The sudden changes in the geopolitical situation have affected businesses operating in the UAE, resulting in economic consequences. Recognising that financially viable businesses should not be forced into insolvency merely because of temporary external conflicts the UAE Cabinet has activated the emergency insolvency provisions contained in Part Five of the Financial Reorganisation and Bankruptcy Law through Cabinet Decision No. 94 of 2026.

A temporary insolvency regime is established under Part Five of the UAE Bankruptcy Law. It is activated only during an Emergency Financial Crisis declared by the UAE Cabinet. The purpose is to prevent viable businesses from being forced into bankruptcy because of widespread economic disruption. It provides temporary relief while maintaining judicial supervision.

When Does Part Five Apply?

  1. The UAE Cabinet must declare an Emergency Financial Crisis.
  2. The debtor’s financial distress or inability to pay debts must have resulted from that emergency.

Cabinet Decision No. 94 of 2026

  1. Application of Cabinet Decision No. 94 of 2026 was issued on 1 June 2026.It implements the provisions of Title 5 of Federal Decree-Law No. 51 of 2023.
  2. The decision applies retrospectively from 28 February 2026. The provision will remain in force until the end date is declared by the cabinet.

Key Features of the Emergency Insolvency Regime

A. Restriction on Creditor-Initiated Bankruptcy Proceedings

The creditors are temporarily prevented from initiating bankruptcy proceedings. The Bankruptcy Court can postpone consideration of creditor applications during the emergency period.

B. Suspension of the Debtor’s Obligation to File for Bankruptcy

Debtors are not required to file for bankruptcy during the declared Emergency Financial Crisis.

C. Court’s Power to Proceed Without Appointing a Trustee

The Bankruptcy Court may approve a debtor’s application without appointing a trustee if they show that the financial distress is from the emergency.

D. Protection of Assets Necessary for Business Continuity

During the emergency period, the Court shall not impose precautionary measures on assets necessary for the continuation of the debtor’s business.

E. Opportunity to Negotiate with Creditors

After admission of the bankruptcy application, the debtor may request up to 40 business days to negotiate with creditors, and the settlement period may go up to 12 months.

F. Approval of Settlement by Creditors

A settlement becomes binding when approved by creditors representing two-thirds of the value of debts participating in the negotiations.

G. Extension of Procedural Time Limits

If the bankruptcy proceedings have already commenced before the emergency financial crisis the court may extend its deadlines or double the ordinary period provided under the law.

H. Protection for Directors and Managers

Directors and managers may use company assets to pay employee wages and salaries. They are protected from liability relating to such payments.They must make sure they act in good faith and caution.

I. Priority Financing

The debtor may request Court approval to obtain new financing subject to the conditions prescribed by the law.

Conclusion

Cabinet Decision No. 94 of 2026 activates the emergency insolvency framework under Title 5 of the UAE Financial Reorganisation and Bankruptcy Law. The measures are intended to assist businesses affected by the declared Emergency Financial Crisis. The framework introduces temporary procedural adjustments relating to preventive settlements, financial restructuring, and bankruptcy proceedings while preserving judicial oversight and creditor participation.

We at Ayesha Al Dahaheri Advocates & Legal Consultants, we regularly advise and represent businesses, creditors, and other stakeholders in matters relating to financial restructuring, insolvency, and bankruptcy under the UAE legal framework.