Overview
Current market conditions in the Gulf have heightened insolvency risk. The regional conflict has driven up fuel, freight and financing costs and disrupted supply chains, prompting the UAE Cabinet to activate the emergency insolvency regime under Cabinet Decision No. 94 of 2026. In this environment, insolvency risk must be managed proactively, not only once a counterparty stops paying, and it can travel both up and down the supply chain.
In this edition, we discuss the UAE's bankruptcy and insolvency framework and the practical steps businesses should take to protect themselves against rising insolvency risk.
Key Takeaways
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While the UAE's emergency regime applies, creditors cannot commence onshore insolvency proceedings, although debtors can. Contractual rights, security and early monitoring are therefore the principal protections.
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Identify the applicable insolvency regime early by confirming which entity signs the contract, owns the assets and grants the security. This determines the procedures and remedies available onshore, in the DIFC or in the ADGM.
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Treat falling margins, late payments and rising costs at counterparties as early warning signs, and act before a margin problem becomes a liquidity shortfall.
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Monitor the entire supply chain, including parent-company events and supplier behaviour, which often signal distress before it appears in the accounts.
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Review change-of-control, set-off, direct-payment, retention and security rights in key contracts, and address gaps or renew expiring protections while counterparties remain cooperative.
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Adopt a graduated response plan and confirm that each step is permitted under the applicable regime. Termination should be a deliberate decision, not an instinctive reaction.
To read the full article, please download the PDF.
Authors: Cameron Cuffe, Partner and OMP, Dubai; Emma Tormey, Partner; Tammam Kaissi, Partner.
