TRW & Co · Banking, Finance & Capital Markets
Debt Restructuring in the UAE
Debt restructuring in the UAE is mostly negotiated, not litigated. Borrowers and lenders agree standstills, extend maturities, reset covenants or swap debt for equity, with the 2023 federal restructuring law and the DIFC and ADGM regimes as the backstop for holdouts. This guide explains the tools, the process, the documents lenders expect and the mistakes that destroy value.
Key pointIn UAE restructurings, security cheques and founders' personal guarantees often drive the timetable more than the corporate facilities, so a standstill that does not expressly cover them can collapse within days.
At a glance
Negotiation comes first
Most UAE restructurings are consensual: standstills, amend and extend deals, consent solicitations and debt-for-equity swaps agreed without opening any court procedure.
Court backstop since 2024
Federal Decree-Law No. 51 of 2023, in force since 1 May 2024, lets a court-ratified restructuring plan bind dissenting creditors where statutory tests are met.
Separate DIFC and ADGM tools
DIFC and ADGM companies use their own regimes, including DIFC rehabilitation and ADGM administration and schemes, which can help restructure holding companies.
Cheques and guarantees matter
Security cheques and personal guarantees give creditors routes against signatories that a corporate standstill does not stop unless it expressly covers them.
Lender constraints are real
Onshore banks must classify and provision restructured loans under Central Bank rules, and the 2025 Central Bank law adds protections for individual borrowers.
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What debt restructuring in the UAE covers
Debt restructuring in the UAE means changing the terms of a borrower's debts so that the business can survive: extending maturities, resetting covenants, cutting interest, converting debt into equity, releasing guarantees, injecting new money or selling assets to pay down lenders. Most of this happens by negotiation, without a court, between the borrower, its banks, bondholders or sukuk holders, and sometimes its trade creditors and shareholders.
This page deals with that negotiated work and the levers around it. Formal court procedures under the federal bankruptcy law and the DIFC and ADGM insolvency regimes are covered in detail on our page on insolvency and bankruptcy in the UAE. In practice the two are linked: the existence of a court procedure that can bind dissenting creditors is what gives a consensual deal its shape, and a well-prepared negotiation is often the best route into a formal plan if one becomes necessary.
The issue becomes a legal question at the first sign of stress: a projected covenant breach, a missed coupon, a lender's reservation of rights letter, or a shareholder unwilling to fund further losses. Decisions in the following weeks, such as who is paid, what information is shared and which documents are signed, decide how much value is left to restructure.
The legal framework behind a negotiated restructuring
No single statute governs out-of-court restructuring. The deal is a contract, but several laws decide what it can achieve and what happens if it fails.
The federal restructuring and bankruptcy law
Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy came into force on 1 May 2024, with Cabinet Resolution No. 94 of 2024 as its implementing regulation. It offers preventive settlement, a court-supervised restructuring in which management usually stays in control under a trustee, and bankruptcy. A restructuring plan can bind dissenting creditors if the voting thresholds are met, or through court ratification where the statutory fairness tests are satisfied, and court-approved new financing can rank ahead of other unsecured debt. These features are the backstop that every onshore negotiation is conducted against.
DIFC and ADGM
Companies incorporated in the DIFC or ADGM sit outside the federal law. The DIFC Insolvency Law provides rehabilitation and company voluntary arrangements before the DIFC Courts, and the ADGM Insolvency Regulations 2022 provide administration, with schemes of arrangement available under ADGM company rules before the ADGM Courts. Many UAE groups use a DIFC or ADGM holding company, which can make a common-law tool available for the top of the structure even where operating companies are onshore.
Security, guarantees, cheques and netting
Creditor leverage depends on the security package. Federal Law No. 4 of 2020 on securing rights over movable property and the Emirates Movable Collateral Registry govern pledges over receivables, accounts, inventory and equipment; real estate mortgages are registered with the land departments. The federal netting legislation protects close-out netting under qualifying financial contracts. Security cheques and personal guarantees, still common in UAE lending, give creditors separate routes against signatories and founders. Our guides to taking security over assets and guarantees explain each instrument.
The 2025 Central Bank law
Onshore bank lenders operate under Federal Decree-Law No. (6) of 2025, in force since 16 September 2025. For restructurings involving individuals and sole proprietorships, it matters in two ways: compound interest on customer credit facilities is prohibited, and guarantees taken from natural persons must be proportionate to income and facility size, with claims lacking the required guarantees inadmissible. Lenders also have to classify and provision restructured exposures under Central Bank credit risk rules, which shapes how much flexibility they can offer.
