United Arab Emirates: Comparative Assessment Of The UAE's New Insolvency Law

Last Updated: 14 July 2017
Article by Mazen Boustany

The old UAE insolvency law that was embedded in the Commercial Transactions Code was an efficient and comprehensive law of 255 articles that was unfortunately little used for a number of reasons, including the use of post-dated cheques by lenders that would rather use this "weapon of mass destruction" instead of going the long and convoluted route of the insolvency law.

Now that the new UAE insolvency law, Federal Law No. 9 of 2016, has been issued, it is pertinent to assess this law in comparison to the old law, to consider the changes that have been brought by the new law, and to gauge whether it will be more widely used by borrowers or lenders than the previous law.

A semantic precision at the outset; the word "insolvency" is used instead of the word "bankruptcy" because historical meaning of the word "bankruptcy" has a criminal connotation.

A formalistic precision, secondly, in relation to the size of the new law: both laws are very comparative in length, since the old law had 255 articles and the new law has 230 articles.

The new law is divided into seven main sections, of which the more voluminous one is Section 4, relating to insolvency, which extends from Article 67 to Article 170 and incudes the restructuring plan provisions.

The seven sections are as follows:

Section 1: Interpretation and application

Section 2: Financial restructuring

Section 3: The voluntary arrangement

Section 4: Insolvency

Section 5: General provisions

Section 6: Penalties and rehabilitation

Section 7: Concluding provisions

It is to be noted here that the new law has removed any references to the arrangement by the court and to the arrangement by abandonment of assets, both of which existed under the old law.

In the previous law, the voluntary arrangement could be launched before or after insolvency proceedings. In the new law, the voluntary arrangement is restricted to the proceedings that take place before insolvency proceedings have been launched, while a restructuring plan can take place after insolvency proceedings have started.

This is confusing, especially as there does not seem to be much difference between the two regimes except for the name.

Turning to the specifics of the law, we notice the following main characteristics:

  1. The law is procedurally heavy and only its practice by the courts will allow enable an assessment of whether these procedures are user-friendly or not.
  2. In terms of definition, the law has introduced an unfortunate definition, that of the "negative financial position" which restricts the jurisprudential role of the courts. In France, for instance, the courts considered that for a trader to be considered insolvent, the threshold was that the trader was not able to pay its debts with its existing liquid assets: a position that was later consecrated by the law. Under UAE law, the legislator has taken a very different position by stating that, for a trader to be declared insolvent, it must not have any assets that would allow it to pay its due debts (not merely its liquid assets), which is also a restrictive factor for the use of insolvency proceedings.
  3. In terms of application, the law applies to traders, whether physical persons or body corporates (the latter even if owned by the government, provided that their Articles of Association mention that they would be subject to the insolvency law), companies that are incorporated in free zones (with the exception of financial free zones, which have their own insolvency laws) and civil professional companies (which is a novelty as these companies were previously subject to the provisions of the Civil Transactions Code).
  4. As previously mentioned, the old law provided for a voluntary arrangement before or after insolvency proceedings. In the current law, a voluntary arrangement may only be proposed before issuing insolvency proceedings, while a restructuring plan may be proposed after issuing insolvency proceedings. It is hard to distinguish between the two and it could be that the difference is more semantic than anything else.
  5. Finally, regrettably, it is notable that the previous law was more favorable to insolvent persons in the event that the plan was approved by the required majority, as such plan was enforceable towards everyone (also the position under French law). The new law, on the other hand, allows secured creditors to keep their security and ranking, as they will be paid in priority from the sale of their secured asset.

I. THE FINANCIAL RESTRUCTURING

A very short section of two articles provide for a financial restructuring committee appointed by the Council of Ministers. The Committee's main role is to oversee the financial restructuring of regulated financial institutions, in addition to other minor roles, such as keeping a list of restructuring experts and their fees and also keeping a register of delinquent debtors.

