New insolvency legislation in the UAE: What’s changing?

News from MEAI

In a noteworthy development for the business landscape of the United Arab Emirates (UAE), the 2023 Federal Law Decree No. 51 concerning Financial Restructuring and Bankruptcy was promulgated, signifying a significant shift in the nation’s insolvency framework. This new legislation, effective from May 1, 2024, replaces the prior federal law on bankruptcy and introduces several key enhancements aimed at modernizing and streamlining the insolvency regime in the UAE.

Strengthened liability measures

The updated legislation broadens the scope of liability to include not just board members but also individuals actively managing companies and those supervising liquidation proceedings. This widened liability framework emphasizes accountability and promotes responsible corporate governance practices.

Establishment of the Bankruptcy Court

A notable feature of the new law is the establishment of a dedicated Bankruptcy Court vested with jurisdiction over bankruptcy-related matters. This specialized court replaces prior judicial bodies and is empowered to adjudicate on insolvency proceedings, ensuring a focused and efficient resolution process.

Decisions rendered by the Bankruptcy Court carry immediate enforceability, eliminating procedural delays and expediting the execution of judgments. The provision for prompt enforcement enhances the efficacy of the legal framework and fosters confidence in the insolvency resolution process.

Preventive settlement mechanism

Substituting the previous preventive composition mechanism, the new law introduces a preventive settlement procedure aimed at enabling ongoing operations of debtor businesses amidst financial difficulties. Essential aspects of this procedure comprise:

  • Authorization for debtors to commence preventive settlement proceedings under specific circumstances.
  • Maintenance of debtor control over business operations throughout the settlement process, with supervision from the Bankruptcy Court.
  • Establishment of a creditors’ committee to supervise the settlement process and endorse proposed restructuring plans, guaranteeing creditor representation and involvement in decision-making.
  • Enforcing a moratorium on creditor claims at the onset of preventive settlement proceedings, granting debtors a temporary respite to devise and execute restructuring strategies.

Claw back provisions and set-off restrictions

Aligned with international best practices, the legislation enhances claw back provisions, reducing the timeframe for reversing transactions prior to bankruptcy proceedings. Furthermore, it imposes limitations on set-off actions following the initiation of insolvency proceedings, protecting creditors’ interests, and fostering fair asset distribution.


The revocation of previous insolvency laws signals a new chapter for insolvency procedures in the UAE, marked by improved efficiency, transparency, and creditor safeguards. Adherence to the new Bankruptcy Law is essential for businesses in the UAE, as failure to comply could lead to penalties.

Looking forward, we anticipate the issuance of executive regulations to supplement the new law, offering additional guidance on its implementation. In the interim, existing regulations and resolutions will remain in effect, ensuring a seamless transition and stability in the insolvency framework.

In summary, the implementation of the 2024 UAE Financial Restructuring and Bankruptcy Law signifies a significant advancement in the country’s legal framework, indicating a dedicated initiative to modernize and fortify the insolvency system. Through comprehensive reforms and procedural improvements, the law aims to foster confidence, enhance financial stability, and streamline the resolution of insolvency matters in the UAE.

TAREK ANTAKI  ASSOCIATE PARTNER LEGAL CONSULTANT – ATTORNEY AT LAW T   +971 (4) 295 00-20 UAE M  +971 (50) 727 4125  BENJAMIN KOZICA LEGAL CONSULTANT ASSOCIATE  T   +971 (4) 295 00-20 M  +971 (50) 656 3135  

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