Ministry of Finance announces details of law which will bring economic stability
Getting a bounced cheque will no longer mean jail time, thanks to the new insolvency law that was announced earlier this week, by the Ministry of Finance (MoF).
Approved by the UAE Cabinet, the insolvency law is applicable to both citizens and expatriates, providing them with a structured payment plan to settle their debts.
Under the new law, a civil court will appoint financial experts to assist debtors in finding a way to pay their debts; with the final settlement also involving the creditor once the court approves the plan.
Dr Hussam Al Talhouni, legal advisor at the Office of the Minister of Finance said “The insolvency law does not decriminalize the bounced cheque. In the insolvency law, if a debtor files for insolvency and the civil court accepts to commence the [payment] procedures, the debtor can take a copy of that civil court order under this new law and go to the criminal court to postpone, stop or stay the procedures there.”
“Most importantly, the new law will ensure that no legal action will be taken against the debtor once they invoke their insolvency status and begin the process of restructuring their financial payments, during which time they will be allowed to continue working normally as well as taking bank loans if approved by the court.”
“The Ministry of Finance is committed to bolstering financial, social and economic stability in the country through legal frameworks that help individuals repay their debts, and to ensure that institutions receive their financial dues through transparent mechanisms,” said Younis Haji Al Khoori, undersecretary of the MoF
“The Federal Decree-Law on Insolvency of Natural Persons serves these objectives by fostering an advanced and stable business environment that encourages small and medium sized enterprises to drive economic diversification and contribute to achieving the UAE Vision 2021,” he added.
Al Khoori said the new law would ensure the rights of both the creditor and debtor, providing more opportunities for investments and cash flows.
“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 thereby encourages increased cash flows and attracts small and medium-sized investments to the state,” he added.
Dr Hussam Al Talhouni, legal advisor at the Office of the Minister of Finance, said that bounced cheques would not be decriminalised, but that debtors could now turn to the insolvency law to resolve their debts without any jail time or legal action taken against them.
He added that “If the debtor pays the amount due on the cheque [under the payment plan] then the case will be dismissed.”
Commenting on the process of creating a payment plan, Al Talhoumi said the ministry was looking at a period of between three to six months, and that the plan could also allow the debtor to take on more loans if it helped them.
Insolvency Law: How it works
- If person a runs into debt and suddenly can’t pay his or her creditors, debtor can approach a civil court in the emirate they reside in, invoking their insolvency status
- Civil court will appoint one or two financial experts to formulate a long-term payment plan with the debtor to find a way to settle their debts. This can be done either through direct payments or through payments by assets – basically things they own, like their car for example
- Once a restructured payment plan is put in place, debtors will no longer face legal prosecution such as facing jail time
- After all payments are completed according to the payment plan, any criminal case against the debtor as a result of their bounced cheque will be dismissed.