars in Abu Dhabi have been detained because of money issues as levels of personal indebtedness rise and a slowing economy leads to job cuts across all industries.
The new bankruptcy law, expected to come into effect in early 2017, will offer protection for shareholders, directors and employees of companies that are threatened with bankruptcy, but not individuals who run up large debts.
So while an owner of a small business whose company cheque bounces because of lost business will receive protection under the new law, an individual whose rent cheque bounced because of short-term cash flow problems, will not.
A number of small business owners in the UAE have fled leaving unpaid loans over the past two years to avoid arrest.
Speaking at the Ministry of Finance in Abu Dhabi on Tuesday morning, Mr Al Tayer said that a bankruptcy law is considered one of the most important pillars of any economy and is a sign of its growing maturity. “It provides protection for all parties, in addition to its pivotal role in attracting capital, in a safe and attractive investment environment and providing a protection legislation and legal acts,” he said.
There are about 300,000 small and medium enterprises in the country, contributing about 60 per cent of non-oil GDP and accounting for 86 per cent of private-sector employment. The government wants to increase the sector’s contribution to the economy to 70 per cent.
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