Restructuring tools compared
The right structure depends on whether the problem is liquidity, leverage or both, and on how many creditors must agree. The table compares the main routes for debt restructuring in the UAE.
| Route | Who must agree | Binds dissenters? | Typical use |
|---|---|---|---|
| Bilateral amend and extend | Borrower and each affected lender | No | Single lender or small club; maturity extension, covenant reset, repricing |
| Standstill and consensual restructuring agreement | Borrower and all participating creditors | No; holdouts remain free unless they sign | Multi-bank groups with broad support; buys time to build a plan |
| Bond or sukuk consent solicitation | Holders meeting the majorities in the trust documents | Yes, within the scope of the collective action clauses | Extending or amending capital markets debt |
| Onshore preventive settlement | Creditor majorities under the federal law | Limited | Early distress, debtor-led, with a statutory stay |
| Onshore restructuring plan | Creditor vote; court ratification | Yes, including court-imposed plans where fairness tests are met | Deeper balance sheet repair, sales as a going concern |
| DIFC or ADGM procedure, or a foreign scheme or plan | Court and creditor classes under the relevant law | Yes, subject to recognition where assets sit | Holding companies; foreign-law financing |
Why most deals start consensual
A negotiated deal is private, faster and cheaper, keeps management in place and avoids the reputational and licensing consequences of a public filing. Its weakness is holdouts: one lender that refuses to sign can enforce, call a guarantee or present a cheque. The practical answer is to design the consensual deal so that, if needed, it can be converted into a court-supervised plan that binds the minority, using the same information, valuation and term sheet.
Debt-for-equity and asset sales
Where leverage is unsustainable, lenders may take shares or a share of sale proceeds. Onshore, this engages the Commercial Companies Law on share transfers and capital changes, foreign ownership rules for the activity, licensing approvals, and sometimes merger control. Shareholder consent is often the hardest point; see our pages on corporate restructuring and shareholder disputes.
A consensual restructuring works best when every creditor can see what the court would do if they refused to sign.
How a negotiated restructuring runs
- Stabilise and take control of cash. Build a short-term cash-flow forecast, stop discretionary and insider payments, and map every debt, security interest, guarantee and cheque across the group.
- Approach the lenders together. Present an honest picture to the main creditors at the same time, usually through a coordinating bank or committee, and propose an information and standstill process.
- Agree a standstill. Creditors agree not to accelerate, enforce, present cheques or file proceedings for a fixed period, in exchange for information rights, milestones and protection against preferential payments.
- Independent review. Creditors usually require an independent business review or valuation. Its conclusions on viability and liquidation value set the boundaries for negotiation.
- Negotiate the term sheet. Agree the new maturity profile, pricing, covenants, security, any new money and its priority, equity or warrants, guarantee releases and governance changes.
- Document and obtain approvals. Prepare the restructuring agreement, intercreditor deed, security amendments, corporate approvals, regulatory consents and any bond or sukuk consent solicitation.
- Implement or convert. Close the consensual deal, or if holdouts block it, use the agreed terms as the basis of an onshore restructuring plan or a DIFC or ADGM procedure.
Documents and information to assemble
Lenders decide quickly whether a borrower is credible, and the quality of the information package drives that judgement. For debt restructuring in the UAE, assemble:
- Audited accounts, current management accounts and a 13-week cash-flow forecast with clear assumptions.
- A creditor schedule showing each facility, outstanding amounts, maturity, security, guarantees, security cheques and cross-default links.
- All facility, security, guarantee, intercreditor and hedging documents, including governing law and dispute resolution clauses.
- A group structure chart identifying onshore, free zone, DIFC, ADGM and foreign entities and which of them are obligors.
- A business plan and viability case, with a comparison against a liquidation outcome.
- Board minutes recording decisions since difficulties emerged, and advice taken.
- Key contracts with change of control, insolvency or cross-default triggers, and licences that require regulatory consent for ownership changes.
Collect every security cheque and personal guarantee before the first lender meeting. In UAE restructurings, these instruments, rather than the corporate facilities, are often what forces the pace, and founders need separate advice on their own exposure from day one.
Risks and common mistakes
Paying the most aggressive creditor first
Under pressure, boards tend to pay whichever lender threatens hardest, or a related party that has supported the business. If the restructuring later fails and a formal procedure opens, transactions that harmed creditors in the months before cessation of payments can be challenged, and the look-back is longer for related parties. Selective payments also destroy trust among the creditor group and make a standstill harder to agree. Treat creditors of the same rank consistently, document the commercial rationale for any payment that departs from that principle, and seek advice before making it.
Ignoring the security cheque and guarantee exposure
A corporate standstill does not stop a creditor from pursuing a founder under a personal guarantee or presenting a security cheque signed by a director, unless the standstill expressly covers those rights. Bounced cheques can now be presented directly for execution, which gives creditors rapid leverage. Make sure the standstill and the final agreement cover guarantees and cheques, provide for their return or release where agreed, and give signatories independent advice. See our note on the cheque law for the current position.
