Financial distress is a legal event as much as a financial one. The moment a business cannot pay its debts as they fall due, a framework of duties, options and deadlines switches on — for its managers, its owners and its creditors alike. The earlier that framework is engaged, the more value survives. We advise on all sides of distress under the UAE’s Bankruptcy Law (Federal Decree-Law No. 51 of 2023).
The 2023 law provides a graduated set of tools: preventive settlement, allowing a debtor to agree terms with creditors while continuing to trade; court-supervised restructuring, reorganising the business and its debts under a plan; and bankruptcy/liquidation, realising assets for distribution where rescue is not viable. It also created a specialised Bankruptcy Court, sharpened the duties and potential liabilities of directors and managers in the twilight zone before insolvency, and preserved the ability to unwind pre-insolvency transactions that prejudiced creditors.
For companies and their boards: early-stage options advice; directors’-duties guidance when the balance sheet turns; preparing and negotiating preventive settlements and restructuring plans; and conducting orderly, compliant voluntary liquidation where a solvent company is simply being closed. For creditors: protecting and proving claims, asserting security and priority, participating in plan votes, and challenging suspect transactions — work we run hand-in-hand with our debt recovery practice.
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