II. THE VOLUNTARY ARRANGEMENT REGIME

This section extends from Article 5 to Article 66. The stated objective of the voluntary arrangement is to assist the insolvent to reach a settlement with its creditors by virtue of an arrangement under the supervision of the court and with the assistance of a trustee.

The voluntary arrangement regime is divided into two steps, the first step relating to the arrangement application (A) and the second step is relating to the arrangement plan (B).

A. The only person with exclusive capacity to file an arrangement application is the debtor itself if 30 days have elapsed since it found itself in a distressed financial situation or in a negative financial position, provided that it has not stopped paying its debts for more than 30 days.

If the debtor files this arrangement application, then it would be exempt from filing an insolvency application during the whole proceedings until the issuance of an order from the court either approving or rejecting the application.

The documents to be submitted by the debtor further to the arrangement application are similar to the requirements provided under the old law, with the difference that the debtor has to submit a cash flow and profit and loss projections for the upcoming twelve months, in addition to preliminary projections for the arrangement plan and any guarantees for its enforcement. The debtor is at liberty to suggest a trustee to handle the arrangement proceedings.

The court will thereafter appoint an expert to assess the situation of the debtor and to provide an opinion as to the viability of the arrangement and whether the debtor's financial situation allows it to enforce any arrangement plan.

The trustee, appointed by the court if the court approves the arrangement application, may ask the court to seal the debtor assets or remove such seal (except for end-of-service indemnities), and will have a much more proactive role than in the previous law in the management of the debtor's assets and business.; It will be entitled to instruct the debtor to perform any activities to safeguard its rights and the rights of its creditors, and the trustee will step in for the debtor in any contractual agreements, whether insurance contracts, lease agreements, any settlements with any creditor or for obtaining any guarantees.

The trustee may also submit a request to the court for new loans, with the offer of any security to secure the continuity of the debtor's operations.

This is a major departure from the old law, where the role of the trustee was more symbolic, as the debtor remained in control of its assets under the supervision of the trustee. The debtor could perform any operations in the ordinary course of its business but could not take any loans or enter into settlements or offer security not required in the ordinary course of its business except after the approval of the supervising judge.

In an unnecessary and contradicting precision, Article 31 provides that the debtor cannot or must not dispose of any of its assets or take any loans unless in the ordinary course of its business and except after the approval of the trustee or the court.

As already mentioned, the voluntary arrangement under the old law dictated the cessation of all actions and enforcement proceedings against the debtor, whether these were raised from unsecured or secured creditors. The new law, in another noticeable departure, does not consecrate this position and allows secured creditors to pursue the enforcement of their security during the arrangement proceedings, provided that the court has given its approval on such enforcement. However, such approval is restricted to the court making sure that there is no collusion between the debtor and the secured creditor.

This could be one of the most damaging characteristics of this law, as it allows secured creditors to enforce their security and thus endangers any types of plans, putting at risk not only the debtor and its assets but also the livelihood of its employees and their jobs.

Contracts validly entered into by the debtor prior to the proceedings remain in force and may not be terminated for this reason. The trustee may request the court to terminate any agreement if the termination is necessary for the debtor's operations or if it is for the benefit of all creditors and does not cause major harm to the counterparty.

B. The second step of the voluntary arrangement regime is the voluntary arrangement plan, which has to be put together by the trustee and the debtor within 45 days from the publication of the order opening the arrangement proceedings. This period may be extended for a period not exceeding 20 days.

The plan has to include the following features:

  • a projection of the date by which the debtor may become profitable again;
  • any debtor's activities that should be suspended or terminated;
  • any settlement propositions;
  • any guarantees necessary for the performance of the plan;
  • any offers to buy part or all of the debtor's assets;
  • any leniency periods or discounts;
  • the possibility for the conversion of the loan in the capital of the debtor; and
  • any offers to merge, create, remove, sell or exchange any security if this is necessary for the enforcement of the plan.

In relation to the conversion of loans, the new Commercial Companies Law of 2015 (the "CCL") restricted any loan conversions to the loans held by the government or financial institutions. Therefore, one will have to take this into account when putting a plan together.

