Friday, September 23, 2005

Bankrupt By Any Other Name

The excrement continues to interact with the mechanical ventilation device. Al Hamed is the company that employs the guys who invaded Sheikh Zayed Highway last week to protest at non-payment of their wages.

Al Hamed's spokesperson has said
1) They currently have five active construction sites, and they pay the guys in rotation monthly (which means you get paid one month in five).
2) They are owed Dhs 100 million by clients for completed buildings.
3) They have a company policy of always keeping the guys 2 months in arrears with their salary to stop them absconding.

None of this surprises me that much - I've been in the Gulf long enough to have seen all these ideas in action. I am surprised that the company has apparently handed over finished buildings but not been paid for them. What steps is the company taking to recover this money? Do they think the 'owners' just forgot to pay?

The policy mentioned in item 3 is utterly disgraceful, not to mention illegal.

We seem to be talking about a company that is actually insolvent. But the UAE has no proper legal mechanism to deal with bankruptcy. If it did, the company could apply to have its non-paying clients closed down, and then seize and sell the assets of that client. Likewise, the company itself could apply for bankruptcy, which would give the owners some protection against their creditors and offer them a way out of what seems like an impossible situation.

The lack of a bankruptcy law is a major, major hole that needs to be plugged as soon as possible. The big guys have to pay the medium-sized guys, who can then pay the smaller guys and then the individuals can get paid. But companies that get into financial trouble need to have a way to solve the problem, without having to spend time in jail or (in the case of lots of expats) run away. Jailing people for debt has never been a great idea - I know we used to do it in the UK until about 100 years ago - if you have no money, and are prevented from earning any, how are you supposed to fix the problem?

I have done work for various Government Departments in the UAE, and some of them really have a good grip on the idea of prompt payment. Others, though, are completely clueless and seem to think that it benefits the country by delaying payment for as long as possible. And this is completely inexplicable given that there is a Hadith that says something like 'you should pay a man for the work he does for you before the sweat on his brow is dry.'