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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Ali Bachrouch - Partner, Head of Corporate Structuring - Northern Emirates - Corporate Structuring
Hussam Helal - Associate - Litigation
In the United Arab Emirates the option of voluntary suspension of trade licenses is offered by a number of licensing authorities to business owners undergoing temporary financial difficulties that prevent them from being able to continue operating in the normal course. The option is availed mainly by individual establishments and limited liability companies.
The first section of this article will tackle the concept of and conditions for temporary suspension, and the second section will focus on the effects and termination of temporary suspension of a licence.
The concept of temporary suspension of a trade licence is generally similar across all licensing authorities that offer the service. The conditions and procedures for applying for a temporary suspension are also usually similar, but with differences in the detail.
The temporary suspension of a licence is commonly recognised as an administrative measure which the licensing authorities have put in place to help investors who face temporary difficulties that prevent them from being able to continue business operations and meet licensing expenses over a certain period of time. The temporary suspension option allows investors to suspend their business operations for a limited period of time without having to pay licensing and operating expenses. At the same time, investors are able to maintain their business track record and rights already acquired in the course of business, including their trade name, without incurring any fines upon the resumption of normal operations. The duration of suspension varies among authorities. Some allow up to a year while others allow up to five years.
The conditions and procedures for applying for approval to temporarily suspend a licence are essentially similar across the various licensing authorities with some minor differences. The basic conditions can be summarised as follows:
The relevant authority’s approval of the investor’s application for temporary suspension of a licence has a number of positive effects for the investor. Firstly, the licensing authority would have provided the investor with a safe exit from the temporary financial difficulties being faced. Secondly, the investor may, during or after the suspension, apply to reactivate the licence and return to normal business operations without incurring any financial costs or additional fees.
The main effects of temporary suspension of a licence are as follows:
The temporary suspension measure also has positive effects for the licensing authority. As a smart solution, the relevant authority uses the measure to retain investors who provide significant contributions to liquidity and sustainable economic growth in the UAE without the risk of losing their existing privileges.
The procedure for ending a temporary suspension varies according to the economic situation of the investor. An investor who manages to recover from a financial setback before the end of the suspension period may apply to the licensing authority for the reactivation and renewal of his licence. The investor would have to enclose, with the application, a new lease for the registered office and satisfy all the other general requirements, as well as pay the usual renewal fee (but no additional fees). This procedure also applies to investors who apply to renew their licenses at the end of the period of temporary suspension. If, on the other hand, an investor’s financial setback lasts beyond the approved maximum period of temporary suspension, the investor should then proceed with the formalities required to cancel his or her licence before the relevant licensing authority, according to the legal form he or she is licensed to operate under and without incurring any additional financial costs. Failure to complete these formalities will result in the fines usually payable for not renewing the licence.
The option of temporarily suspending a licence can be described as a stop gap solution to help investors overcome temporary setbacks in business, through cost-effective mitigation measures over a fixed period of time during which the establishment would continue to exist as a legal entity positioned to directly and promptly resume business operations after the setback. The relevant authorities, in offering a temporary suspension of licence, take into particular account the position of investors and the issues they face due to fluctuations in the local and external markets, as well as supply and demand shifts in the market, and aim to help investors to return to financial stability and resume their operations. While the formalities and conditions attached to the licence suspension application vary from one licensing authority to another, the concept and general conditions are the same.
For further information, please contact Ali Bachrouch (firstname.lastname@example.org) or Hussam Helal (email@example.com).
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