The UAE’s Council of Ministers has approved a draft of a long-awaited financial regulation and bankruptcy law, according to the Emirates News Agency (WAM).

The proposed law includes more flexible options to bail out businesses in financial troubles that might lead to bankruptcy.

Current laws criminalise bounced checks and make the risk of bankruptcy very costly for companies. Companies must apply to the courts for either protection or bankruptcy within 30 days if they are unable to meet their liabilities. Failure to follow this procedure could result in either civil or criminal legal proceedings.

New legislation has been under study since 2009. It was prompted by the 2008 real estate crisis, when numerous developers and contractors were unable to meet their obligations.

The draft law aims to regulate accumulated debts, ease the restructuring of companies and support struggling businesses.

If passed, it should mitigate bankruptcy risks. This would contribute to a safer and more attractive business environment in the UAE, and encourage investments and entrepreneurship.

The UAE government is aiming to provide incentives to invest in the country by ensuring a supportive environment for businesses, according to WAM.

The legislation was prepared following a consultancy process involving federal and local entities as well as international bankruptcy and financial restructuring consultants.

The draft law will now have to be approved by parliament, the Federal National Council, the rulers of the seven emirates and President Sheikh Khalifa bin Zayed al-Nahyan.