NEN holds a forum "Restructuring and financing companies"

(NEN) Al-Waqyan Al-Awadhi, Al-Seif Law Firm, with the collaboration of its partners, DLA Piper in Kuwait, organized a forum about "Restructuring and financing of companies in GCC countries". The forum took place on Monday, 05/10/2009 in JW Marriot Hotel.

Many legal and financial experts talked about the main legal developments in this field and cases where companies officers should look for solution to their problems namely in light of the current world financial crisis. During the forum, legal experts saw a great need for the review of current bankruptcy laws in Kuwait in light of the latest developments imposed by the crisis. They also stated that laws regarding bankruptcy and incapacity of payment in Kuwait are old and do not reflect the modern forms of work.

The partner of Al-Waqyan Al-Awadhi, Al-Seif Law Firm, Attn. Nader Al-Awadhi declared that the Kuwaiti bankruptcy law was stipulated in the Kuwaiti Commercial Law No 68 of the year 1980 where the fourth book of the Kuwaiti commercial law discusses bankruptcy, the procedures, conditions and consequences thereof in facing creditors and contracts concluded with third parties prior to adjudicating bankruptcy. He pointed out that any company can adjudicate bankruptcy in the event where its financial works were negatively affected thus obliging it to suspend the payment of its debts. The said law stipulated the conditions subject to which the companies may adjudicate bankruptcy namely the suspension of debts payment.

Al-Awadhi also stated that meeting the conditions required to adjudicate bankruptcy is sufficient to consider the company as bankrupted; therefore,
a legal judgment shall be rendered in this regard by the competent court and mentioned that the company's partner shall not have the right to file a request for bankruptcy. AL-Awadhi revealed that the request for bankruptcy shall be filed in the same manner as cases. In summary case, the request may be submitted in a petition to the head of the Court of First Instance. It shall include proofs that the company suspended the payment and reasons behind the summary. He added that other reasons may lead to the bankruptcy of the company and its incapacity to fulfill its obligations such as credits exchanges between customers and suppliers within work channels inside a certain sector. This matter applies for main industries that encompasses a network of diverse relations and depends on the partition of work roles. Al-Awadhi exposed the differences that exist between the Kuwait bankruptcy laws and the laws applied in the United Arab Emirates and Bahrain stating that current laws applicable with regard to bankruptcy and incapacity of settlement in Kuwait and other countries are old and do not reflect the modern forms of work whereas articles of such laws have not been experimented and therefore, its is hard to expect the verdict that may be rendered by virtue thereof. For that reason, it is necessary to review the current laws in light of the latest developments imposed by the current world crisis.

The managing partner in DLA Piper – Kuwait Office, Abdul Aziz Al-Yaqout, indicated in his paper that "The obstacles preventing recovery are stagnation, stumble, bankruptcy and the intense reliance on the government and the old existing net. Moreover, the legal regulations in the States of Gulf CooperationCouncil are not based on or designated for dealing with the contraction cases."

Al-Yaqout discussed in his paper the reaction of the government and the legislators, stating that "The effect of the crisis or the recovery is not the same in all the States of the Gulf". The Saudi Arabian Monetary Agency sought to guarantee a better level of transparency through putting pressure on the stumbled companies, to reveal the real levels of debts, he added. The Qatar Investment Authority resolves to purchase 10 to 20 per cent of the capital of banks listed in Doha Stock Exchange, while Dubai pumped 20 billion dollars to the government entities and the entities related to the government that is considered of strategic importance for development in this Emirate, he stated. As for Kuwait, the government interference was not in the same degree, he pointed out.

Concerning Tony Holland from DLA Piper, he talked in his paper about restructuring debts, where he mentioned that it is necessary that the managers ofany stumbled company face the problems with the creditors and deal with them to reach arbitration. He stated: "The other substitute is to sit and pretend that the problem does not exist." He added: "There is a third matter which is making sure of the manner
of restructuring debts. This provides many options and enables the parties to reach a solution, if any." Other experts spoke about the faltering of the world financialcrisis concerning the States of the region.
They stated that the real estate retreat in Dubaihas affected the economic growth and banks. Theymentioned that the crisis in Kuwait has affected theinvestment companies under the circumstances of not being sure of launching solutions or governmentinitiatives, and this aggravates the problem. During the last period, the performance of the entire region declined, they added.