Dear Friends and Clients,
A crisis always also offers opportunities and has positive consequences. The historic accords with Israel and the restoration of ties with Qatar already have a significant impact on the Gulf region. The UAE will strengthen their position as the most important hub in the Middle East and the forecasts are positive.
On the other side, the world economy has shrunk by thousands of billions. The consequences of the economic downturn will be felt for many years to come and the next financial crisis may be coming soon. Entire sectors of the economy have been almost wiped out. Many large corporations have decided to restructure and get rid of their creditors. We can recommend the same to medium and small businesses: take a realistic look at the figures of your own company, do not close your eyes and appease yourself with the hope that “it will be better again”.
After such deep recessions it is legitimate to deal with the idea of debt relief and restructuring in order to re-enter the emerging economic life by shaking off the old ballast. The modern insolvency laws provide for ample restructuring opportunities to return to economic life with full force.
As already stated in the November newsletter, companies in UAE are expected to be granted a one-year period in which they do not have to pay old debts and no court proceedings or executions can be initiated. This law could certainly save a lot of endangered companies in the UAE. However, we are all still awaiting the publication and effectiveness of the new law.
The recent amendments to the UAE Commercial Companies Law also opens up another possibility to avoid insolvency. If a proposal for a capital increase does not receive the necessary three-quarters majority at a general meeting, a single minority shareholder can apply to the court for an emergency capital increase. If the court grants the application, any shareholder can take over the increased capital even against the will of a majority shareholder.
We would also like to draw your attention to the list of our webinars in February and March 2021 (Link). We will hold two webinars on bankruptcy, one for our clients in the Arab region with focus on insolvency/bankruptcy and restructuring of companies and individuals in danger of insolvency, and another on international bankruptcy law which might also be of interest to our clients in the Asian region and Europe.
The debtor friendly systems also in cross-border bankruptcies support companies to get rid of such debts and to start anew. Also all the criminal penalties especially in UAE are largely lifted or at least postponed upon the filing of the insolvency.
And be aware that late filing can result in personal liability of directors, managers and even shareholders.
So make your decision taking into account the above and after thorough consultation with professionals. We have over 40 years of advisory experience in bankruptcies and can safely lead you out of the crisis.
Remaining with best wishes for the year just started
UAE: Re-opening of borders with Qatar
UAE reopens all land, sea and air ports for inbound and outbound movement to and from Qatar effective January 9. This was announced after the signing of the Al-Ula declaration which opened the trade and travel links as well as diplomatic ties between GCC countries with Qatar. Qatar had agreed to suspend legal cases against its neighbours related to the embargo and that it would cooperate on counter terrorism and transnational security. But until now it isn’t yet clear when it is possible to book a direct flight to Doha. The Emirates airline offers no flights to Qatar yet.
UAE: Outlook 2021 – A recovery
According to the Global Investment Outlook report, it is expected, that the UAE economic will recover and to grow by about 2,5% overall this year and 3,6% in the non-oil sectors as the economic recovers from the Covid-19 pandemic in 2020. The report also predicts a further boost and an improvement in the tourism sector and other sectors, including retail and real estate activities due to the postponement of Dubai Expo to October 2021.
The International Monetary Fund (IMF) and the World Bank also predicted a positive trend for the UAE economy after the government announced rapid progress in vaccine development and rapid implementation of the program. The IMF predicted the UAE economy would grow 1,3% this year, accelerating to 2,2% by 2022, while the World Bank took a conservative view, forecasting GDP growth of 1% in 2021 and 2,4% in 2022.
According to the World Bank report on ease of doing business, the UAE ranks first in the Arab world and 16th in the world. The UAE announced to implement numerous new reforms to improve their ranking even further and are well-positioned to benefit from the coming global recovery.
According to the Fitch Ratings, the GCC economies will also benefit as oil demand and prices continue their recovery from the severe falls in 2020. The GCC off-budget stimulus programmes has amounted nearly 30% of the GDP in Bahrain and Oman, more than 10% in Kuwait, Qatar and the UAE and more than 7% in Saudi Arabia.
In the medium term, improved growth should also result from well-received reform initiatives, as well as from normalised relations with Israel and Qatar.
UAE: ESR deadline extended
The Ministry of Finance has extended the deadline for submitting the Economic Substance Regulations (ESR) notifications. The MOF has previously changed the deadline from December 31, 2020 to January 31, 2021. No further extension will be given after that and companies who are unable to comply will be subject to administrative penalties.
Ras Al Khaimah: New office center for RAKEZ clients
RAKEZ launched it new Compass Co-working Centre. Starting January 3, 2021, all clients with existing Flexi packages will automatically be converted to co-working packages. The transition will be reflected in all existing “Occupancy Agreements”, which will be replaced with new “Lease Agreements” upon licence renewal. Benefits of the Co-working Centre include:
- Access to Compass Co-working Centre;
- 2 hours free meeting room usage;
- Access to community events;
- Discounted amenities/services;
- Lease agreement with an assigned address;
- Employee visa validity extension of up to 3 years (for packages with 2 visas.
Please be aware that such coworking center does not fulfill the requirements of a permanent establishment under international law!
Ras Al Khaimah: RAKEZ issues 3-year employment visa
RAKEZ announced that starting January 3, 2021, all issued and renewed employee visas will have a validity of three years instead to two. The costs for the 3-year visa will be:
- AED 3,600 for new employee visas (including medical test and emirates ID);
- AED 3,400 for visa renewals (including medical test and Emirates ID).
Applications submitted before January 3 will get the two-year visa validity. For those who have just recently applied, the visa application can still be changed to 3 years as long as the request is not yet submitted to the Immigration. For employees with dependents, the validity of a dependent visa will follow the validity of the current visa held by the sponsor.
Singapore: Business travellers will not need to be quarantined
Singapore will launch segregated travel lane arrangements on the second half of January 2021 for short-term business travellers from all countries. No quarantine is required for those who opt to use the lane as long as they stay for up to 14 days or shorter. Travellers will be transported from the airport to dedicated facilities where they will stay and work. Regular testing will be implemented on random days during their stay in addition to tests conducted upon their arrival and before their departure from their home countries.
Singapore: Free trade deal between Singapore and UK starts
The UK-Singapore free trade agreement takes effect on January 1 as BREXIT transition ends. The EU-Singapore FTA will no longer apply to trade between the two countries. The UK-Singapore FTA was signed last December 10 and both countries have completed their respective domestic procedures for the FTA’s provisional application, enabling them to apply treaty commitments on a provisional basis until the agreement is ratified and enters into force. Companies will be able to enjoy the same EU-Singapore FTA benefits when trading between the UK and Singapore under the new FTA as stated by the Ministry of Trade and Industry.
Thailand: Longer holidays for citizen to stimulate traveling
The Government of Thailand is looking into giving longer holidays every month next year to stimulate local tourism since the international market remains unstable. Thailand has offered visa exemptions for 56 countries for the month of December to attract more tourists to travel in the country but the 14-day quarantine is still mandatory.