The plan must be enforced within three years from the approval of the court of the same. The old law provided for the same time period. This timeline may be extended by a similar period, provided that this extension is approved by a majority of creditors holding two thirds of the debtor's debts.

The old law provided that the voluntary arrangement had to include an offer to settle 50% of the debts within a period of three years. This threshold has been removed, and the court has a more proactive role in assessing the viability of the plan, and can also request the trustee to amend the plan.

If the court is satisfied with the plan, it then directs the trustee to call the creditors to a hearing or hearings to discuss the plan and vote on it.

The court may resolve to create one or several committees for each category of creditors (e.g. unsecured, secured, bonds or sukuks holders). Each committee shall discuss the plan and suggest any amendment it sees fit during the hearings.

The trustee and the debtor must provide any clarifications required during such hearings.

Voting on the plan shall be restricted to unsecured creditors whose debts have been finally approved, and if secured creditors wish to participate in the deliberations and voting on the plan, they must waive their security. Such waiver will only become definitive if the plan is approved; if the plan is annulled for any reason, then the security shall be reinstated.

The court, upon approving the plan, may decide to prioritize the payment of the creditors that would have approved to discount their debts in furtherance of the arrangement.

Unlike the previous law (and the provisions of French law), the approval of the plan does not extend to secured creditors, who keep their rank and security and must be paid in preference from the sale of their secured asset.

It seems, however, that these secured creditors may not be able to continue with their individual lawsuits and enforcement actions after the approval of the plan (unlike the situation before such approval) and will have to satisfy themselves from the payment in priority of the sale of any of the debtor's assets in accordance with the plan's terms.

The court may decide to restrict the sale of any of the debtor's assets if the asset is considered essential for the performance of the debtor's activities for a period not exceeding the plan's period. If the asset is secured, then the court may decide to replace the security.

The trustee oversees the implementation of the plan and must submit quarterly reports to the court on the progress of the plan. Any amendments that the trustee may wish to bring to the plan that may affect the rights or obligations of any party must be approved by the court after hearing all concerned, including the creditors that had voted on the plan.

The plan may be subject to annulment if any criminal proceedings were brought against the debtor and the latter is found guilty of any of the bankruptcy crimes, unless the court decides otherwise for the benefit of the creditors. The plan may also be subject to termination, at the request of any creditor, if the debtor did not perform the plan's terms or it appears that such terms could not be enforced for any reason.

If the plan is annulled or terminated, then the court will declare the insolvency of the debtor.

The court may also declare ex-officio, or at the request of any concerned party, the termination of the arrangement proceedings, if it was evidenced that the debtor had stopped paying its debts for more than 30 days as a result of its distressed financial situation or its negative financial position, or the same was obvious to the court during the implementation of the arrangement plan. The court may also declare the debtor insolvent if it has been proven impossible to implement the arrangement plan and the termination of the arrangement proceedings would have led to the debtor being in arrears of the payment of its debts for more than 30 days as a result of its distressed financial situation or its negative financial position.

The above provisions can be confusing, but one has to bear in mind that the threshold here is the 30 days: i.e. if 30 days has elapsed since the debtor was in default in payment of its matured debts, then it would not be able to apply for the arrangement and the insolvency regime provisions will apply.

If the debtor is declared insolvent, the trustee's appointment under the arrangement proceedings is terminated unless otherwise decided by the court. However, the same court oversees the insolvency proceedings.

III. INSOLVENCY

This section is the most voluminous part of the law spanning from Article 67 to Article 170. This section includes, however, the provisions relating to the restructuring plan, covered in Articles 99 to 123.

A. The insolvency regime

1. The insolvency application

The debtor may submit an application to the court in relation to insolvency proceedings if it was in arrears in payment of its matured debts for more than 30 days as a result of its distressed financial situation or its negative financial position.

