Qatar’s cabinet has approved a draft law on corporate bankruptcy aimed at improving the investment environment in the country.
The law, prepared by The Ministry of Economy and Commerce, aims at developing a comprehensive regulation of the provisions of corporate bankruptcy and prevention, taking into account international standards in this regard.
The cabinet also approved a draft law regulating competition.
The draft law was prepared to replace Law No. (19) of 2006 on the protection of competition and the prevention of monopolistic practices, as part of the modernization of legislation to keep pace with developments.
Qatar has been emerging as a regional financial hub, with banks and financial services sector contributing in double digits to the national economy.
Nonetheless, the country has been criticized for not having a broader environment that encourages insolvent businesses to restructure themselves rather than liquidate and vanish after paying off their creditors.
Previously, bankruptcy procedures in the country were aimed at disbanding a company and liquidating its assets to pay off creditors rather than restructuring debt and making sure that the business survived and made a turnaround.
There is also a social stigma associated with insolvency in Qatar. So bankruptcy is looked down upon as management failure rather than a fallout of risks and uncertainties.
According to a report by Kuwait’s Financial Centre that is known as Markaz, it takes 2.8 years to resolve insolvency in Qatar, with a recovery rate of 55.6%. In developed countries, the time consumed is much less (1.7 years), and the recovery rate is 70.6%.
Of late, countries in GCC have been waking up to the need for better bankruptcy laws.
UAE President Sheikh Khalifa bin Zayed Al Nahyan recently issued the long-awaited Federal Law on Bankruptcy by decree.
The new bankruptcy law provides a legal framework to help distressed companies avoid bankruptcy and liquidation.
It promises lower risks for those who want to run businesses in the country as it allows entrepreneurs to skip a jail term if their firms default on debt payment.