Debt-ridden individuals will be protected from criminal prosecution and instead offered support to repay debts within three years, according to a new UAE law.The UAE Cabinet approved a new Federal Law on Sunday to regulate cases of insolvency.
The new law will protect debtors from legal prosecution, decriminalise the financial obligations of insolvent persons, and offer them an opportunity to work, be productive and provide for their families.
According to legal experts, the law is the end of 'bad news' for people faced with spiralling debts.
"This will stop people with financial difficulties from running away from the country," said Ashish Mehta, founder and managing partner of the legal firm, Ashish Mehta and Associates.
Social workers hailed the law saying 'it is a great gift' to many families knee-deep in debt.
The law, which will enter into force in January 2020, will assist debtors in settling their financial obligations through one or more experts, to be appointed by the court.
It will support individuals who are facing existing or anticipated financial difficulties, rendering them unable to settle their debts. Individuals will be allowed to reschedule their debts and will have the opportunity to avail of new concessional loans.
The laws aims at enhancing the competitiveness of the UAE by ensuring the ease of doing business, creating favourable conditions for individuals facing financial difficulties and protecting those who are unable to pay their debts from going bankrupt, Wam reported.
The law is part of the government's efforts to ensure convenience for citizens and residents, and respond to their needs.
The experts appointed by the courts will coordinate with the debtor and creditors to come up with a plan, lasting no longer than three-years, to settle the financial liabilities and fulfil all obligations stipulated in the plan.
During this period, the debtor will be prevented from taking any loans until the court decides, upon the request of the expert, the debtor or any of the creditors, that the implementation of the plan has been accomplished.
The law also contains special provisions that contribute to the swift completion of legal procedures and reduces the fees charged for rescheduling and restructuring the debts, with a view towards finding a fair compromise for both creditors and debtors.
The legislation not only contributes to enhancing the credit-worthiness of the country and its future growth prospective, but also enhances the competitiveness and strength of its economy, thus ensuring and enabling an environment that encourages entrepreneurship and provides favourable conditions for doing business.
The law, which complements existing financial laws, will contribute to increased transparency, in terms of civil debt repayment transactions, and will ultimately strengthen the UAE's position as an ideal hub for investment, where the rights of all parties are guaranteed.
"The law essentially gives some hand-holding for individuals and assures them that there is no need to cross the coast. I will say this is fantastic news," said lawyer Ashish Mehta.
According to him, when people take extreme measures like running away from the country to escape debts or legal prosecution, they leave a trail of losses that affects hundreds or even thousands including his clients or employees.
"That will stop now as the law gives them a breathing space to restructure their debts and rebuild their lives. And in turn, this will also boost confidence of businesses and investors as there will be more confidence in the market."
"More than just helping businesses, this is a great humanitarian gesture," said Naseer Vadanapally, a social worker based in Dubai.
"I know cases where debts have driven people to extreme measures like suicide. In fact, mounting debts and harassment from banks were the reasons for the majority of the suicide cases I had dealt with in the past."
According to him, families will hugely benefit from the law because most of them are eager to negotiate and settle their debts so that they can continue to live and work in the UAE.