What is the Restructuring Process in the UAE?

Learn how the UAE 2024 restructuring process rules manage corporate distress through preventive settlement, restructuring plans, and bankruptcy cases.

The UAE has modernized its corporate restructuring framework through Federal Decree-Law No. 51 of 2023 (the Financial Restructuring and Bankruptcy Law), which took effect on May 1, 2024. The decree and Cabinet Resolution No. 94 of 2024 (executive regulation) replace the 2016 Bankruptcy Law and establish a new system for handling financial distress. It has three distinct procedures, and it creates specialized bankruptcy courts and gives more protection to debtors and creditors.

Types of restructuring procedures

The Financial Restructuring and Bankruptcy Law sets out three pathways to address different stages of financial distress.

Preventive settlement

Preventive settlement offers a simplified option for companies seeking a quick resolution of short-term financial difficulty. Only the debtor can initiate proceedings, and management retains full control under court supervision. The process imposes a three-month moratorium on creditor actions, extendable to six months.

It replaces the earlier “preventive composition” model and removes the former 30-day filing deadline. No trustee can be appointed unless the court finds it necessary. It suits companies that remain solvent but need temporary protection to reorganize their finances.

Restructuring

The restructuring procedure applies to companies requiring a longer and more complex recovery process. It involves court-appointed trustee supervision, moratorium protection, and the ability to bind dissenting creditors through “cram-down” mechanisms. It allows:

• Automatic moratorium on all creditor enforcement until plan ratification or case termination;
• Court-appointed trustee authority to manage the debtor’s operations, negotiate settlements, and oversee plan execution;
• Court power to approve a “cram-down” plan binding dissenting creditors if fairness criteria are met; and
• Permission for asset disposals, contract amendments, and new financing under judicial supervision.

The process is intended for larger or multi-creditor cases.

Bankruptcy and liquidation

Bankruptcy proceedings involve full asset liquidation when restructuring alternatives are no longer viable. Once bankruptcy is declared, the debtor loses control of its operations, and the appointed trustee assumes full management authority. Then asset realization and debt settlement occur under court direction to ensure equal treatment of creditors.

Moratorium and creditor protection

Once proceedings are initiated, all judicial and enforcement actions against the debtor are automatically stayed. The moratorium remains in force until the plan is approved, or the process ends, without the previous 14-month limit.

It covers all creditor claims related to assets and liabilities but excludes labor and personal status matters. The structure provides a genuine “breathing period” for companies to negotiate solutions and finalize restructuring terms without the immediate threat of enforcement.

Court oversight and specialization

After the 2024 law, dedicated federal and local bankruptcy courts can now handle all restructuring and insolvency cases. The courts hold exclusive jurisdiction over financial restructuring matters. They can issue binding orders on plan approval, moratoriums, and trustee conduct.

Trustee powers and functions

The 2024 law grants trustees full managerial powers equivalent to those of a company’s board of directors, chairman, and chief executive officer. This eliminates earlier delays that required separate court approvals for standard business actions.

They have to perform these functions:

• Managing and safeguarding the debtor’s assets;
• Supervising the restructuring plan and its implementation;
• Maintaining records of creditors, debts, and distributions;
• Liaising with regulators and government authorities; and
• Taking steps necessary to protect creditor rights.

As per the law, trustees must approve certain transactions before execution. They need to provide security to third parties, early repayment of debts, establishing subsidiaries, transferring assets outside normal operations, and settling ongoing litigation.

Cram-down mechanism

The cram-down mechanism in the 2024 law allows courts to confirm restructuring plans even without unanimous creditor consent. A plan can be approved if dissenting creditors are not worse off than they would be in liquidation.

Creditor voting and plan approval

Voting rules have been simplified to avoid procedural deadlock. Earlier laws required majority approval by both number and value, which often stalled negotiations. The 2024 framework now focuses on approval by value and gives weight to financial exposure rather than headcount.

The current thresholds are:

• Preventive settlement: Two-thirds by value of creditors present at the meeting, provided at least half of total debt is represented;
• Restructuring: Two-thirds by value of verified claims; and
• Secured creditors: May vote if rights are affected by the restructuring plan.

Shareholder participation

The law has brought shareholder approval for restructuring plans. It ensures that shareholders formally acknowledge the financial impact of restructuring and that management actions reflect corporate consent.

Procedural framework

Application process

Applications for restructuring can be initiated by:

• Debtors, when unable to meet obligations as they fall due;
• Creditors, once their claims exceed statutory minimums; and
• Regulatory authorities, in the case of supervised or licensed entities.

