Important Note: This article presents an independent analysis and has not been reviewed or endorsed by any regulatory authority, including the UAE Ministry of Economy, the Ministry of Human Resources and Emiratisation, or any other competent authority referenced herein. It does not constitute legal advice, and its primary purpose is to provide an institutional perspective that contributes to informed discussion on the legal and regulatory framework governing business operations in the United Arab Emirates.
Companies operating in the United Arab Emirates (UAE) face a constantly evolving regulatory environment, in which the adequacy of governance structures, contractual arrangements, and operational processes is not merely an option, which is why the periodic review of these structures in light of the applicable legislation is fundamental and distinguishes well-positioned organisations from those exposed to risks that are, in their essence, avoidable.
In this context, seven areas deserve particular attention, namely transactions and mergers and acquisitions, contractual exposure, data protection and remote security, governance of private clients and family businesses, employment and workforce planning, real estate and development projects, and insurance coverage. Each of these will be addressed in turn.
1. Transactions and M&A Operations
With regard to transactions and M&A operations, mergers with the potential to generate excessive economic concentration that may affect competition in the UAE are subject to prior approval by the Ministry of Economy, pursuant to Article 12(1) of Federal Decree-Law No. 36 of 2023.
The law requires that the approval request be submitted at least 90 days in advance of the expected closing date, which is suspended until the ministerial resolution is issued, pursuant to Article 13(2).
At the corporate level, the procedures relating to mergers, acquisitions, and spin-offs are governed by Federal Decree-Law No. 32 of 2021, the Commercial Companies Law, which requires a special resolution of the General Assembly for the approval of a merger, as well as the notification of creditors within ten business days following such approval.
In this regard, creditors are guaranteed the right to oppose the merger and to request a judicial suspension of the process, which may remain in effect until the opposition is resolved or the debtor company provides security for the debt. In the case of acquisitions, Article (299) of Federal Decree-Law No. 32 of 2021 allows for a capital increase of the acquiring company to enable the transaction, with an exemption from certain subscription preference rules.
2. Contractual Exposure
With regard to the management of contractual risk in uncertain environments, particular attention must be paid to force majeure, termination, and notice provisions, as governed by Federal Law No. 5 of 1985, the UAE Civil Code.
Article (273)(1) provides that, in bilateral contracts, the supervening occurrence of a force majeure event that renders the performance of the obligation impossible may result in the automatic termination of the contract. On the other hand, pursuant to Article (273)(2), where the impossibility of performance is only partial, the obligation is extinguished solely in respect of the part affected by the supervening event, and the creditor is entitled to cancel the remaining contract.
Article (273) (1) In contracts binding on both parties, if force majeure supervenes which makes the performance of the obligation impossible, the corresponding obligation shall cease, and the contract shall be automatically cancelled. Federal Law No. (5) of 1985 Concerning the Issuance of the Civil Transactions Law of the United Arab Emirates 58 (2) In the case of partial impossibility, that part of the contract which is impossible shall be extinguished, and the same shall apply to temporary impossibility in continuing contracts, and in those two cases it shall be permissible for the obligee to cancel the contract provided that the obligor is so aware.
In situations where performance becomes merely excessively onerous as a result of exceptional circumstances of a public nature and unforeseeable character, Article (249) authorises the judge to reduce the obligation to a reasonable level, and any contractual clause excluding this protection shall be null and void.
In cases of non-performance, Article (272)(1) conditions the exercise of the right of termination upon the sending of a formal notice, making strict compliance with notice requirements an essential element for the preservation of contractual rights.
3. Data Protection & Remote Security
The protection of personal data in the UAE is governed by Federal Decree-Law No. 45 of 2021, which imposes relevant obligations on controllers and processors operating in distributed environments or with teams working remotely across different jurisdictions.
By way of example, Article (20) requires the adoption of adequate technical and organisational measures, including encryption and pseudonymisation, to ensure the highest standard of information security, with specific protection against destruction, loss, or unauthorised access. Furthermore, in the event of a data breach, immediate notification must be provided to both the data subject and the UAE Data Office.
For cross-border operations, the international transfer of data is permitted where the destination country has equivalent protective legislation or a bilateral agreement with the UAE. However, the transfer is also possible in the absence of such conditions, provided it is carried out through specific instruments, such as contracts imposing the standards of UAE law or the express consent of the data subject.
4. Private Clients & Family Businesses
Wealth planning and the governance of family groups also find support in the UAE Civil Code, Federal Law No. 5 of 1985, whose Article (1183) provides that family members may establish in writing a family ownership structure over jointly held or inherited assets, with a duration of up to 15 years. Article (1184), in turn, grants a co-owner the right to apply to the court for the early withdrawal of their share, provided that a relevant justification is presented.
Beyond intra-family relations, the Law also provides protection for family assets against third-party interference. One example is the provision in Article (1185)(2), which prohibits the transfer of shares to persons outside the family without the unanimous consent of the remaining co-owners, as set out in the following wording:
If an outsider to the family acquires the ownership of the share of one of the co-owners with his consent or if that happens compulsorily, he shall not be a co-owner in the family ownership save by his consent and the consent of the remainder of the co-owners.
Furthermore, the Law authorises the majority of shareholders to appoint managers for the day-to-day administration of the assets, including with powers to adopt measures that enhance the use and appreciation of the family assets.
Article (1186) (1) The owners of a majority of the shares in a family ownership may appoint one or more of their number to manage the co-owned property, and the manager of the family-owned property may effect changes in the use for which the co-owned property was intended whereby the means of enjoyment of such property are enhanced, in the absence of an agreement to the contrary.
