Every business needs to maintain its stability while growing, which can only be done with proper sound financial management. However, there are two significant challenges that trouble many businesses: late payments and volatile currency rates from clients.
When clients postpone payments, it affects cash flow and everyday operations are more difficult to manage. Meanwhile, currency swings can alter the effective value of international trade, introducing financial uncertainty.
Addressing these concerns requires a proactive approach by the business using UAE financial law and strategic solutions. What you’ll learn: We’ll discuss real advice to help businesses mitigate risk, manage cash flow, and assuredly stride into an unpredictable economy.
Regulations for Recovery Planning
New Bankruptcy Law does not cover financial institutions. Rather, it introduces specific requirements for them through the Recovery Planning Regulation issued by the CBUAE. Pursuant to this regulation, entities in the financial sector in the UAE (specifically banks, branches of foreign banks, and insurance companies) are required to prepare a plan in a structured manner for recovery.
This saves them a huge amount of time and makes it significantly easier for them to get back on their feet. Together these regulations enhance the stability and resilience of the financial sector by integrating financial law with UAE business law. We will issue a client alert shortly giving a detailed breakdown of these changes.
Amendment to UAE Financial Law: Financial Restructuring and Bankruptcy
On 31 October 2023, the UAE enacted a new corporate bankruptcy law (the New Law) that will go into effect on 1 May 2024. It is designed to supersede the current 2016 bankruptcy law, making necessary progress and advancements. It tightens definitions to clarify key concepts, revises the liability regime of boards of directors and managers of insolvent companies, and augments the mandate of the Financial Restructuring Committee.
It also explicitly recognizes specialized bankruptcy courts to hear insolvency cases and makes it easier for secured creditors to enforce security.
A significant transformation in this bill swaps the rigid “Preventative Composition” structure of the 2016 law for its UX-conscious successor, “Preventative Settlement.” These developments are in step with financial laws regulations and protocols to create a more organized and practical platform for corporate insolvency in the UAE
UAE Financial Law Update: Regulation of BNPL Entities in Finance Companies
The CBUAE recently issued a new Finance Companies Regulation, which includes two new categories of licenses. The first relates to the ‘Restricted License Finance Company’, which is relevant to entities providing ‘Buy Now Pay Later’ (BNPL) services. Agent: This category enables entities to offer BNPL services without the need for a license if they enter into an arrangement with a licensed finance company or bank in the UAE.
In a significant element, non-licensed BNPL operators were given still until 27 December 2023 to either successfully apply for a CBUAE operating license or cease operating. [BNPL Regulation Ensures BNPL services operate in a regulated legal context under these regulatory reforms, which are critical to financial litigation.
Updates to Moveable Security Registration Fees
Emirates Integrated Registries Company (EIRC) recently amended its fees and services on 15, December 2023. The registration fee will be a minimum of AED 100 for periods up to 12 months (was AED 100).
Increment will depend on the registration period chosen with an increased fee. Moreover, EIRC has launched sixteen additional services in the area of registration amendments, extensions filing of objections, and other credits. The new classification and fees will come into effect on 27 February 2024. Be sure to read our recent update covering these changes and what they mean for UAE financial law.
Conclusion
With this in mind, businesses must stay ahead of the curve and keep pace with the changing financial landscape in the UAE. Because of financial instability, businesses handle payment issues for instance, and to deal with trading in global markets, one has legal knowledge that could gum up business and must take the risk.
The new Recovery Planning Regulation, amendments to the bankruptcy law, and regulation of BNPL entities are just three key regulatory changes that will provide financial institutions with greater stability and certainty.
Amendments for moveable security registration fees, among other packages, updates will also influence financial operations. By being aware of and adapting to these updates, businesses can stay resilient and comply, positioning themselves for success in an ever-changing economic landscape. To help navigate these changes, contact Khairallah Law Firm for advice.
Having said that, Contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.
*Disclaimer: our blogs, law updates, and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.
If you have any questions and need assistance, contact us at our number or book an appointment online.
