A mid-sized trading group operating across multiple UAE jurisdictions. onshore entities registered with the Department of Economic Development (DED) and a subsidiary licensed through a Free Zone Authority. found itself unable to service obligations to more than a dozen creditors simultaneously. Creditor pressure was escalating. A formal demand from one financial institution threatened to trigger cross-default clauses that would have accelerated the entire debt stack within days.
Corporate restructuring in the UAE involves insolvency proceedings governed by federal insolvency legislation and, where applicable, the separate legal regimes of the Dubai International Financial Centre (DIFC Courts) or the Abu Dhabi Global Market (ADGM). A restructuring plan can be pursued through preventive composition, a formal administrator-led process, or a negotiated creditor arrangement – each route carrying distinct eligibility conditions and timelines. Selecting the wrong instrument at the outset can foreclose more favourable options entirely.
This case study traces how the matter was approached: the legal instruments deployed, the sequence of key milestones. The complications that arose. Additionally, the lessons that apply to comparable multi-creditor situations across the UAE and the wider region.
Client profile and the challenge presented
The client was a family-owned trading group with operations split between a mainland entity subject to federal commercial legislation and a free zone entity regulated by its own Free Zone Authority licensing rules. Total liabilities were distributed across secured bank lenders, trade creditors, and intercompany obligations owed to related parties in other jurisdictions.
The immediate challenge was structural. Each entity sat in a different regulatory perimeter. The mainland entity fell under the jurisdiction of UAE federal insolvency legislation, administered with oversight from the Ministry of Economy. The free zone entity was subject to its own insolvency regime. No single court or authority had consolidated jurisdiction over both.
At the same time, creditors were not a unified bloc. Secured lenders held registered security over real assets. Trade creditors held unsecured claims. Several creditors had already filed demands in different forums. A creditors meeting had not yet been convened, but individual creditor actions were creating a race to enforcement that threatened to destroy asset value for everyone.
The key question was whether to pursue a preventive composition procedure. preserving the going-concern value of both entities. or to accept that one entity would need to enter formal insolvency proceedings while the other was stabilised.
Legal strategy: instruments chosen and the rationale
The strategy centred on a two-track approach. For the mainland entity, the team filed for a preventive composition procedure under federal insolvency legislation. This imposed an immediate moratorium on individual creditor enforcement actions. The moratorium was the critical stabilising instrument – it halted the race to enforcement and created space for structured negotiations.
For the free zone entity, the applicable regime did not provide an equivalent moratorium mechanism of the same scope. The team therefore pursued a negotiated standstill agreement with the entity's principal creditors directly, supported by a written restructuring plan tabled for creditor review. This approach required all material creditors to submit a formal proof of debt – establishing the quantum and priority of each claim before substantive negotiations began.
The rationale for separating the two tracks was straightforward. Pursuing a single consolidated procedure would have required resolving the jurisdictional overlap first – a process that could have consumed weeks and allowed enforcement actions to resume in the interim. Parallel tracks, while more demanding to manage, preserved the moratorium on the mainland entity immediately. For matters involving the DIFC Courts or ADGM. Similar parallel-track logic applies. practitioners experienced in UAE insolvency law consistently note that forum selection at the earliest stage is among the most consequential decisions in any multi-entity restructuring.
An administrator was appointed for the mainland entity, with a mandate to assess asset values, verify the proof of debt submissions from each creditor, and prepare a draft restructuring plan for approval. The administrator's role was to serve as a neutral intermediary – a function that proved essential when creditor disputes over ranking threatened to derail the process.
For a broader view of the insolvency and restructuring options available across UAE jurisdictions, see our overview of insolvency and restructuring in the UAE.
Key milestones and complications encountered
The moratorium on the mainland entity was obtained within the first two weeks. This halted two pending enforcement applications and prevented the triggering of cross-default clauses in the secured lending agreements.
The first major complication arose during the proof of debt verification stage. Several trade creditors submitted claims that overlapped with intercompany receivables. Determining which claims were genuine third-party obligations – and which were intercompany positions subject to subordination – required detailed forensic accounting work. This stage consumed approximately six weeks and delayed the convening of the formal creditors meeting.