A creditor or a group of creditors holding not less than AED 100,000 in loans may also apply to the court to launch insolvency proceedings against the debtor, provided they would have put the debtor on notice and 30 days have elapsed since the debtor's receipt of the notice. The old law did not provide for a figure, as the default in the payment of a single commercial loan, whatever its value, was sufficient to submit an application to start insolvency proceedings, nor did the old law provide for the necessity of a notice to the debtor.

As in the old law, upon submitting its application to launch insolvency proceedings, the debtor must also submit a number of documents and reports which now include cash flow projections and profit and loss projections for the upcoming twelve months. It is worth noting that the debtor is at liberty to suggest a trustee to handle the arrangement proceedings. The documents to be submitted also include a report by a credit rating company.

As another novelty in the law, any applicant (whether the debtor or the creditor(s)) has to deposit with the court AED 20,000 or a bank guarantee in the same amount, to cover the costs and initial expenses of the application.

The old law provided only that if there were no funds with the debtor's to cover the insolvency costs, then those would have to be borne by the public treasury, to be then recovered in priority by the first amounts that would be collected by the debtor. This latter provision was kept by the new law; if the debtor did not have any money available, then any fees or expenses would be paid by the court and would be recovered in priority from the first amounts that would be collected by the debtor.

The court may appoint an expert to assess the debtor's situation. The expert in its report must also provide its opinion in relation to any potential restructuring plan and whether the debtor has enough assets to sustain any restructuring plan.

The above provisions contrast with the provisions related to the arrangement plan, as in the latter situation, it is incumbent on the court to assess the arrangement plan and Article 42 of the law does not mention that the court may appoint an expert to assist in such assessment. This evidently poses a huge burden on the court and will require judges to be insolvency specialists to assess arrangement plans. Are we thus implicitly witnessing a shift to more specialist judges in their respective fields?

2. The court's order on the insolvency application

The insolvency application will be considered by the court, which will issue its order within five business days from either the filing of the application or the filing of the expert report, as the case may be.

If the court approves the insolvency application and opens the insolvency proceedings, then all lawsuits and enforcement actions against the debtor shall be suspended, excepting the lawsuits and enforcement actions of secured creditors, which may proceed after the order of the court. The court may only refuse such actions for a restrictive reason, mainly the risk of collusion between the secured creditor and the debtor.

While the new CCL has introduced the concept of holding companies, it seems from the new insolvency law that there will be a separate insolvency for each separate body corporate and there will be no group insolvencies, except in cases of confusion between assets of the debtor and those of any other person, unless, in the latter case, the court finds it practical or cost efficient to open separate proceedings for these persons. This was the situation under the old law as well.

Whilst Article 73 (regarding the insolvency application) by the debtor gives, as mentioned above, the liberty to the debtor to suggest a trustee, the Article does not mention explicitly that the trustee must be an expert. However, Article 82 states that the trustee must either be appointed from the list of experts suggested by the debtor or any other expert that the court selects. The court can also ask the arrangement trustee to continue in its role and to appoint others in addition to it or revoke any of them.

It is to be noted that the new law has removed any reference to the Assembly of Creditors that existed in the old law, which included exclusively unsecured creditors, and has replaced that Assembly with committees composed of each category of creditors (such as unsecured, secured, bonds or sukuks holders). These committees will appoint supervisors to supervise the arrangement or insolvency proceedings.

The role of the trustee during the insolvency proceedings is to call on the creditors to submit evidence of their debts through publication in newspapers, and to coordinate with the debtor and collect any additional evidence and details that the debtor had not disclosed to the court previously, within a timeframe set by the trustee.

The trustee will set up a registry for each creditor and for each security granted by the debtor. Debts owed to the government are de facto included in such registry without the need for any further scrutiny.

The trustee has wide powers, as it may request any information in relation to the debtor, its operations and its assets and may request any person with such information to cooperate with it. In the event of the refusal by any person to cooperate, then the trustee may raise the issue with the court to take the relevant decisions in this respect.

