| In Brief * On 1 June 2026, the UAE Cabinet issued Resolution No. (94) of 2026, designating the acts of the recent regional conflict with Iran as a “Financial Emergency Crisis” under Federal Decree-Law No. 51/2023 (the “Bankruptcy Code”). * The designation applies retroactively from 28 February 2026 and remains in force until a further Cabinet resolution lifts it — there is currently no fixed end date. * The effect is to activate Chapter 5 (Articles 251–257) of the Bankruptcy Code: faster court access, a protected 40-day negotiation window, a lowered creditor-approval threshold, an automatic freeze on creditor-led proceedings, director and manager protection for continued wage payments, and enhanced rescue-financing options. * Businesses affected by the regional conflict since 28 February 2026 — even indirectly, through lost bookings, client budget freezes, insurance costs, or supply disruption — should assess now whether they wish to take advantage of this development. * Hospitality, tourism, and marketing and advertising businesses are, given their cost structures and demand sensitivity, among the sectors most likely to qualify. |
What Happened
Federal Decree-Law No. 51/2023 (the Financial Reorganisation and Bankruptcy Code) has, since it came into force, contained a standing but dormant mechanism for exactly this scenario. Article 1 of the Law defines an “Emergency Financial Crisis” as an event — expressly including war — that disturbs a debtor’s financial position or ability to pay its debts as a result of a general situation that affects trade or investment in the State.
The Law provides that the cause and duration of any such crisis is to be fixed by Cabinet resolution, on the proposal of the Minister of Justice. Cabinet Resolution No. (94) of 2026 is that resolution. It:
- Refers to the Iranian aggressions against the State as the qualifying emergency;
- fixes the start date of the emergency at 28 February 2026; and
- leaves the end date open — the regime will remain active until a further Cabinet resolution, issued on the Minister of Justice’s proposal, brings it to a close.
Because the Resolution was only published and brought into effect on 1 June 2026, it operates retroactively. A business that has been under financial strain since late February 2026 as a result of the conflict does not need to wait for a future trigger — it may invoke the regime now, in relation to distress that has already accrued.
The Effects on the Overall Insolvency Process
The key provisions are summarised below.
| Article | Mechanism |
| Art. 252 — Gateway | The Bankruptcy Court may accept a debtor-led application to open preventive settlement, restructuring, or bankruptcy proceedings, and may dispense with appointing a trustee — provided the debtor demonstrates that its distress arises from the war as the designated financial emergency. |
| Art. 253 — Protected negotiation window | The debtor may obtain up to 40 days to negotiate a settlement with creditors. An agreement approved by creditors holding two-thirds of the debt value of those who actually participated binds all creditors, including those who did not take part — a materially lower threshold than the ordinary “Required Majority” test. |
| Art. 254 — Automatic freeze | Creditor-initiated applications to open proceedings are automatically postponed until the crisis is resolved. Courts must also refrain from seals or other precautionary measures over assets the business needs to continue operating. |
| Art. 255 — Extended deadlines | For cases already underway before the emergency was declared, the court may extend the Law’s ordinary statutory deadlines by up to double the standard period. |
| Art. 256 — Director and manager protection | Board members and managers are not personally liable for using company funds to keep paying ordinary wages and salaries (excluding bonuses and discretionary payments) during an emergency-driven payment suspension, provided they act prudently, in good faith, and keep the company’s accounts updated. |
| Art. 257 — Rescue financing | The court may approve new financing that ranks ahead of existing unsecured debt, and, in defined circumstances — including where the lender is a licensed financing institution — that primes existing secured debt, up to 30% of the relevant asset’s value. |
Why This Matters for Your Business
F&B, Hospitality & Tourism
F&B, Hospitality and tourism operators are natural candidates for this regime, even absent any direct physical loss. Regional conflict conditions typically depress inbound travel through flight suspensions and rerouting, war-risk insurance surcharges, travel-advisory-driven cancellations, and broader consumer and corporate risk-aversion — all of which fit squarely within the Bankruptcy Code’s definitions of “cessation of payment” and “disturbance of the debtor’s financial position.” High fixed costs — leases, franchise and management fees, payroll — combined with thin margins make hotels, tour operators, and food and beverage businesses acutely exposed to a demand shock of this kind. The Article 256 wage safe harbour is particularly relevant given how labour-intensive the sector is: it allows management to keep paying housekeeping, food and beverage, and front-of-house staff out of company funds during a payment suspension, without personal exposure. The Article 257 rescue-financing mechanism may also assist asset-backed operators needing bridge liquidity without permanently subordinating existing lenders, and the Article 253 negotiation window is a natural vehicle for consensual rent concessions with landlords or renegotiated management-contract terms.
Marketing & Advertising
Agencies tend to be early and disproportionate casualties of macro shocks, because marketing spend is typically the most discretionary line in a client’s budget, while agencies themselves carry committed media-buying obligations, production costs, and staff costs that do not scale down quickly. Long regional payment cycles — 60 to 90 days or more is common — mean an agency can reach a cessation-of-payment position even while balance-sheet solvent, if a wave of client budget freezes or non-payment lands at once. This is precisely the fact pattern the Law’s “disturbance of financial position” definition anticipates. Because agencies are typically asset-light, the Article 257 priming-lien financing tool is less likely to be of assistance (there is often little to pledge), which makes the Article 253 negotiation window, together with the Article 254 freeze on creditor action, the more relevant combination for this sector — buying time to restructure payables to media owners and production vendors while continuing to trade.
Threshold Question: Where Is the Entity Incorporated?
The Bankruptcy Code does not apply to companies and institutions in free zones that operate their own bespoke insolvency regimes — in practice, DIFC and ADGM. It does, however, apply to entities in the operational free zones where many hospitality, tourism, and marketing businesses are commonly established — including DMCC, Dubai Media City and twofour54, JAFZA, and the various tourism-focused free zones — none of which maintain a standalone insolvency code. Confirming onshore, mainland, or non-financial free zone incorporation (as opposed to DIFC or ADGM incorporation) should be the first step in assessing whether a given group entity can access this regime.
Seek Legal Counsel
For further information or advice in relation to any of the matters addressed above, please feel free to contact the Head of Banking and Finance, Ali Dakhlallah at Habib Al Mulla & Partners.