United Arab Emirates: Federal Cabinet Resolution No.4 Of 2018

Last Updated: 15 May 2018
Article by STA Law Firm
Most Read Contributor in United Arab Emirates, September 2018

FEDERAL CABINET RESOLUTION NO. 4 OF 2018 FORMING THE FINANCIAL RESTRUCTURING COMMITTEE

On issuance of Federal Bankruptcy Law under the Federal Decree No. 9 of 2016 for various bankruptcy cases. On 19 October 2017, the current Cabinet members have been reshuffle by H.H. Sheikh Mohammad bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai.  Cabinet Resolution No.4 of 2018 forms Financial Restructuring Committee which was published in the Federal Official Gazette Issue 627 on 28 February 2018 and came into force on 1 March 2018. The Resolution sets out the terms of its membership and function. The Federal Restructuring Committee is responsible for:

  1. Overseeing the implementation of the federal UAE bankruptcy law and managing the various registers inspecting under that law. It also consists of insolvency expert to investigate the insolvency of the financial institution.
  2. It is responsible for supervising out of court restructuring processes for licensed financial institutions.

Role of the Financial Resolution Committee

The Financial Resolution Committee (FRC) will have the following functions:

  1. The supervising the management of out of court restructuring of financial institutions.
  2. Approving and managing the role of experts and trustees who will oversee bankruptcy processes.
  3. Maintaining the registers of disqualified directors and bankrupt companies inspected under the UAE Bankruptcy Law.
  4. Reporting back to the Minister of Finance on the work of the FRC.
  5. A raising voice of public awareness of the UAE Bankruptcy Law.

Who will sit on the Financial Resolution Committee?

The FRC is expected to comprise of nine members, which includes representatives of each of the Ministry of Finance, the Ministry of Economy, the Ministry of Justice, the Central Bank, the Securities and Commodities Authority, and the Governments of Abu Dhabi and Sharjah.

When can an institution apply for a financial restructuring?

A financial institution can apply to FRC if it:

  1. Is in financial distress but is not yet insolvent for the UAE Bankruptcy Law.
  2. Is not in a preventative composition or bankruptcy process under the UAE Bankruptcy Law.
  3. Has not been subject to a financial restructuring in the preceding year.

The application process for restructuring entails that, a financial institution must submit specific information to the FRC, including assessment of institution's funding needs for next 12 months. The institution may appoint an expert from the role of experts to oversee its financial restructuring.

Consequences of accepting FRC application

Once the FRC application is accepted then following are the consequences:

  1. An expert will be appointed to supervise the restructuring process.
  2. A debtor will continue to manage business throughout the financial restructuring process.
  3. On acceptance of FRC application of financial restructuring, then any obligation on the financial institution to file for bankruptcy under the provisions of the New Bankruptcy Law will be suspended.

Role of the expert in a financial restructuring

  1. The expert appointed to oversee the restructuring of a financial institution will:
  2. Assess the economic and financial status of the debtor.
  3. Facilitate a consensual agreement between the debtors and creditors.
  4. Provide the debtor with proposals to continue its business and retain its employees.
  5. Submit the monthly report to the FRC to keep it informed of progress.
  6. Undertake any other tasks assigned by the FRC.

When will the financial restructuring terminate?

On reaching upon the consensual agreement between the creditors and debtors, the financial settlement will terminate. Additionally, if the debtor fails to pay the requisite fees and expenses.

Who are the experts?

Experts can be natural or legal persons. Anyone can apply for the post of experts on submission of an application to the secretariat of the FRC. FRC is empowered to require experts to pass specialized courses in the field of restructuring and bankruptcy to be registered on the role of experts. A summary of the expert's credential will be recorded in an electronic register. Last but not least, both the resolution and the UAE bankruptcy Law sets out circumstances when an expert cannot act in respect of a particular restructuring.

PROCEEDINGS OF THE FRC

Membership  The FRC is expected to comprise of nine members, being representatives of each of the Ministry of Finance, the Ministry of Economy, the Ministry of Justice, the Central Bank, the Securities and Commodities Authority, and the Governments of Abu Dhabi, Dubai, and Sharjah. A minimum of seven members is mandatory at all times.

The Chair of the FRC will be the Deputy Minister, and the Vice Chair will be appointed by the FRC's members at its inaugural meeting. In a further resolution of the Cabinet membership of FRC will be approved.
A term Each member, will be appointed for an initial term of three years or for long-term as is required to hire a replacement representative. The appointment is renewed by Cabinet Resolution.
Meetings    Once every four months.
Quorum A majority of members including the Chair and Vice Chair.
Voting One vote per member. Resolutions passed by a majority, subject to chair casting a ballot.
Resolutions  The minutes of the meetings will be recorded, and it may be circulated more widely at the FRC's discretion.
Administrators   The FRC will have a secretariat function to manage it is administrative, financial and technical affairs.
Advisors   The FRC may invite advisors to attend meetings on a non-voting basis.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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