Article 95 creates some confusion as it relates to the acceptance of new creditors and the assessment by the trustee of the impact of such acceptance on "the draft plan." This "draft plan" is most probably the report prepared by the expert under Article 77, i.e. before the court's order in accepting the insolvency application.

Article 95 creates even more confusion when mentioning the restructuring plan proceedings in the context of insolvency proceedings.

The trustee must also submit a report to the court assessing the possibility for the debtor to restructure, and whether a restructuring plan has to be submitted to the creditors. The trustee will most probably tap into the report prepared by the expert during the insolvency proceedings before the court's order, in addition to the information and data it would have collected since then.

The court may request the trustee to amend its report before the report is submitted to the creditors for their comments.

The trustee may also request the court to freeze the accrual of interest and indemnities including late interest, until the court approves or rejects the restructuring plan.

3. The court's order on the trustee's report

The court calls upon the debtor and the creditors to attend hearings to discuss the report. If the court does not order the insolvency of the debtor, it will open the restructuring proceedings and will request the trustee to prepare a restructuring plan, provided that the debtor has announced its willingness to continue its operations. The court has to assess whether the debtor may become profitable within a reasonable period of time, given its operations, the nature of its business and the quantum of its debts.

B. The restructuring regime

If the court issues an order to start restructuring proceedings, the trustee has to prepare the plan with the assistance of the debtor within three months, which may be extended provided it does not exceed three additional months.

The details of the plan are identical to the voluntary arrangement plan and thus the same caveats and considerations must be taken into account, more specifically around debt conversion and how it fits with the CCL.

However, unlike the voluntary arrangement plan that is for a period of three years, the restructuring plan may not exceed five years. This can be extended for a further three years by approval of the creditors that would not have yet been paid in accordance with the original plan.

Again, the court has a proactive role in assessing the plan and requesting the trustee to make any amendments the court sees fit before calling upon the creditors to hearings to discuss and vote on the plan.

The court may, after deliberations with the trustee, set up various committees of different categories of creditors to discuss the plan and suggest any amendments thereto within the aforementioned hearings.

However, voting on the plan is restricted to unsecured creditors whose debts have definitely been approved, and if a secured creditor wants to vote on the plan, it has to waive its security.

In favor of debtors, and unlike in contracts governed by English law, contracts entered into with the debtor remain valid and enforceable and may not be terminated due to the launch of restructuring proceedings. The situation was the same under the old law, but the law goes further in specifying that the launch of restructuring proceedings does not lead to any debt acceleration, and any contractual provisions to the contrary shall be deemed void.

The plan is approved by the vote of a majority of creditors holding two-thirds of the debts.

Upon approving the plan, the court may decide to prioritize the payment of the creditors who agreed to discount their debts in furtherance of the restructuring.

It seems, however, that these secured creditors may not be able to continue with their individual lawsuits and enforcement actions after the order approving the plan (unlike the situation before such approval) and will have to satisfy themselves from the payment in priority of the sale of their secured assets in accordance with the plan's terms.

If any assets were considered essential for the continuation of the activity of the debtor, then the court may prohibit the sale of such asset for a period not exceeding the restructuring plan period, and if that asset was secured, then the court may decide to replace that security.

The trustee oversees the implementation of the plan and must submit quarterly reports to the court on the progress of the plan. Any amendments that the trustee may wish to make that may affect the rights or obligations of any party must be approved by the court after hearing all concerned, including the creditors that had voted on the plan.

The plan may be subject to annulment if any criminal proceedings were brought against the debtor and the latter was found guilty of any of those crimes, unless the court decides otherwise for the benefit of the creditors. The plan may also be subject to termination, at the request of any creditor, if the debtor did not perform the plan's terms or it appears that these were impossible to enforce for any reason.

If the plan is annulled or terminated, then the court may seal the debtor's assets.

Any actions performed by the debtor between the approval of the plan and its annulment or termination are enforceable towards the creditors and may not be rescinded unless through the provisions of the civil code in relation to a rescission action, which must be filed within two years from the annulment or termination of the plan.

