Overview
The UAE’s approach to Bankruptcy Law and financial distress has evolved substantially over the past decade — moving away from a system historically associated with stigma and, in some cases, criminal exposure, toward a structured, court-driven framework focused on early rescue and restructuring. Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy replaced the previous Federal Decree-Law No. 9 of 2016 on Bankruptcy, and took full effect on 1 May 2024.
The law applies to onshore UAE companies, government-owned entities, free zone entities, and — notably — recognises both natural and legal persons as “debtors,” extending its coverage to certain personal debts as well as corporate insolvency. It does not apply to companies registered in the DIFC or ADGM, which maintain their own standalone insolvency laws and courts, nor to banks, financial institutions, and insurance companies licensed by the Central Bank of the UAE, which are governed by separate legislation (most recently consolidated under Federal Decree-Law No. 6 of 2025 on the Central Bank, Regulation of Financial Institutions and Activities, and Insurance Business).
Key Provisions Relating to Debtors and Creditors
1. Three Core Procedures
The law provides for three principal procedures, allowing debtors to be rescued at the earliest possible opportunity before proceeding to liquidation:
- Preventive Settlement — a more accessible, court-supervised mechanism replacing the previous “Preventive Composition” tool, designed for debtors facing financial difficulty who wish to reach an amicable settlement with creditors before their situation becomes critical.
- Restructuring — enabling a debtor company to prepare a restructuring plan for approval by its creditors, incorporating features commonly associated with U.S. and UK restructuring law, including access to new-money financing (rescue financing) and a court-ordered moratorium on creditor claims during the process.
- Bankruptcy (Liquidation) — the formal declaration of bankruptcy and liquidation of the debtor’s assets where restructuring is not viable or has failed.
2. Who Can Initiate Proceedings
The law grants the debtor the authority to initiate preventive settlement, restructuring, or bankruptcy proceedings by submitting a request directly to the Bankruptcy Administration — encouraging early, proactive engagement with financial distress rather than waiting for creditor action.
3. Recognition of Natural and Legal Persons as Debtors
Unlike the previous 2016 law, the 2023 law expressly recognises both natural persons (individuals) and legal persons (companies) as “debtors” capable of being subject to its procedures, broadening the scope of protection and obligation under the law.
4. Protection of the Bankruptcy Estate
A notable feature of the law is its emphasis on protecting the Bankruptcy Estate from potential damage during restructuring, balancing the interests of multiple stakeholder groups — including creditors, employees, and, specifically, spouses — to help ensure a smoother and more effective restructuring process.
5. Role of the Trustee
The law extends the powers and duties of the court-appointed Trustee compared to the previous regime, including expanded authority to deal with and manage the debtor’s assets during proceedings.
6. Court-Appointed Experts and Auditors
The Bankruptcy Court is now empowered to engage independent experts and auditors, funded through the judiciary’s budget, to enhance the court’s technical capacity when overseeing complex restructuring and bankruptcy matters.
7. Post-Bankruptcy Settlement
The law introduces new provisions allowing for a formal settlement to be reached between a debtor and its creditors even after bankruptcy has been declared through a final court decision — offering a route to resolution beyond simple liquidation.
8. Objections and Grievances
The law sets out specific conditions and procedures for filing objections and grievances against decisions made by the Bankruptcy Court or the Trustee, providing debtors and creditors with a structured mechanism to challenge decisions they believe to be unfair or incorrect.
Key Provisions Relating to Businesses and Institutional Framework
1. Dedicated Bankruptcy Court (2025)
Under Federal Judicial Council Decision No. 39 of 2025, a dedicated Federal Bankruptcy Court was established at the Abu Dhabi Federal Court of First Instance, headed by a judge of the Court of Appeal — a significant institutional development strengthening the UAE’s capacity to handle complex restructuring and insolvency cases efficiently.
2. Executive Regulations (Cabinet Resolution No. 94 of 2024)
The Executive Regulations bring important procedural clarity to the framework, including clearer thresholds for initiating proceedings, expanded powers for supervisory authorities, and additional security measures — all designed to balance the interests of debtors and creditors while ensuring only credible claims proceed to court.
3. Scope of Application
The law’s coverage extends to a broad range of entities and debts, including companies owned by the government, entities operating in free zones (other than DIFC and ADGM), regulated (non-financial) entities, and certain categories of personal debt — though banks, financial institutions, and licensed insurance companies fall outside its scope.
