Dear Friends and Clients,
It is not to be overlooked: The Gulf region is undergoing a significant liberalisation process. The UAE, Saudi Arabia and now Oman are showing considerable relief in terms of direct foreign investment and in adapting Arab traditions to modern life interests.
We have been deliberately waiting for this November newsletter, knowing that a comprehensive change in UAE company law is imminent. Unfortunately, the exact wording of the law is not yet available to us, but the essential contents are already known. The 100% foreign participation in an onshore (mainland) LLC will be anchored in law, as well as the commencement of foreign business in the mainland without a commercial agent. These are substantial changes, which we will analyse in detail in a special newsletter.
Further examples of the liberalisation can be found in the amendments of the civil transactions law, family law and penal code, as you can read below.
But there is no doubt that the amendment to the Bankruptcy Law 2016 is most important in economic life. This amendment grants the debtor an ADDITIONAL 12-month period during which no recovery action needs to be taken. The debtor can therefore “in times of an emergency financial crisis”, apply for this 12-month period, during which he enjoys full legal action and protection against execution, but can continue to operate his business without restriction. Only after this one-year period has elapsed, the debtor must make the legally required applications, such as Protective Composition Plan or Restructuring Plan.
This new regulation is intended to give “Covid aggrieved” companies the option of leaving all debts unpaid for an initial period of 12-months without the risk of being sued or executed. After the 12 months, the application can be withdrawn once the over-indebtedness or insolvency is eliminated.
So we can only congratulate all debtors in this country and rather pity creditors. Despite decades of experience in insolvency law, we have not encountered such a legally established moratorium in any jurisdiction.
We have been active in insolvency law since 1975 and have been appointed by courts as insolvency administrators in over 100 cases. We can therefore point to a wealth of experience. Especially in times like these, this expertise may distribute to help businesses rise out of the crisis like Phoenix from the ashes without debts.
Always remember that in a capitalist economy there is no shame in using legal means of debt relief.
Yours,
Theodor Strohal
Office News:
Theodor Strohal shows in his blog on the expected amendments in Commercial Companies Law: Amendments in the Commercial Companies Law
The UAE amended the Commercial Companies Law and allows full foreign ownership of commercial companies in the “Mainland”
Amendments have been made to UAE Federal Law No. 2 of 2015 on Commercial Companies and will come into effect from 1 December 2020. Some of the changes include:
- It annuls the requirement for commercial companies to have an Emirati majority shareholder or Emirati agent, providing full foreign ownership of onshore companies.
- It grants local authorities a set of powers, including setting a specific percentage of Emiratis in the capital allocation and boards of directors of companies, approving requests to establish companies – except for joint stock companies – and identifying fees and charges according to the policies adopted by the UAE Cabinet.
- Firms who wish to become joint stock companies can now sell more than 70% of the company through IPOS.
- The decree enables the stakeholders to sue a company in civil court over any failure of duty that results in damages.
We will inform you with further details in a separate newsletter.
UAE amends several aspects of the family law, criminal law and the civil code
On 7. November 2020, the UAE announced several changes in the family law, criminal law and civil codes which have a deep impact mostly on UAE Expats and their daily life. The decree covers e.g. divorce, wills and inheritance but also changes in criminal law related to the protection of women’s rights. We mentioned some changes in a short summary for you:
- Expats have now the option to choose the law which shall apply to their inheritance but if there is no will in place or no specific law mentioned, the laws of the country of nationality of the deceased will apply.
- A major change and update is the punishment for sexual offences. With the amendment the consensual sex between two adults with full mental capacity is no longer punished by the law. Also the co-habitation between an unmarried couple or unrelated mixed sex flatmates is no longer prohibited but explicitly legal.
- In addition to the above changes and amendments the consumption of alcohol is not a criminal offence as long as the consumption is in a private place or licensed public place. Also an alcohol license is no longer necessary across all emirates.
- During a court procedure it is now mandatory for the defendants and witnesses, whom are not able to speak and understand Arabic, to have a legal translator.
We will inform you with more details in separate newsletter.
UAE: Cabinet approves amendments of the Commercial Transactions Law
Several amendments were approved to amend some provisions of the Federal Law on Commercial Transactions. The amendments include:
- Creating several mechanisms that will ensure simple and fast collection of payments on bounced cheques and cheques without value. It will oblige banks to partially pay the amount after deducting the total amount available to the beneficiary and making bounced checks an executive document to be executed directly by an appropriate judge in court.
- The amendment also aims to avoid a criminal lawsuit by encouraging reconciliation and urging the payment of the value of the original cheques as the main condition for abatement of a criminal lawsuit.
It also introduces several ancillary penalties including:
- Canceling the checkbooks of convicted persons and preventing them from getting a new one for five years’ maximum.
