Practice led by Jouslin Khairallah, Founder — Corporate Strategy, Restructuring & AML — with Dr. Abdultaiyab Bahrainwala, Head of Corporate.
Financial distress is a race against time — and against the law’s deadlines. Cash tightens, a creditor files, cheques loom, and every week of delay closes options that existed the week before. The companies that survive distress are rarely the least indebted; they are the ones that took advice while choices remained. KH Legal acts on both sides of that moment: for companies that need restructuring, and for creditors who need recovery (see our debt collection practice).
Restructuring or Liquidation: Which Is Your Situation?
| Restructure | Liquidate | |
|---|---|---|
| The business is… | Viable but over-indebted | No longer viable |
| Control | Owners typically keep running it | Handed to a liquidator |
| Creditors | Negotiated haircuts/reschedules | Paid by statutory priority from assets |
| Outcome | Company survives | Company ends, cleanly |
| Cost/time | Higher effort, ongoing business | 2–6 months, defined end |
Honest rule of thumb: if the operating business makes money before debt service, restructure; if it doesn’t, liquidate properly before the debts grow teeth. See also: financial restructuring vs bankruptcy and company liquidation.
The Law That Actually Governs: Federal Decree-Law No. 51 of 2023
The UAE’s bankruptcy regime was rebuilt by Federal Decree-Law No. 51 of 2023 on Financial Restructuring and Bankruptcy, in force since 1 May 2024, replacing the 2016 law. It created a specialized Bankruptcy Court and three tracks: preventive settlement (debtor keeps running the business while agreeing a plan with creditors), restructuring (court-supervised rescue), and bankruptcy (liquidation of the insolvent estate). If advice you’ve received still speaks of “preventive composition” under the 2016 law, it is out of date — the terminology and the mechanics changed. (DIFC and ADGM companies follow their own separate insolvency regimes.)
Preventive Settlement: Protection While You Keep Control
The headline innovation: a debtor who moves early can seek court protection while remaining in possession — running the business, shielded from creditor execution during the process, negotiating a binding plan. It rewards exactly one behavior: acting before the situation is terminal. Companies that wait for the bounced-cheque stage lose access to the gentlest track.
Debt Restructuring for SMEs
Most UAE distress is SME distress — and most of it can be handled without a courtroom: bank negotiations, creditor standstills, rescheduling agreements drafted to hold, asset sales done in the right order. This firm was founded in 2008 under the Mohammed Bin Rashid Establishment for SMEs — we have been the small company at the table, and we negotiate for SMEs with that memory. Where informal workouts fail, the 51/2023 tracks provide the formal backstop.
Directors and Managers: Your Duties Shift in the Insolvency Zone
When a company approaches insolvency, directors’ duties tilt toward creditors — and personal exposure appears: liability for wrongful trading decisions, clawback of preferential transactions, and the criminal-law interface where cheques and personal guarantees are involved. The most valuable advice in this area is timing advice: get counsel before the board minutes are written, not after. Our criminal team under Dr. Mahmoud Fahmy handles the crossover cases where distress meets prosecution.
Why KH Legal
Restructuring at KH Legal is led personally by Jouslin Khairallah, whose practice joins company strategy, restructuring and anti-money laundering — the exact combination distress cases demand, where refinancing, creditor pressure and compliance scrutiny arrive together. Corporate mechanics run through Dr. Bahrainwala’s department; disputes and enforcement through litigation. One firm, both sides of the balance sheet, in English, Arabic and Russian.
Related Laws (Current)
- Federal Decree-Law No. 51 of 2023 — Financial Restructuring & Bankruptcy (in force 1 May 2024)
- Federal Decree-Law No. 32 of 2021 — Commercial Companies
- Federal Decree-Law No. 50 of 2022 — Commercial Transactions (incl. cheques)
Frequently Asked Questions
Can a company be saved without liquidation in the UAE?
Yes — through informal workouts or the preventive settlement and restructuring tracks of the 2023 law, which let viable businesses bind creditors to a rescue plan. The earlier you move, the more of these doors are open.
What is preventive settlement?
The Federal Decree-Law 51/2023 track letting a debtor keep running the business under court protection while agreeing a plan with creditors — the successor to the old law’s preventive composition, with reworked mechanics.
Are directors personally liable when a UAE company can’t pay its debts?
They can be — for decisions taken in the insolvency zone, preferential transfers, and cheque or guarantee exposure. Early advice converts most personal risk into managed process.
How long does restructuring take?
Informal workouts: weeks to months. Court-track processes: months, depending on creditor composition and plan complexity. Liquidation, by comparison, typically runs 2–6 months.
We’re creditors of a distressed company — does this page apply to us?
Your remedies live on our debt collection page — and in the 51/2023 processes, where you’ll want your claims lodged and your committee seat used. We act for creditors too.
Confidential restructuring consultation: +971 4 427 0845 · WhatsApp.