Government officials are working on a proposed bankruptcy law designed to lower costs for businesses seeking to raise capital for start-ups or for expanding in the UAE, legal experts say.
Observers following developments generally agree the country's economy would benefit from more entrepreneurial risk-taking and a boost to the number of new businesses.
But some also say it would help to lower the cost of funds needed to launch or grow a company.
"International markets do not perceive UAE law as providing a viable reorganisation procedure and, as a result, companies in the UAE pay a premium when raising capital," said Adam Goldberg, an associate with Latham & Watkins, a law firm in Dubai.
"Reforming the insolvency law to provide a clear, predicable and transparent means for a company to reorganise would benefit the national economy and all UAE companies by reducing the costs of capital for UAE companies over the medium to long term."
A bankruptcy law already exists. But it has not been tested by any company, which means there is much uncertainty in legal circles about how it could be applied in reality, said Jody Waugh, a partner in the banking and finance division of the law firm Al Tamimi & Company.
"Current requirements under the bankruptcy law can make it difficult for companies to propose or obtain a court-supervised arrangement with creditors," Mr Waugh said.
An overhaul of the existing law would affect businesses of all sizes, experts say. Yet some note smaller start-ups could be the biggest benefactors.
In the tourism sector, many companies tend to be well-known brands that are well established.
But a greater number of smaller hotels or tour operators might start entering the market if the new law helps to push capital costs lower.
"Best practice bankruptcy provisions can play an important role in stimulating investment and entrepreneurial activity across all levels of the tourism industry," said Lawrence Franklin, the strategy and policy director for the Abu Dhabi Tourism Authority, "but particularly among small to medium enterprises, which are the backbone of any tourism sector and where, if international experience is taken into account, much turnover occurs."
At present, banks tend to ask for personal guarantees from small businesses, but a new law would pressure them to evaluate a company based on its creditworthiness, said Abdul Baset Al Janahi, the chief executive of Dubai SME, an agency under the emirate's Department of Economic Development.
This would eventually improve a bank's lending procedure, he added.
Others, however, note capital costs often have a premium in the UAE compared with other countries because of a high concentration of family-owned businesses.
"That in itself imposes a personal relationship beyond the corporate structure, said Bachir Nawar, the legal director of the Abu Dhabi office at Berwin Leighton Paisner, an international law firm.
"That's why banks will continue to ask for guarantees, separate from the insolvency regime."
nparmar@thenational.ae
Company%20Profile
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Business Insights
- Canada and Mexico are significant energy suppliers to the US, providing the majority of oil and natural gas imports
- The introduction of tariffs could hinder the US's clean energy initiatives by raising input costs for materials like nickel
- US domestic suppliers might benefit from higher prices, but overall oil consumption is expected to decrease due to elevated costs
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Disclaimer
Director: Alfonso Cuaron
Stars: Cate Blanchett, Kevin Kline, Lesley Manville
Rating: 4/5
SPECS
%3Cp%3E%3Cstrong%3EEngine%3C%2Fstrong%3E%3A%202-litre%20direct%20injection%20turbo%20%0D%3Cbr%3E%3Cstrong%3ETransmission%3C%2Fstrong%3E%3A%207-speed%20automatic%20%0D%3Cbr%3E%3Cstrong%3EPower%3C%2Fstrong%3E%3A%20261hp%20%0D%3Cbr%3E%3Cstrong%3ETorque%3C%2Fstrong%3E%3A%20400Nm%20%0D%3Cbr%3E%3Cstrong%3EPrice%3C%2Fstrong%3E%3A%20From%20Dh134%2C999%26nbsp%3B%3C%2Fp%3E%0A
The specs
Engine: four-litre V6 and 3.5-litre V6 twin-turbo
Transmission: six-speed and 10-speed
Power: 271 and 409 horsepower
Torque: 385 and 650Nm
Price: from Dh229,900 to Dh355,000
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
THE SPECS
Engine: 1.5-litre turbocharged four-cylinder
Transmission: Constant Variable (CVT)
Power: 141bhp
Torque: 250Nm
Price: Dh64,500
On sale: Now
COMPANY%20PROFILE
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Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
The specs
Engine: 2.7-litre 4-cylinder Turbomax
Power: 310hp
Torque: 583Nm
Transmission: 8-speed automatic
Price: From Dh192,500
On sale: Now
COMPANY PROFILE
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Total funding: Self funded
US tops drug cost charts
The study of 13 essential drugs showed costs in the United States were about 300 per cent higher than the global average, followed by Germany at 126 per cent and 122 per cent in the UAE.
Thailand, Kenya and Malaysia were rated as nations with the lowest costs, about 90 per cent cheaper.
In the case of insulin, diabetic patients in the US paid five and a half times the global average, while in the UAE the costs are about 50 per cent higher than the median price of branded and generic drugs.
Some of the costliest drugs worldwide include Lipitor for high cholesterol.
The study’s price index placed the US at an exorbitant 2,170 per cent higher for Lipitor than the average global price and the UAE at the eighth spot globally with costs 252 per cent higher.
High blood pressure medication Zestril was also more than 2,680 per cent higher in the US and the UAE price was 187 per cent higher than the global price.
MATCH INFO
Group B
Bayern Munich v Tottenham, midnight (Thursday)
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COMPANY%20PROFILE%20
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Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
PROFILE OF SWVL
Started: April 2017
Founders: Mostafa Kandil, Ahmed Sabbah and Mahmoud Nouh
Based: Cairo, Egypt
Sector: transport
Size: 450 employees
Investment: approximately $80 million
Investors include: Dubai’s Beco Capital, US’s Endeavor Catalyst, China’s MSA, Egypt’s Sawari Ventures, Sweden’s Vostok New Ventures, Property Finder CEO Michael Lahyani
Name: Peter Dicce
Title: Assistant dean of students and director of athletics
Favourite sport: soccer
Favourite team: Bayern Munich
Favourite player: Franz Beckenbauer
Favourite activity in Abu Dhabi: scuba diving in the Northern Emirates
