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Orion liquidation shows bankruptcy law working in Dubai

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The Dubai International Financial Centre Court has ordered an involuntary liquidation of Orion Holding Overseas, a financial services company once valued at more than $270 million, only the third insolvency case to be held in the DIFC.

This is the same court that has been empowered to host a special tribunal to administer claims from the creditors of Dubai World in the event that bankers are unable to agree on a rescheduling of debts totaling $22 billion by the end of April.

Orion shareholders

Shareholders in Orion included a 32 per cent stake held by Petra Invest of Jordan, Shuaa Capital and other investment groups. Justice Sir John Chadwick has appointed Shahab Haider as the provisional liquidator of Orion. He is charged disposing of the company’s assets and using the proceeds to settle claims from creditors including former employees.

Justice Chadwick explained: ‘The position during the summer of 2009 was that the company had effectively ceased doing business, was no longer paying employees and was trying to dispose of assets.’

According to a report in The National, last November 13 ex-employees alleged that Orion owed them money but was ‘winding up without filing for liquidation’. Assets were frozen including accounts at Abu Dhabi Commercial Bank and Standard Chartered, and apartments in the Jumeirah Lake Towers.

Effective bankruptcy law

This orderly judicial process shows the laws of bankruptcy operating effectively in the DIFC. New laws extending this procedure to the rest of the emirate are expected as the city moves to clear up the financial fall-out from the local real estate crash and global economic crisis.

In the meantime the precedent established by the Orion case seems to show that this is nothing that cannot be handled by local institutions, although the general bankruptcy law is clearly in need of updating to global best practice rather than being subject to individual decrees from the Ruler of Dubai.

For more than two decades the high rate of economic growth in Dubai made bankruptcy a very rare event, and easily handled by the ruler personally. Sadly times have changed, although Dubai is now a very much bigger city and for a modern commercial centre proper laws of insolvency are essential.

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Written by Peter Cooper

January 16, 2010 at 9:45 am

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