4. Exclusion of DIFC and ADGM Entities
Companies registered within the DIFC or ADGM remain subject to their own standalone insolvency frameworks and specialist courts, rather than the federal Bankruptcy Law. Businesses operating both onshore and within these financial free zones should be careful to apply the correct framework to each entity.
5. Minimum Debt Thresholds
Certain operational details — including minimum debt value thresholds for initiating bankruptcy proceedings — are addressed through the Executive Regulations and subsequent Cabinet decisions rather than fixed permanently within the primary law itself, meaning these thresholds may be updated over time.
Frequently Asked Questions
When did the current UAE Bankruptcy Law come into effect?
Federal Decree-Law No. 51 of 2023 came into effect on 1 May 2024, replacing the previous Federal Decree-Law No. 9 of 2016.
Does this law apply to companies in the DIFC or ADGM?
No. Companies registered in the DIFC or ADGM are subject to their own standalone insolvency laws and specialist courts, separate from the federal Bankruptcy Law.
Can a company initiate its own restructuring process?
Yes. The law grants debtors the ability to proactively submit a request to the Bankruptcy Administration to initiate preventive settlement, restructuring, or bankruptcy proceedings, rather than waiting for creditors to take action.
What is “Preventive Settlement” under the new law?
Preventive Settlement is a more accessible, court-supervised procedure that replaced the previous “Preventive Composition” mechanism, allowing a debtor experiencing financial difficulty to negotiate an amicable settlement with creditors under court supervision.
Can individuals (not just companies) be subject to this law?
Yes. Unlike the 2016 law, the 2023 law expressly recognises both natural persons and legal persons as “debtors,” extending certain provisions to personal debt as well as corporate insolvency.
Is there now a dedicated court for bankruptcy cases in the UAE?
Yes. A dedicated Federal Bankruptcy Court was established in 2025 at the Abu Dhabi Federal Court of First Instance, headed by a Court of Appeal judge, to handle restructuring and bankruptcy matters.
Does the law apply to banks and insurance companies?
No. Banks, financial institutions, and insurance companies licensed by the Central Bank of the UAE are excluded from the scope of this law and are instead governed by separate banking and insurance legislation.
When Do You Need a Specialist Bankruptcy & Restructuring Lawyer?
- When your company is facing financial difficulty and you want to explore Preventive Settlement or restructuring options before the situation becomes critical.
- When you are a creditor seeking to recover a debt from a company that has entered restructuring or bankruptcy proceedings.
- When you need to understand how a moratorium or restructuring plan may affect your existing contracts, guarantees, or security interests.
- When you are considering rescue (new-money) financing for a distressed business and need to understand the legal protections available.
- When you need to file — or respond to — an objection or grievance regarding a decision of the Bankruptcy Court or the appointed Trustee.
- When advising a DIFC or ADGM-registered entity on which insolvency framework applies to its specific situation.
Related Services from Our Firm
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References
- Federal Decree-Law No. (51) of 2023 Promulgating the Financial and Bankruptcy Law, UAE Legislation: uaelegislation.gov.ae/en/legislations/2190/download
- “Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy,” Lexology: lexology.com/library/detail.aspx?g=b20ca2fe-ff43-4cb0-8080-aa863c8111cb
- “Reshaping UAE’s Financial Landscape: The New Bankruptcy Law Explained,” Dechert LLP: dechert.com/knowledge/onpoint/2024/1/reshaping-uae-s-financial-landscape–the-new-bankruptcy-law-expl.html
- “Significant Step Forward: New UAE Bankruptcy Law,” Addleshaw Goddard: addleshawgoddard.com/en/insights/insights-briefings/2024/restructuring/new-uae-bankruptcy-law-what-you-need-to-know
- “Key Provisions from the Latest Executive Regulations of the UAE Bankruptcy Law No. 51/2023,” BSA Law: bsalaw.com/insight/key-provisions-from-the-latest-executive-regulations-of-the-uae-bankruptcy-law-no-51-2023
- “Federal Law Decree No. (51) of 2023 concerning Financial Restructuring and Bankruptcy,” ME-Alliance: me-alliance.com/federal-law-decree-no-51-of-2023-concerning-financial-restructuring-and-bankruptcy
- “UAE Bankruptcy and Financial Restructuring Law: The Complete Guide,” LYLAW: lylawyers.com/podcast/uae-bankruptcy-and-financial-restructuring-law
Content last updated: July 2026. This content is provided for general informational purposes only and does not replace specialist legal advice.