Restructuring only the onshore borrower
Group finance in the UAE often involves an onshore operating company, free zone trading entities and a DIFC, ADGM or offshore holding company that guarantees or borrows. Each sits under a different legal regime. A deal that only amends onshore facilities may leave holding company guarantees, share pledges or foreign-law bonds untouched, allowing a creditor to enforce at the top of the group. Map every obligor and guarantor to its law and forum, and decide early which entities need to be party to the deal or to a formal procedure.
Signing a standstill without milestones
A standstill that simply freezes enforcement can drift. Lenders lose patience, the business continues to burn cash and the eventual outcome is worse for everyone. A good standstill sets clear milestones for the independent review, term sheet and signing, defines information rights, regulates payments and new security, and states what happens on expiry. For the borrower, short milestones that are achievable are better than long ones that invite renegotiation.
Overlooking tax and regulatory consequences
A debt write-down, conversion to equity or intra-group transfer of assets can have corporate tax consequences, and changes of ownership in regulated or licensed businesses may need approvals. These issues often surface late and delay closing. Model the tax treatment of each element before terms are fixed, consider whether group relief or restructuring reliefs are available, and list the regulatory consents in the term sheet. Our corporate tax page sets out the framework.
The creditor's perspective
For a bank, fund or major supplier, the first question is not whether to support a restructuring but what its realistic alternatives are. That depends on the quality and enforceability of its security, the existence of guarantees and cheques, its position relative to other creditors and the time and cost of enforcement in the forum that matters. A secured lender with a registered pledge over receivables is in a very different place from an unsecured trade creditor.
Creditors should check early whether their security was properly perfected and registered, whether any of it was granted recently enough to be vulnerable if a formal procedure opens, and whether their documents contain cross-default, information and consent rights that give them a seat at the table. Where a creditor group forms, a coordinating committee with its own advisers usually achieves more than individual lenders acting alone, but committee members must manage confidentiality and any trading restrictions on the debt.
Creditors also need to think about the endgame. Supporting a standstill may preserve value, but a creditor should negotiate protections in return: milestones, information, a ban on new security for others, and a share of any upside through fees, warrants or equity. If the borrower cannot produce a credible plan, the creditor should be ready to move to enforcement or to apply for a formal procedure without losing ground, because the onshore law allows creditors as well as debtors to apply for a restructuring.
Islamic finance and capital markets debt
Many UAE borrowers have Islamic facilities: murabaha, ijara or wakala structures, and sukuk issued through special purpose vehicles. Debt restructuring in the UAE in these cases must preserve Sharia compliance. Interest-based concepts such as default interest are replaced by structures such as charitable payments, extensions are achieved through new contracts rather than simply resetting a rate, and the relevant Sharia board must approve the amended structure. Our Islamic finance page explains the main contracts.
Bonds and sukuk are amended through the procedures in the trust and agency documents. Consent solicitations, written resolutions and meetings of holders are governed by the instruments' governing law, often English law, and by listing rules where the instruments are listed. Holders may organise into ad hoc groups that negotiate alongside bank lenders, and intercreditor arrangements between banks and capital markets creditors become a central negotiating point.
Cross-border restructuring
A large share of UAE corporate debt is documented under English law, and many UAE groups have assets, lenders or parents in India, Saudi Arabia, Bangladesh, the UK, Singapore or China. That creates choices. An English scheme or restructuring plan can compromise English-law debt, and the DIFC and ADGM have adopted versions of the UNCITRAL Model Law on cross-border insolvency, so recognition there is available. Onshore recognition of foreign restructuring orders remains largely untested, so where key assets are onshore, a parallel onshore deal or procedure may be needed.
For groups with operations in Bangladesh, the practical issue is often a UAE trading or holding company with UAE bank facilities and factories or receivables in Bangladesh, where enforcement and insolvency rules differ substantially. India's insolvency code and Saudi Arabia's bankruptcy law each have their own procedures and moratoria. TRW & Co's network allows us to coordinate the legal strategy across jurisdictions, so that the UAE deal does not trigger an uncontrolled process elsewhere. For enforcement-side questions, see our debt recovery page.
How TRW & Co helps
We act for borrowers, shareholders, lenders and creditor committees in debt restructuring in the UAE, focusing on strategy, documentation and coordination.
Early-stage options review
We review the debt and security map, identify the pressure points such as cheques, guarantees and cross-defaults, and set out the consensual and formal options with their likely timelines and trade-offs.
Standstill and lock-up agreements
We draft and negotiate standstills, lock-ups and information protocols that buy time while protecting the parties' positions and setting realistic milestones.
