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Consultation Paper No. 4 Insolvency Law

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January 2003

This draft law is published for consultation purposes only. The regulatory authority reserves the right to amend this draft at its sole discretion. The enactment of this draft law is conditional upon the official publication of a federal decree, the amendment of Dubai decree no. 3 of 2002, and the issuance of the law by the chairman of the DIFC

Insolvency Law of the Dubai International Financial Centre

Primary Purposes

1. To protect the assets and creditors of a company, prior to the onset of insolvency and whilst in liquidation.
2. To promote creditor agreement as a viable alternative to liquidation or administration.
3. To provide suitably qualified insolvency practitioners and to provide them with necessary assistance and protection from liability to perform their work.
4. To provide assistance to foreign courts in respect of insolvency proceedings.

Summary

Part 1: General

Establishes the title, authority, application, enactment, commencement and interpretation of the Insolvency Law.

Part 2: Company Voluntary Arrangements

Provides for company voluntary arrangements binding on creditors, with the possibility of a moratorium during negotiations and, at the court's discretion, a stay on proceedings, winding up or administration once agreement has been reached.

Part 3: Receivership

Establishes receivership and administrative receivership and details the powers, duties, liabilities and interaction of receivers.

Part 4: Winding Up

Provides for the winding up of companies either voluntarily (by Members or by creditors) or involuntarily by the court; details the means of appointment and the powers of liquidators.

Part 5: Protection of Company Assets In Liquidation; Part 6: Overseas and Unregistered Companies; Part 7: Miscellaneous

Protect the assets and creditors of a company in liquidation by making certain preferences and Security transactions made by a company voidable prior to its insolvency and by requiring persons who mislead a company's creditors or engage in wrongful trading to reimburse and / or compensate the company. Provide assistance to the courts of the country of incorporation of an overseas company in foreign insolvency proceedings; provide for the winding up as an unregistered company of an overseas company which has been trading in the DIFC notwithstanding that it has already ceased to exist in its country of incorporation. Provide rules to assist liquidators and receivers to get in and realise company Property and to limit their liability.

Part 8: Supervision of Insolvency Practitioners

Provide the Regulatory Committee with authority to create rules on the qualifications required by insolvency practitioners.

Part 9: Protected Cell Companies

Provide for the application of the law to protected Cell companies

Submission of Comments

Please note, that although each draft is in near final form, it is still 'work in progress' and may therefore undergo ffirther amendments prior to enactment. However, it is anticipated that any amendments would be technical in nature rather than substantive and therefore the Regulatory Authority believes it is a sensible time to engage in consultation.

Any persons wishing to submit comments should, where applicable, provide details of the organizations they represent. In addition, persons suggesting alternative approaches are encouraged to submit the proposed text of possible amendments that would be necessary to incorporate their suggestions.

Please note that the names of the commentators and the content of their submissions may be published on the Regulatory Authority website and in other documents to be published by the Regulatory Authority. If you wish your name to be withheld from publication by the Regulatory Authority, please indicate this when you make your submission.

Any comments should be addressed to Ms. Roberta Calarese, Legislative Counsel, Regulatory Authority, P.O. Box 74777, Dubai, u.a.e. All comments should be provided in writing no later than 28 February 2003.