UAE Cabinet announces an Emergency Financial Crisis period under the Bankruptcy Law

UPDATE: UAE Cabinet announces an Emergency Financial Crisis period under the Bankruptcy Law

The UAE Cabinet has issued Cabinet Decision No. 94/2026, dated 1 June 2026, on the implementation of the provisions of Title 5 of Federal Decree-Law No. 51/2023 (the Financial Reorganisation and Bankruptcy Law). Title 5 shall now apply to preventive settlement, restructuring and bankruptcy adjudication proceedings where the debtor’s financial distress was caused by the declared emergency, with effect from 28 February 2026 and until the Cabinet determines an end date.

Title 5 introduces a tailored set of measures designed to give affected businesses a faster and more flexible route through financial difficulty, while maintaining court oversight and creditor protections. The key features are as follows:

• The Bankruptcy Court may approve an application and proceed without appointing a trustee, provided the debtor demonstrates that its financial distress was caused by the emergency.
• The debtor may request up to 40 days to negotiate a settlement with creditors. The agreed settlement period may not exceed 12 months from the date of the Court’s approval.
• A settlement approved by creditors representing two-thirds of the value of debts participating in the negotiation binds all creditors, including those who did not participate.
• The Court shall postpone consideration of creditor applications to open proceedings during the emergency period. Precautionary measures may not be imposed on any debtor assets necessary for business continuity, save where the Court considers them unrelated to the conduct of the debtor’s business.
• Where proceedings were already open before the emergency, the Court may extend existing procedural deadlines by up to twice the ordinary periods.
• Board members and managers of a corporate debtor are not liable for using the debtor’s assets to pay periodic wages and salaries needed for business continuity during the emergency. They must, however, update accounts, act with caution and good faith, and protect the company’s objectives and financial assets.
• The Court may authorise new financing with or without security, which will rank ahead of any existing ordinary debt. The new financing may also be secured against the debtor’s unmortgaged or mortgaged assets, subject to the conditions set out in the Law.

This is a welcome and timely measure, giving affected businesses a clearer framework to stabilise operations and engage constructively with their creditors.

Please do not hesitate to contact our partner, Michael Kortbawi, and our senior associate, Nadia El Tannir, if you would like to discuss how this Decision may affect your business.