5. Employment & Workforce Planning
The legal framework of the United Arab Emirates also provides special protection to employment relationships, as evidenced by the modernisation brought about by the enactment of Federal Decree-Law No. 33 of 2021, which introduced new contractual modalities and considerably expanded employer obligations.
By way of example, part-time, temporary, and flexible contracts are now recognised, in accordance with Article (7). Remote work, also specifically regulated, allows the employer to stipulate specific working hours, subject to the worker’s consent.
With regard to employer obligations, the employer has a duty to provide a safe and adequate working environment, to supply means of prevention against occupational diseases and accidents, and to bear the costs of the worker’s medical care.
Another relevant provision is that contained in Article (66), which establishes Arabic as the official language, without however restricting the access or understanding of workers who do not speak the language. As a result, contracts and instructions must be provided in a language understood by workers who do not speak Arabic, without prejudice to the prevalence of the official language in cases of disputes.
Furthermore, under UAE law, it is essential that companies operate strictly within the scope of the activities for which they are licensed. The description of intended activities should not be viewed as a mere formality in the company formation process. All applicable regulations, obligations, required licenses, the competent authority supervising the business, and the form of regulatory oversight are directly tied to the company’s licensing, especially in the case of regulated activities.
For this reason, a company cannot be incorporated based on one set of intended activities and then begin operating in a different area without undergoing the proper procedure for amending and updating its commercial license. Conducting business outside its approved scope may create the false perception of short-term efficiency or savings on licensing fees, but ultimately exposes the company and its owners to severe penalties that go far beyond fines, which are already substantial on their own.
The penalties for violations of these rules are severe, and recently, the Ministry of Human Resources and Emiratisation (MoHRE) penalised approximately 1,300 establishments, owned by roughly 1,800 business owners, due to discrepancies between the activities the companies were carrying out and the activities for which they were licensed, as well as for maintaining sponsored workers under irregular arrangements.
The rules governing these matters are primarily set out in Ministerial Resolution No. 318 of 2024, which addresses establishments that do not perform their licensed functions but employ workers without a legitimate employment relationship; Federal Decree-Law No. 33 of 2021, which, in Article (60)(2), deals with the fictitious appointment of workers and the penalties applicable to companies engaging in this practice; and Cabinet Resolution No. 21 of 2020, which outlines specific fines and administrative sanctions.
6. Real Estate & Development Projects
Contracts for the provision of engineering and construction services are classified by the Civil Code as contracts for works, subject to a specific regime of liability and risk management.
Pursuant to Article (877), defective performance entitles the employer to require repair within a reasonable period or, in the absence thereof, to request termination of the contract or the engagement of third parties at the original contractor’s expense. Article (878), in turn, provides for the contractor’s exemption from liability for delays and losses arising from unforeseeable events or force majeure.
Article (877) The contractor must complete the work in accordance with the conditions of the contract. If it appears that he is carrying out what he has undertaken to do in a defective manner or in a manner in breach of the agreed conditions, the employer may require that the contract be terminated immediately if it is impossible to make good the work, but if it is possible to make good the work it shall be permissible for the employer to require the contractor to abide by the conditions of the contract and to repair the work within a reasonable period. If such period expires without the reparation being performed, the employer may apply to the judge for the cancellation of the contract or for leave to himself to engage another contractor to complete the work at the expense of the first contractor.
Article (878) The contractor shall be liable for any loss or damage resulting from his act or work whether arising through his wrongful act or default or not, but he shall not be liable if it arises out of an event which could not have been prevented.
For unit-price contracts, the Civil Code places on the contractor the duty to immediately notify the employer when the quantities executed significantly exceed the original plan, under penalty of losing the right to recover the excess costs.
With regard to liability, the Civil Code establishes the joint and several ten-year liability of architects and contractors from the date of delivery of the works, in cases of total or partial collapse of the building or of defects that threaten its structural stability.
7. Insurance Coverage
Finally, the rules applicable to claims management and the maintenance of insurance coverage are also of utmost importance and require particular care on the part of the business operator.
Evidence of this is found in Article (1028)(1)(b) of the Civil Code, which establishes express protection for the insured by declaring null and void any clause that conditions the maintenance of coverage on strict compliance with the claims notification deadline, where a plausible justification for the delay is established.
On the other hand, the existence of rights also presupposes the fulfilment of corresponding obligations, which is why the Law imposes on the insured the duty to disclose, at the time of contracting, all information relevant to the assessment of the risk, and to notify the insurer of any supervening circumstance that increases those risks during the term of the policy. The fraudulent concealment of information, pursuant to Article (1033)(1), entitles the insurer to cancel the contract and retain the premiums already paid, as set out in the following wording, verbatim:
If the assured acting in bad faith conceals any matter or provides incorrect information Federal Law No. (5) of 1985 Concerning the Issuance of the Civil Transactions Law of the United Arab Emirates 238 such as to lessen the degree of the risk insured against, or to vary the subject matter thereof, or if he fraudulently fails to discharge any obligation he has undertaken, the insurer may require that the contract be cancelled, and he shall be entitled to keep any instalments which fell due prior to such requirement.
Conclusion
In light of all that has been set out in this article, the periodic review of the areas addressed is not an isolated precautionary measure, but an integral part of robust and desirable operational governance for companies operating in the UAE markets.
Experience shows that the proactive alignment of contractual structures, strict compliance with notice requirements, and preventive engagement with counterparties and regulatory authorities materially reduce the risk of disputes and the resulting strain, while also ensuring the operational, commercial, and institutional sustainability of businesses.
Should you wish to explore in greater depth how these provisions apply to your company’s structure, operations, or contracts, our team remains available to discuss these matters and assist in developing practices consistent with the regulatory environment of the United Arab Emirates.
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