The second complication was creditor classification. Secured lenders resisted being placed in the same voting class as trade creditors for the purposes of restructuring plan approval. Under UAE federal insolvency legislation, creditor classes must be constituted in a manner that reflects genuine commonality of interest. The administrator prepared separate class analyses for submission to the supervising court. Resolving this classification dispute added a further three weeks to the timeline.
On the free zone side, one creditor declined to sign the standstill and filed a claim before the relevant Free Zone Authority tribunal. This required a parallel response. contesting the procedural admissibility of the claim on grounds that the standstill negotiations were ongoing and that the creditor's conduct was inconsistent with its prior written agreement to participate in the restructuring process. That challenge was ultimately resolved without a full hearing, but it consumed legal resources and introduced uncertainty into the broader creditor negotiations.
The restructuring plan for the mainland entity was presented at the creditors meeting approximately fourteen weeks after the moratorium was first obtained. The plan provided for a phased repayment of secured claims over an extended schedule, a partial write-down of unsecured trade creditor claims. Additionally. The elimination of the intercompany positions through a debt-for-equity conversion within the group structure.
Where creditor disputes escalate into contested litigation, the procedural tools available before the DIFC Courts and the considerations that arise in that forum are addressed in our analysis of corporate disputes in the UAE.
To explore how a comparable restructuring approach was applied in a different jurisdiction, the Singapore parallel is examined in our case study on corporate restructuring in Singapore.
To discuss how a similar two-track strategy could apply to your restructuring situation in the UAE, contact us at info@ferrazwhitmore.com.
Transferable lessons for cross-border restructuring
Lesson one: forum selection precedes all other strategy. In the UAE, the distinction between federal courts, the DIFC Courts, the ADGM, and individual Free Zone Authority tribunals is not merely procedural. Each forum operates under a different legislative regime. An entity that files in the wrong forum may find that the moratorium it sought is either unavailable or unenforceable against creditors who have filed in a parallel forum. Identifying the correct forum for each entity in a multi-entity group is the first and most consequential step.
Lesson two: proof of debt integrity determines plan viability. A restructuring plan can only be voted on by creditors whose claims have been verified. If the proof of debt process is rushed or contested, the entire plan approval timeline shifts. In multi-creditor situations, it is common for creditors to submit inflated or duplicative claims. An experienced administrator – or a liquidator in a formal insolvency context – with the mandate and resources to conduct rigorous verification is essential. Practitioners in the UAE note that disputes over claim quantum are among the most common sources of delay in restructuring proceedings.
Lesson three: standstill agreements require enforceable drafting. A creditor who signs a standstill but later defects. as occurred in the free zone element of this matter. can cause disproportionate disruption relative to the size of their claim. Standstill agreements in UAE restructurings should include explicit provisions addressing what constitutes a breach, the consequences of filing in a parallel forum during the standstill period, and the governing law of the agreement itself. Where creditors are domiciled in multiple jurisdictions, the governing law choice and the enforcement mechanism for the standstill deserve careful attention at the drafting stage.
About Ferraz & Whitmore
Ferraz & Whitmore is an international law firm based in Lisbon, advising business clients across 46 jurisdictions. Our team combines Portuguese civil law expertise with English common law tradition to deliver cross-border legal solutions in insolvency, restructuring, and multi-creditor debt management across the UAE and the wider Middle East region. As a law firm with deep UAE practice experience, we advise on insolvency proceedings before UAE federal courts, the DIFC Courts, and the ADGM – as well as in related Free Zone Authority contexts. Our attorneys have handled restructuring plan negotiations involving creditors domiciled across civil law and common law systems. The firm's Lisbon base provides direct access to EU regulatory frameworks, while our common law expertise supports enforcement and arbitration strategies in English-speaking jurisdictions including the DIFC and ADGM. Engaging a lawyer in UAE matters who understands both the onshore federal regime and the common-law-based free zone regimes is essential in any multi-entity restructuring. To discuss your restructuring or creditor management situation in the UAE, contact us at info@ferrazwhitmore.com.
Disclaimer: This publication is provided for informational purposes only and does not constitute legal advice. The information herein should not be relied upon as a substitute for professional legal counsel tailored to your specific circumstances. Ferraz & Whitmore assumes no liability for actions taken or not taken based on the contents of this material. For advice regarding your particular situation, please contact info@ferrazwhitmore.com.