C. The insolvency judgment

An insolvency judgment will be issued in the following situations:

  • if the voluntary arrangement plan or the restructuring plan was terminated or annulled;
  • if the restructuring proceedings were considered unsuitable, as evidenced by either the expert's or the trustee's reports; or
  • if the plan was rejected by the creditors or the court.

In such situations, the debtor will be removed from the management of its company and will be prohibited from performing any commercial activities if its behavior or negligence led to its insolvency. The prohibition will be for a limited period not exceeding the rehabilitation period. However, in another contradicting provision, Article 131 provides that the court may allow the debtor, upon the request of the trustee and under the latter' supervision, to continue in managing its assets in order to sell them at the best price.

The debtor will not see its civil rights or other personal rights affected as a result of the insolvency proceedings.

We see this as an improvement vis-ŕ-vis the old law here, as insolvency by itself does not lead to the prohibition in performing commercial activities, unless the debtor's negligence or behavior led to this result.

The court will appoint a trustee whose mission shall be to carry out the insolvency proceedings and liquidate the debtor's assets through public auction by approval of the court and under its control and supervision.

Upon the issuance of the insolvency judgment, all debts will become due.

The following persons are prohibited from taking part of or buying the debtor's assets, either directly or through a proxy:

  • the debtor itself;
  • any person related to the debtor;
  • any person who was a partner, accountant, employee or proxy to the debtor during the two years prior to the insolvency judgment; and
  • a supervisor of the proceedings.

A waiver may be given by the court to the above persons (except the debtor) if this is beneficial to the creditors.

Proceeds of the liquidation of the assets must be paid to privileged creditors, and secured creditors must be paid out of the sale of their secured asset. If such sale is not enough to cover their debts, then they will rank as unsecured creditors for the balance of their debts.

If all creditors are paid, then any remaining balance must be handed over to the debtor.

Insolvency proceedings may be closed either by the final distribution of all the debtor's money to the creditors, or if the causes that gave rise to the insolvency no longer exist. Any creditor that still has any money due may enforce against the debtor to have its debt paid, as the acceptance of the debt in the insolvency proceedings is considered an enforcement deed.

If it appears that the assets of a company are not enough to cover 20% of its debts, then the court may compel the members of the board of directors or the manager (s), to pay the company's debts, jointly or severally, if they are found responsible for its losses.

D. Clawback provisions

Provisions in relation to clawback of assets remain the same as in the old law. Unfortunately, the legislator missed an opportunity to provide for the concepts of "true sale" and "bankruptcy remoteness," which could have encouraged securitization and sukuks issuance in the State. In particular, the two-year period ("the suspect period") remains as is and thus poses a risk to structured finance operations, as transfer of assets to an SPV or other entity may be clawed back if the transfer took place during the suspect period.

Again in relation to the sale of goods, the law is not in tune with modern insolvency laws , as once the goods are in the insolvent's warehouses, they may not be recovered, despite any contractual stipulations to the contrary, even if these goods were not paid in part or in full. Other legal systems, such as French law, have evolved in this respect and consecrated the right of the seller to retain title to the goods even after the launch of the insolvency proceedings and even if those goods are integrated into other goods or are fungible goods.

IV. GENERAL PROVISIONS

During the voluntary arrangement proceedings or the restructuring proceedings, the debtor or the trustee may submit a request to the court to approve any new financings and to grant security to the lender, it being understood that any such new financing will have priority over any unsecured prior financing. However, Article 182 creates some issues, as it allows a new security over an already secured asset to rank higher than the existing security "provided that the new facility does not prejudice the interest of the secured lender." It will be very difficult to reconcile the two interests in these circumstances.

Additionally, a chapter is dedicated to the priority of creditors, a situation that existed under the old law but that was not expressed as clearly as in the new law.

