What the UAE's emergency financial crisis period changes

The UAE Cabinet has declared an Emergency Financial Crisis period under the Financial Reorganisation and Bankruptcy Law, activating the part of the law, Title Five, that is reserved for exactly that situation. Cabinet Decision No. 94/2026 applies to preventive settlement, restructuring and bankruptcy proceedings where a debtor's financial distress results from the declared emergency, takes effect from 28 February 2026, and stays in place until the Cabinet decides otherwise.

Michael Kortbawi, a partner at BSA LAW, and Nadia El Tannir, a senior associate at the firm, answered written questions from Disrupts jointly on what the declaration means for a business already in difficulty, for its creditors and for its board. Their answers set out a regime that extends deadlines, removes the trustee from negotiations and opens a route to priority financing, while keeping the Bankruptcy Court in charge of all of it.

What triggers the period

The law defines an Emergency Financial Crisis broadly. In the wording the BSA LAW authors supplied, it is "an incident that befalls the debtor, resulting in a disturbance of its financial position and its inability to pay its debts or its cessation of payment as a result of a general situation that affects trade or investment in the State, such as an outbreak of an epidemic, a natural or environmental disaster, war, or others". The cause and duration of that situation are set by a Cabinet decision on the proposal of the Minister of Justice.

"We note that the definition is deliberately broad and non-exhaustive," Kortbawi and El Tannir said. Activation therefore needs a Cabinet decision specifying the cause and the duration, which is what Cabinet Decision No. 94/2026 does: it activates Title Five of the Bankruptcy Law for proceedings where the debtor's distress results from the declared emergency, with effect from 28 February 2026 and until the Cabinet decides otherwise.

Twice the time

For a business that already has proceedings under way, the practical change sits in Article 255. The Bankruptcy Court may extend the deadlines and time periods set out in the law to additional periods not exceeding twice the standard ones, "in order to confront the direct consequences that the circumstances of the emergency financial crisis had on the debtor's business".

"This means, for example, that a three-month deadline for submitting a restructuring plan could be extended to up to six months, or a 10-day procedural period could become 20 days, giving the debtor additional breathing room to comply with its obligations under the existing proceedings," the authors said.

They were careful about what Article 255 is not. It is tailored to pre-existing proceedings: it does not create new ones but adjusts the procedural framework within which existing ones operate, on the basis that the crisis may have disrupted a debtor's ability to meet the standard timetable.

Negotiating without a trustee

Under the standard regime, restructuring means appointing a trustee, preparing creditors' registers and following prescribed timelines for plan preparation and creditor approval. Title Five, in the authors' words, "streamlines this significantly".

"The debtor negotiates directly with creditors without a trustee, and a settlement approved by two-thirds of participating debt by value becomes binding on all creditors, including those who did not participate. The settlement period is capped at 12 months. Creditors cannot initiate involuntary proceedings during the crisis, and the court cannot impose precautionary measures on assets essential to the business." The result, they said, is a faster and more practical negotiating environment that keeps judicial safeguards against abuse.

Priority financing, and its price

Article 257 allows the Bankruptcy Court to permit a debtor to raise new financing, with or without security, once its application under the crisis regime has been approved. That financing ranks ahead of existing unsecured debt, and may be secured against unencumbered assets or against encumbered assets whose value exceeds the existing secured debt.

The authors' advice to boards is to treat that option with care. Emergency financing can provide critical liquidity, but granting priority or security to a new lender necessarily subordinates existing creditors and may complicate the negotiations that follow. "Boards should assess whether the financing is genuinely necessary for operational survival, whether the terms are commercially reasonable, and whether the proposed security arrangements leave sufficient asset value to support a viable restructuring or settlement. Court approval provides a safeguard, but informed commercial judgement remains essential."

What creditors keep

Asked whether flexibility for debtors comes at creditors' expense, Kortbawi and El Tannir listed the safeguards that remain. The debtor must prove a causal link between the declared crisis and its own distress. The Bankruptcy Court supervises the whole process and may reject any settlement it considers inconsistent with good faith. The two-thirds-by-value threshold means a binding settlement needs substantial creditor support. And board members and managers stay under a continuing duty of care, "requiring them to act with caution, update accounts in light of crisis-related losses, and protect the entity's financial assets".

"This balance ensures that debtor flexibility does not come at the cost of transparency, fairness, or accountability," they said.

The next six months

The authors read the activation of Title Five as a signal of "the UAE's commitment to providing a responsive, structured legal framework that protects business during periods of exceptional and temporary disruption, rather than allowing financial distress to be considered through rigid processes": business continuity supported, institutional credibility kept through court oversight.

For boards of distressed businesses, their advice for the next six months is to review the financial position and debt exposure and consider whether early engagement with creditors, supported by the new framework, could produce a better outcome than waiting. They should also evaluate emergency financing needs, make sure corporate accounts accurately reflect crisis-related losses, and take legal advice on the procedural steps needed to access the regime's protections before difficulties become unmanageable.

The emergency period has no fixed end date. It runs from 28 February 2026 until the Cabinet issues a further decision closing it.