- Stopping professional or commercial activities.
- Additional penalties for legal persons, barring banks and financial institutions which includes a financial fine, suspension of licenses for up to six months and dissolution of the licenses of legal persons for repeat violations.
The amendments also cover the opening of joint accounts between two or more persons. If one of the two or more persons dies or loses legal control the other joint account holders must notify the bank within 10 days from date of death or disqualification. The bank then should limit the ability to withdraw from the joint account within a party’s share of the account balance on the day of death or disqualification. The new decree will come into force on 2022 and will be published in the UAE’s official gazette.
UAE: Cabinet approves amendments of the bankruptcy law due to Covid-19
The UAE Cabinet has approved Amendments to the provisions of the Federal Law by Decree No. 9 of 2016 on Bankruptcy with regards to emergency situations such as pandemics, natural and environmental disasters, etc. It stipulates that the debtors shall be exempted from commencing procedures to declare bankruptcy. Should the debtor file an application that would be approved by a competent court, he may reach a settlement with creditors wherein he may request for a grace period or negotiate a debt settlement within a period of not more than 12 months. The competent court, in case of approving the bankruptcy application, would not take any proceedings involving the debtors’ funds that are needed to keep businesses running during the set period in case they defaulted on debt for emergency.
RAK: Airport welcomes passengers again
RAK International Airport will now start to allow expats to enter the Emirate starting 15 October with no prior approvals. Travelers or sponsors should cover the cost of another PCR test upon arrival and quarantine costs in case of a positive result. Tourists are now allowed to enter provided that they follow the following requirements:
- Travel ticket reservations
- Medical insurance
- PCR test at least 4 days before coming to the country
- Filled medical disclosure form
Emirati citizens and residents are now allowed to travel to any country through RAK International Airport as long as they adhere to the travel requirements applied by their country of destination.
Saudi Arabia: Tax relief for real estate buyers
Saudi Arabia scraps 15% VAT on property sales to bring relief to property buyers. Property transactions will now only be subject to a new 5% real estate sales tax. The government will also shoulder the cost of taxes for first-time home buyers on properties worth up to 1 million riyals. A new threshold for tax exemption has been increased to 850,000 riyals for citizens buying homes for the first time.
Oman: Expats can now buy property
Oman’s Ministry of Housing and Urban Planning has announced that expats can now purchase apartments in multi-story buildings in Muscat und the following conditions:
- Must be a resident of Oman for at least 2 years;
- Properties that can be obtained should be licensed by the Ministry of Housing and Urban Planning;
- Fees incurred by the seller would be 3% of the unit value, and fees for the beneficiary would be 5% of the unit value upon registration.
The lease is for an initial period of 50 years, which may be renewed up to 99 years.
Far East:
Thailand: Seven-day quarantine for foreign tourists – but high risk tourists are not allowed to enter
Thailand will implement shorter quarantine periods effective November if the first batch of inbound tourists in October have negative COVID-19 results. The new proposed quarantine period will be shortened to 7 days in mid-November. Tourists entering the country have to complete a strip test and a PCR test upon arrival.
The Foreign Ministry of Thailand has also announced that the most important requirement for Special Tourist Visa (STV) for long stay tourists is they must come from low COVID-19 risk countries. The documents required for STV are as follows:
- Certificate of eligibility
- Proof of payment for state or hospital quarantine for 14 days
- Full payment for post-quarantine accommodation or ownership accommodation
- Thai health and accident insurance policy with at least 400,000-baht in-patient coverage and 40,000 baht out-patient coverage
Health insurance policy with at least US$ 100,000 (3.16 million baht) coverage for COVID-19 treatment.
Cambodia: GDT a go on capital gains tax
The General Department of Taxation of Cambodia will begin the collection of capital gains tax starting next year. According to the Director-General, the GDT will start tax collection on capital gains made from the sale of assets and capital investment from January 1. Tax will be levied on tax payers’ gains from the sale, transfer or establishment of property rights, or the registration ownership or possession rights.
Cambodia: New stimulus packages for private sectors
New stimulus packages for the private sector have been announced by the Government of Cambodia to stimulate economic growth in the midst of COVID-19 pandemic.
- Garment Sector – to be provided with $ 40 per month for 3 months until December for workers who were laid off or suspended. Factory owners shall add $ 30 to the handout.
- Delayed taxes for social protection scheme.
Tourism Sector – employees to be provided with $ 40 per month for 3 months until December plus an addition of $ 40 from employers. Hospitality establishments in certain areas are exempted from taxes for the next 3 months. Travel agents and operators also get delayed GDT audits and exempted from patent and building taxes. Minimum taxes for travel companies registered in Cambodia will be delayed for 3 months as well.