The new law distinguishes between different situations:

  1. Priority under the voluntary arrangement and the restructuring regimes:

    1. Judicial costs and expenses.
    2. Any costs or expenses related to the continuity of any agreements, provided that these costs and expenses benefit the debtor and its operations.
    3. Any new unsecured financing, including any unpaid amounts of the capital, interests and costs.
  2. Priority under the insolvency regime:

    1. Secured creditors will rank in priority to unsecured creditors., However, any costs and expenses borne by the trustee during the sale of the assets will be withheld before making any distribution to the secured creditors.
    2. If the trustee does not sell the secured assets within a month from the issuance of the insolvency judgment, then the secured creditor may submit a request to the court to take enforcement action. The court will have ten days to decide on the request.
    3. If the trustee sees that the sale of any secured asset will not be enough to cover its fees and costs relating to that sale, it may decide not to proceed with the sale and shall inform the secured creditor of its decision immediately. Presumably, this will allow the secured creditor to seek enforcement through the court as above, as that creditor will have the right to object to the trustee's decision before the court.
    4. Any balance of the sale proceeds will be delivered to the trustee on behalf of the debtor and if the proceeds are insufficient to cover the secured creditor's debt, that creditor shall be considered an unsecured creditor for the balance.
  3. Creditors privileged by law:

    The following shall be considered creditors privileged by law and shall be paid accordingly:

    1. Judicial costs and expenses, including trustees and experts fees and any expenses for safeguarding the debtor's assets.
    2. Employee's remuneration and end-of-service benefits for a total sum not exceeding three months' salaries (an improvement vis-ŕ-vis the old law, which was restricted to 30 days' salary). However, the court may authorize the disbursement of such remuneration for a period not exceeding 30 days' salary from the money available with the debtor.
    3. Any amount due to government authorities.
    4. Any amount incurred after the launch of the proceedings in order to secure the supply of goods and services to the debtor in order for it to continue its operations.
    The law provides that the ranking of creditors in each category mentioned above shall be equal unless there are insufficient monies to cover them, in which case the debts shall be reduced in equal proportions.

    It seems clear from the above that priority should be distinguished according to the relevant regimes, with judicial expenses and costs coming first in all cases. In the arrangement and restructuring regimes, secured creditors will obviously be secured by the sale of their secured assets and in the insolvency regime, creditors privileged by law will be paid first as secured creditors. Accordingly, they will be able to enforce their secured assets and will become unsecured creditors for the balance.

V. PENALTIES AND REHABILITATION

The concepts of negligent bankruptcy, gross negligent bankruptcy and fraudulent bankruptcy that existed under the old law remain the same and have been transposed in the new law, with an increase in fines for these offences. One noticeable amendment compared to the old law is that a debtor that has defaulted on its debts for more than 30 days and has failed to file for bankruptcy will no longer criminally liable.

Any person found criminally liable may be prevented from operating, managing or supervising any commercial company for a period not exceeding five years from the date of closure of the insolvency proceedings, and the name of the person shall be flagged at the relevant commercial or professional registry (as the case may be).

A debtor may be rehabilitated after five years from the closure of the insolvency proceedings or earlier if he has repaid all his debts for a year period, or has reached a settlement with his creditors, or received a waiver from his creditors.

VI. THE CHEQUE ISSUE

In the context of a voluntary arrangement regime or restructuring regime, any offences related to a bounced cheque will be suspended and the beneficiary of the cheque shall be considered an unsecured creditor.

If the above applications are rejected, then the holder of the cheque shall be able to resume his criminal proceedings.

VII. CONCLUSION

In conclusion, it is clear that the legislator has tried very hard to put in place a good, modern and comprehensive law.

However, the law has some failings and is procedurally heavy and complex. Trustees and the courts have seen their respective roles reinforced and expanded. The legislator has tried to put some clear and definite time frames for each steps of proceedings but the complexity may work against the wishes of the legislator, and any layer of intervention will add additional time for the resolution of the proceedings.

Finally, the most important thing is that this law is used by the courts and insolvency practitioners alike. However, it will only be used if it is considered user-friendly, which does unfortunately not seem to be the case prima facie.

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You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.