Restructuring documentation
We prepare term sheets, amendment and restatement agreements, intercreditor deeds, security amendments, guarantee releases and debt-for-equity documents, including Sharia-compliant structures.
Creditor-side advice
For banks, funds and trade creditors, we assess leverage, security and enforcement options, and negotiate the terms on which they will support or resist a plan.
Conversion to a formal plan
Where holdouts block a deal, we prepare the transition to an onshore restructuring or a DIFC or ADGM procedure. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Cross-border coordination
We coordinate advice in the UK, Bangladesh, India, Saudi Arabia, Singapore and China so that foreign-law debt, foreign assets and the UAE deal are aligned.
See also our banking and finance work and all our practices.
Checklist for decision-makers
- Do we have a reliable 13-week cash-flow forecast and a clear view of when payments will stop?
- Have we mapped every facility, security interest, guarantee, security cheque and cross-default across the group?
- Have we stopped insider and selective payments, and documented the rationale for any exception?
- Do we know which law and forum govern each obligor and each debt instrument?
- Have founders and directors received independent advice on personal guarantees, cheques and liability?
- Is there a standstill with achievable milestones, and a plan if a creditor refuses to sign?
- Have the tax and regulatory consequences of the proposed deal been modelled?
- Would the proposal survive a court's fairness test if it had to become a formal plan?
The earlier a restructuring is planned, the more options remain. Contact TRW & Co to discuss debt restructuring in the UAE for your business or your exposure as a creditor.
Frequently asked questions
01What is the difference between debt restructuring and insolvency in the UAE?
Debt restructuring is the process of changing debt terms to keep a business viable, usually by negotiation with lenders. Insolvency refers to the formal court procedures under the federal bankruptcy law or the DIFC and ADGM regimes, such as preventive settlement, restructuring plans and bankruptcy. Many restructurings are completed without any court involvement, but the formal procedures shape the negotiation because they can bind creditors who refuse to agree.
02Can one bank block a consensual restructuring?
In a purely contractual deal, yes: a lender that does not sign keeps its rights to enforce, call guarantees or present cheques. That is why consensual deals are usually designed so they can be converted into a court-supervised plan. Under the federal law, a restructuring plan approved by the required creditor majorities, or ratified by the court where fairness tests are met, can bind dissenters. DIFC and ADGM procedures offer similar outcomes for entities incorporated there.
03What should a standstill agreement include?
A standstill should define the parties and debts covered, the period, and what creditors agree not to do, including acceleration, enforcement, presentation of security cheques and filing proceedings. It should set information rights, milestones for the independent review and term sheet, restrictions on payments and new security, and the treatment of guarantees. It should also state what happens on expiry or breach. Short, achievable milestones help keep the process moving.
04Does a corporate restructuring release founders from personal guarantees?
Not automatically. A guarantee is a separate obligation, and creditors can usually pursue the guarantor even while the company's debts are being renegotiated. Release must be negotiated and documented expressly, often in return for new money, additional security or the founder's continued involvement. Founders and directors who signed guarantees or security cheques should take independent advice early, because their interests may differ from the company's.
05How are sukuk and bonds restructured?
Through the amendment procedures in the trust or agency documents, typically consent solicitations, written resolutions or holder meetings with defined majorities. These are governed by the instruments' governing law, often English law, and by listing rules where relevant. Sukuk amendments must also preserve Sharia compliance and need Sharia board approval. Where the required majorities cannot be reached, a court process may be needed to bind dissenting holders.
06Can a DIFC or ADGM holding company use its own restructuring tools?
Yes. Entities incorporated in the DIFC or ADGM are outside the federal bankruptcy law and use their own insolvency and company regimes, including DIFC rehabilitation and company voluntary arrangements, and ADGM administration and schemes of arrangement. These can be useful for restructuring debt at holding company level, but operating subsidiaries onshore remain subject to federal law, so groups often need a coordinated plan.
07When should a borrower involve lawyers in a debt restructuring?
As soon as a covenant breach, missed payment or funding gap is foreseeable. Early advice helps the board avoid preferential payments, protect directors, organise lender engagement and preserve the option of a court-backed plan. It also allows the company to address security cheques and guarantees before creditors use them. Waiting until a lender has accelerated or enforced usually reduces the options and increases cost.
Sources and official materials
- Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy — Onshore restructuring and bankruptcy law
- Cabinet Resolution No. 94 of 2024 — Implementing regulation of the bankruptcy law
- Federal Decree-Law No. (6) of 2025 (announcement) — New Central Bank law affecting bank lenders
- DIFC Courts: rules and decisions — Forum for DIFC restructuring procedures
- ADGM Courts — Forum for ADGM administration and schemes
- UAE Ministry of Justice — Bankruptcy unit and register
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
