It’s Crunch Time For Uae’s Biggest Contractor Arabtec As Liquidation And Claims’ Deadline Loom
Gulf News Feature, Nov 17th, 2020:
Troubled construction giant calls shareholders meet on Nov. 30 to provide clarity
Dubai: Arabtec could soon be replaced as contractor on some ongoing projects as clients try and reduce the risk of dealing with a company heading into liquidation.
One leading developer already had discussions internally about replacing Arabtec at one of its prestige projects. The developer is reportedly weighing the credentials of two other contractors before taking any such decision, sources say. (It could even be that the developer might still stick with Arabtec if it feels the work can still get done.)
Arabtec has so far not given any updates on the status of its existing projects in the UAE or whether there are any re-negotiations happening with clients. Multiple sources in the industry say that at a few project sites, work activity has “dropped”. Again, confirmation on the various projects' status is awaited from Arabtec.
The UAE’s biggest contractor by far decided in September that dissolving the company via liquidation is the only option left after accumulated losses mounted. There was talk of futher funding coming in from strategic investors, but those came to naught.
The Arabtec issue has come at a worst possible time for the UAE construction sector. Project activity was sharply down in October “mostly due to a lack of new building projects”, according to monthly data put out by IHS Markit.
Fairly straight forward
Switching contractors in the UAE at any stage of a project is relatively easy, and there are laws that enable it if project promoters can come up with due reasons. In the recent past, several developers have taken this extreme step and, this way, not allowed their projects to lag.
Since the liquidation request has not been submitted yet, then subcontractors will have to either wait for a liquidator's appointment, or apply now to register a lawsuit
- Hesham Elsamra of Abdulla Alawadi & Associates
Some clarity
Arabtec has called a virtual meeting of shareholders on November 30, where they will be given a chance to go over all the steps taken by the management to set in motion the liquidation. Or the shareholders could give their approval - through a Special Resolution – to the Board of Directors to “amend the timetable” for the winding down of operations.
This relates to the extra one year provided to local businesses to try and sort out their financial affairs under an amended UAE Bankruptcy Law.