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New UAE law on insolvency addresses debt defaults
ABU DHABI – The new UAE law on insolvency of natural persons allows debt defaulters “a safe environment” to settle personal loans, according to the Ministry of Finance.
The ministry said that the independent legislation “strengthens the financial and economic stability of the nation”.
The new law addresses the debtor’s inability to pay their debts due to their insolvency and debt default.
The regulation is linked to the Civil Transactions Act, in accordance with a principle called ‘Facilitator’s View’; a principle that is rooted in Islamic jurisprudence, whereby the debtor is granted a reasonable period of time to fulfil their obligation in accordance with their circumstances, provided that such delay does not cause serious harm to the creditor.
The ministry said the law will increase transparency in civil debts and bolster financial security, thereby enhancing financial stability in the country.
This law will also accelerate growth and make it easier for individuals to obtain loans, with clear rules to collect bad debts and rehabilitate the debtor financially.
In addition to its economic objectives, this law guarantees the protection of the debtor’s dignity as a natural person, helps create an opportunity for them to manage their finances and lessens the burden on them.
Younis Haji Al Khoori, Undersecretary of MoF, said: “This law creates a safe environment for personal loans to the satisfaction of both the creditor and the debtor, as it provides the balance to ensure the rights of both creditor and debtor.”
The law on the Insolvency of Natural Persons differs from bankruptcy law, particularly in the definition of the debtor; The legislation on the insolvency of a natural person applies to a natural person who is not engaged in economic activity and is not a trader.
However, the primary purpose of both laws is united, as both exist to protect the common interests of the creditor and the debtor in a fair and balanced manner, as well as to divide the risks between them in order to remove the debtor from the cycle of financial difficulties and enable them to pay off their debts.
During the briefing, the legal advisor at the Office of the Minister of Finance, Dr. Hussam Al Talhouni, reviewed the ways specified by the decree-law to help debtors overcome their financial difficulties, the documents they must provide to request a settlement of their financial obligations, and the court’s procedures for accepting the settlement procedure.
Additionally, the details of the proceedings and conditions of declaring insolvency as an individual and the liquidations of assets, and the penal provisions contained in the decree-law, which will come into effect from January 2020 were also iterated. Dr. Talhouni responded to media inquiries regarding the law and its implementation mechanisms.
The Ministry of Finance has developed a comprehensive plan to inform the public about the Decree-Law on the Insolvency of Natural Persons, which includes holding a series of awareness workshops to discuss the law with the target groups.
Through this plan, the ministry will engage with federal and local government entities, chambers of commerce and business communities in the country judiciary, law firms, lawyers and legal advisers in the UAE, traditional and digital media, banking institutions, as well as universities and all other relevant entities. ICA/WAM/Expat Media
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