The executive regulations set the following minimum debt levels for initiating proceedings:

Source: Cabinet Resolution No. (94) of 2024, UAE

Implementation timeline

Once a petition is filed, the law prescribes following steps:

• For application filing, petition should be submitted to the competent bankruptcy court;
• Moratorium involves automatic suspension of creditor actions;
• Trustee appointment done by the court to supervise proceedings;
• Disclosure period happens with the submission of assets and creditor lists, generally within three to six months;
• Plan development involves drafting and circulation of a restructuring proposal;
• Creditor voting means approval of the plan based on statutory thresholds; and
• Court ratification involves confirmation of the plan and supervision of implementation.

Free zone considerations

The 2024 law applies primarily to onshore companies, but also extends to most free zone entities, with some exceptions. Companies incorporated within the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) have their own common law insolvency principles.

Free zone businesses should evaluate whether they fall under:

• UAE federal bankruptcy jurisdiction;
• Specific free zone insolvency procedures; or
• DIFC or ADGM regimes.

Operational continuity and management authority

Debtor-in-possession model

In preventive settlement and certain restructuring cases, the debtor continues operating under court and trustee supervision. The debtor-in-possession approach has been framed by keeping in mind the necessity of preserving business continuity and maintaining oversight.

Operational restrictions

The Executive Regulations specify actions that require prior trustee approval:

• Creation or renewal of security interests;
• Scheduled or early repayment of debts;
• Establishment of subsidiaries or new corporate structures;
• Asset transfers beyond the ordinary course of business; and
• Legal settlements or waivers of existing claims.

Market examples and cases

Emirates Hospital Group

In November 2024, Emirates Hospital Group completed a US$950 million restructuring, and marked the first large-scale healthcare case under the new law. The plan preserved more than 2,000 jobs and introduced a creditor-controlled governance framework.

JBF Group

In October 2024, JBF Group finalized a US$1 billion debt-for-equity swap and became the first onshore transaction of its kind. Davidson Kempner Capital Management had acquired controlling interests in JBF’s Belgium and Bahrain operations.

For the first time, these cases introduced several new innovations in the UAE’s restructuring history:

• Judicial use of cram-down mechanisms against dissenting creditors;
• Court approval of priority financing arrangements;
• Execution of complex debt-for-equity conversions under UAE law; and
• Active foreign investor participation in onshore restructuring plans.

Cross-border and foreign investor impact

The UAE has established various treaty-based mechanisms for cross-border enforcement, like the GCC Convention for Execution of Judgments (1996) and multiple bilateral treaties. But the recognition of restructuring plans abroad depends on reciprocity and local enforcement standards. Foreign creditors may need to seek separate recognition in their home jurisdictions before recovery.

Foreign creditor rights

The 2024 law guarantees equal treatment for domestic and foreign creditors. Foreign claimants enjoy identical rights regarding:

• Participation in restructuring proceedings;
• Voting on restructuring plans;
• Enforcement of approved plan terms; and
• Priority treatment based on debt classification.

Investment protection and risks

Foreign investors should look at several risk factors before committing to restructuring procedure:

• Cross-border guarantees and related-party exposures;
• Temporary restrictions on enforcement during moratoriums;
• Currency and valuation risks during conversions; and
• Regulatory approvals required for ownership transfers.

Valuation and financial risks

Restructuring participants need to think over several financial considerations, like:

• Disputes over debt haircuts and asset valuations;
• Dilution of existing shareholders in debt-for-equity swaps;
• Priority financing arrangements that may affect existing creditor recoveries; and
• Litigation over “no worse off” determinations under cram-down provisions.

Recommendations for stakeholders

For debtors

• Engage restructuring advisors early once distress indicators appear;
• Map stakeholder relationships to foresee creditor reactions;
• Prepare realistic business plans demonstrating post-restructuring viability; and
• Coordinate with regulators when subject to sectoral supervision.

For creditors

• Negotiate intercreditor agreements to coordinate voting and recovery;
• Review existing security documents to understand enforcement limits;
• Conduct recovery analysis comparing restructuring versus liquidation outcomes; and
• Prepare cross-border enforcement strategies for overseas claims.

For foreign investors

• Conduct proper due diligence and use UAE restructuring law benefits;
• Include contractual standstill and restructuring clauses in financing terms;
• Structure security arrangements mindful of moratorium and trustee restrictions; and
• Obtain legal opinions on enforceability of UAE restructuring plans abroad.

In short

The 2024 Financial Restructuring and Bankruptcy Law, supported by executive regulations, has already helped several high-profile restructurings and invited foreign investors by offering adequate safeguards.

Since it gives a equal treatment for creditors and the recognition of cross-border complexities, businesses have become particularly interested in maintaining a permanent presence and ensuring financial discipline in the UAE.

Read more: UAE 2025 Visit Visa Updates: New Categories and Income-Based Sponsorship Rules Explained

(US$1 = AED 3.67)

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