Dubai issues new financial centre insolvency law

Pedro Gonçalves
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Dubai issues new financial centre insolvency law

Sheikh Mohammed bin Rashid, vice president and ruler of Dubai, has enacted a new insolvency law for companies operating in Dubai International Financial Centre (DIFC).

The new law, which will come into effect on August 28, 2019, has been issued following the collapse of Dubai-based private equity firm Abraaj, which had a DIFC-regulated entity Abraaj Capital.

The regulation introduces a new debtor in possession bankruptcy regime. The law also provides for a new administration process where there is evidence of mismanagement or misconduct.

Ensuring that businesses and investors can operate across the region with confidence is crucial to our role in connecting the economies of East and West"

It also enforces the rules governing winding up procedures and incorporates the UNCITRAL Model Law on cross border insolvency proceedings with certain modifications for application in the Centre.

Essa Kazim, governor of DIFC, said: "Ensuring that businesses and investors can operate across the region with confidence is crucial to our role in connecting the economies of East and West.

"We are committed to continuously enhancing our legislative infrastructure in order to give leading global institutions the certainty and access they need to capture the opportunities within the MEASA region, through Dubai."

DIFC said the new law was subject to substantial research and global benchmarking, as well as thorough public consultation, to ensure that the DIFC remains the most sophisticated and business-friendly Common Law jurisdiction in the region.

The latest measure by Dubai comes after the high-profile collapse last year of Abraaj Group. It was once the region's biggest private equity company which claimed to manage almost $14bn (Dh51.42bn) of assets at its peak before investors such as the World Bank's International Finance Corporation and the Bill and Melinda Gates Foundation questioned the use of their money in the company's $1bn Abraaj health fund.

 

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