BANKRUPTCY & DEBT RESTRUCTURING
Reorganise and Reform The structural reforms that are being implemented across the Gulf region, including modern bankruptcy legislation, have boosted the oil-rich nations’ efforts to make their economies more enticing to investors
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he COVID-19 pandemic is expected to put to test the insolvency and restructuring refo r m s t h a t a re b e i n g implemented across the six-nation bloc of GCC countries. Bankruptcy and insolvency laws seek to stimulate economies by allowing individuals and corporates in financial distress to reorganise their financial affairs and repay their debts. The lack of modern bankruptcy legislation in the GCC region created difficulties for cash-strapped companies seeking to restructure debt with
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creditors since the 2008 global financial crisis and the oil price crash in 2014. However, the structural reforms that are being implemented across the region, including modern bankruptcy legislation, have boosted the oil-rich nations’ efforts to make their economies more enticing to investors. Though GCC countries introduced billions of dollars in stimulus measures to mitigate the economic impact of coronavirus last year, governments also made changes to insolvency regimes to provide more sustainable options for companies that needed financial
Banking and Finance news in the MEA market
restructuring. According to the World Bank, bankruptcy costs play a major role, during both crises and recoveries. Saudi Arabia’s bankruptcy law faced its major test in resolving the kingdom’s longest-running and largest debt dispute involving Ahmad Hamad Algosaibi & Brothers Co.’s (AHAB). Resolving insolvency was an area of improvement for Saudi Arabia, which saw the Gulf state climbing 30 places to 62nd in the World Bank Doing Business 2020 report.
GCC bankruptcy regimes
UAE The UAE broadened the scope of the 2016 bankruptcy law in November 2020 to protect individuals and businesses facing insolvency due to “emergency situations”—a category that covers the COVID-19 pandemic and extends to include natural as well as manmade disasters, including wars. PwC said that the UAE’s bankruptcy law contributes to raising the level of credit and financial security in the country by enhancing investor confidence. The
