Structuring your Debt in the UAE – Debt Structuring Services

Structuring your Debt in the UAE

 

Unpaid invoices and outstanding receivables are a major problem faced by companies in the UAE. The lack of cash inflows and outstanding debts due to them forces many companies to shut down.

At MBG Corporate Services, we help you structure debt and recover outstanding dues from your customers both through effective management strategies and through the legal course of action.

Structuring of debts is about tracking and following up with payment demand from the defaulter whose legal obligation it is to comply. We normally follow the following process for debt structuring:

Extra-judicial process:

     

1. Due Diligence:

In the event of the defaulter being non-reachable by normal means, our assigned representative conducts investigations of the contact number and due diligence at the registered regulatory authority, as to the validity of the trade license and whether it is operational if it is a company, and at the Immigration department, if it is an individual. We also examine the best chances of recovery. Also, it is necessary to be aware of the debtor’s solvency status.

2. Serving demand letter/legal notice:

A formal demand letter or a legal notice carefully drafted by our expert lawyers is served via email, registered post, or courier. It contains details of the debt, the name and contact details of the defaulter, the object of the debt and the payment deadline. The letter and the notice also constitute potential legal action should the payment not be made on time. This notice may also be served by way of a notarization through the Notary Public in the respective emirate.

3. Communications:

Once the demand letter/legal notice is successful, our representative establishes a line of communication for negotiations with the counterparties. This is done with constant emails, phone calls, visits to the site of the defaulter, etc. until an appropriate answer is offered to the client.

4. Negotiations and Settlement

Under this, once the representative is confident that the communication is established, the debt collector engages in informal negotiations for prompt payment with the defaulter. The most important part of the collection process is the evaluation of the defaulters’ behaviour and how willing they are to pay and settle the matter. There is constant bargaining and negotiations via phone, emails, virtual or personal conferences.

The negotiations are effected and settled by a documented settlement agreement agreeing on the payment terms and conditions, which may include discounts, instalments, or counteroffers.

Once the terms are agreed upon, there is an execution of a formal settlement agreement. The settlement agreement can be immediately legalized at the court of competent jurisdiction. The parties may agree on issuing post-dated cheques or manager cheques for the settlement amount.

 

Judicial process:

The UAE government understands the need for strong judicial processes to help investors and business owners sustain and run their business smoothly. There are several options available to the creditor to initiate a claim. These are as follows:

1. Payment Orders:

Now a Creditor may avoid long and costly hassles of court procedures and may directly obtain a payment order against the debtor if the debt is confirmed. The UAE Civil Procedures Code Number 11 of 1992 (the Civil Code) and its amendments, under articles 143 to 149, deal with the provisions for the payment order.

The payment order is a shortcut for a direct order from the summary court for the payment of the debt. The creditor can obtain the order within 48 hours from the claim initiation. The payment order conditions usually apply to instruments issued by banks, financial institutions, and traders, consisting of goods and service agreements.

The payment order begins with a notarized legal notice served to the defaulter to fulfil the payment, granting a grace period of five (5) days under the Civil Code as per the jurisdiction. If the payments are not made during the grace period, the court issues a payment order upon due registration and with documentary evidence. The payment order comes in together with the principal amount as well as the interest that may be calculated at the discretion of the court.

The mandatory documents are agreement or contract, commercial invoices, bounced cheques (if any), statements of accounts, delivery notes, email correspondences, etc. When they are submitted with a well-crafted memorandum, the court renders the payment order. This payment order is immediately due for execution with the completion of a fifteen-day legal notice grace period.

*Under the Civil Transactions Law Number 05 of 1985, the limitation for initiation of the claim is capped at fifteen (15) years, which comes with general exceptions.

In the interim before executing the order, a stage for initiating precautionary and provisional relief takes course. The said measures are for ensuring the maintenance of status quo amongst the parties and safeguarding the creditors' rights and interests. One such action is freezing the known assets.

Under the execution proceedings, such procedures are undertaken, upon the judgment being final and binding, by initiating the enforcement of the payment order for recovering the amount by taking precautionary and executionary procedures.

This process consists of initiating and obtaining the execution writ; registering commercial execution at the courts of competent jurisdiction; the competent authorities investigating all assets such as shares and bonds, trademark, trade license, properties, vehicles, bank deposits, brand name, trademark belonging to the debtor; serving notices on the judgement debtors, initiating precautionary attachment on the assets found during the investigation; initiating execution seizures such as arrest warrants, travel bans, bank deposits and auction sale of the assets obtained, etc

Further, should there be a bounced cheque, a request for a travel ban may be submitted against the authorized signatory or the company's manager before the initiation of litigation.

The most effective way is to achieve debt recovery prior to the initiation of the legal proceedings.

How MBG can help:

The concept of credit structuring is critically important in the prevailing business environment of today. MBG shall advise the distressed creditors, who are challenged with the unpaid debts, by taking our representation to take action against the defaulters.

MBG, on behalf of the creditors, shall give an opportunity to the debtors to clear the outstanding debts by themselves, in order to maintain their market reputation. Should the debtor fail to make the payments diligently, the best approach is to act immediately by taking a legal course of action.

Ensuring that all appropriate steps are taken in terms of legal notice, claims submission, etc, MBG takes the responsibility of recovering and collecting your outstanding debt so that you, the creditor and our client, can focus on your business operations.

For more information and any Corporate Services requirements, please connect with us:

Email: uae@mbgcorp.com Call / WhatsApp: +971 52 640 6240