In Brief:
- Modernised legal framework: The new UAE Civil Transactions Law (Federal Decree-Law No. 25 of 2025), effective from 1 June 2026, replaces the 1985 law and modernises the UAE’s private law regime by aligning it with contemporary commercial practices and international legal standards.
- Key implications for businesses: The law introduces important reforms affecting contract formation and interpretation, good faith obligations, remedies for breach, limitation periods and evidentiary rules, requiring businesses to review contractual arrangements, internal policies and risk allocation mechanisms.
- Practical corporate considerations: Companies should update their standard form agreements, strengthen contract governance and dispute management processes, and assess the impact of the new law on ongoing commercial relationships and future transactions to ensure compliance and minimise legal risk.
The UAE’s new Civil Transactions Law (Federal Decree-Law No. 25 of 2025) (“New UAE Civil Code”), which came into force on 1 June 2026, marks one of the most significant reforms to the UAE’s private law framework in over four decades. Replacing the former Civil Code of 1985, the legislation modernises the legal framework governing civil and commercial relationships and aligns it more closely with contemporary business and transactional practices.
Whilst much of the commentary surrounding the New UAE Civil Code has focused on its broader civil law reforms, a number of its provisions will have significant implications for corporate governance, mergers and acquisitions (M&A), joint ventures, financing transactions, shareholder arrangements and commercial contracting. The legislation also codifies several principles that had previously been developed through judicial practice, whilst introducing entirely new statutory obligations in other areas.
Business legal teams, boards of directors and transaction advisers should therefore review their existing practices and documentation to ensure they remain fit for purpose under the new legislative framework, and should be mindful of these changes to the law in their operations and transactions going forward.
1. Pre-Contractual Conduct: The Transaction Begins Before Signing (Articles 121–123)
One of the most significant developments is the introduction of a statutory framework governing pre-contractual negotiations. For the first time under UAE statute, parties are expressly required to negotiate in good faith and disclose information bearing materially on the other party’s decision to enter into the contract. These obligations are mandatory and cannot be excluded by contractual agreement. The New UAE Civil Code also establishes separate liability for the unauthorised use or disclosure of confidential information obtained during negotiations.
This change represents a significant development in UAE contract law by imposing express mandatory legal duties during negotiations. Whilst confidentiality agreements, entire agreement clauses and non-reliance provisions remain important contractual protections, they should not be viewed as excluding the legal obligations of good faith, disclosure and confidentiality imposed by the New UAE Civil Code.
For corporate and commercial transactions, this has immediate implications for M&A transactions, investment rounds, joint ventures, shareholder arrangements and high value commercial negotiations, where extensive discussions and due diligence typically precede execution of definitive agreements.
Practical considerations
Companies should consider:
- implementing formal negotiation protocols requiring legal oversight of material disclosures;
- maintaining comprehensive virtual data rooms and disclosure records;
- documenting key negotiations and material decisions throughout the transaction process;
- reviewing precedent non-disclosure agreements (NDAs), heads of terms and disclosure letter templates to ensure they do not conflict with mandatory statutory obligations;
- updating legal due diligence checklists to reflect the new disclosure obligations; and
- training directors, legal teams and commercial personnel on the statutory duties applicable during negotiations.
2. Enhanced Certainty for Commercial Transactions (Articles 161, 167 and 174)
The New UAE Civil Code adopts a more commercially pragmatic approach to defective contracts. Rather than automatically treating certain contracts as void, a number of defects, including mistake, coercion (duress) and contracts entered into by persons with limited legal capacity, now generally render contracts voidable, but not automatically void. Such contracts therefore remain legally effective unless successfully challenged within the applicable limitation period.
This reform enhances transactional certainty by reducing the likelihood that historical agreements may subsequently be declared void ab initio.
For legal due diligence exercises, the focus may consequently increasingly shift from determining whether a contract is inherently invalid to assessing whether any right to challenge remains available and whether the relevant limitation period has expired.
3. Exploitation and Distressed Transactions (Article 179)
The New UAE Civil Code expressly codifies exploitation as a statutory ground for challenging contracts.
A contract may be challenged where one party has exploited another’s urgent need, lack of experience or vulnerable position, resulting in a substantially unbalanced transaction. Such claims must generally be brought within one year, subject to an absolute three-year longstop period.
Whilst intended to discourage unfair commercial practices, this provision introduces additional legal considerations for distressed M&A transactions, restructuring exercises, shareholder disputes, rescue financing, urgent business disposals, supply chain and critical logistics contracts, procurement sub-contracts, and standard business terms (such as commercial leases, SaaS procurement, and corporate insurance policies).
Accordingly, parties should ensure that pricing methodologies, independent valuation reports, board deliberations and negotiation processes clearly demonstrate that transactions were conducted on an arm’s-length basis and on commercially reasonable terms.
4. Disclosure Obligations Extend Beyond Contractual Warranties (Article 171)
The New UAE Civil Codeexpressly recognises that deliberate concealment or silence regarding a material fact may constitute actionable misrepresentation where disclosure is legally required or where the undisclosed information would have materially influenced the other party’s decision to contract.
For sellers, investors and transaction advisers, this reinforces the importance of robust disclosure exercises. Contractual warranties should no longer be viewed as the sole mechanism for allocating disclosure risk.
Companies should therefore ensure that disclosure letters, due diligence responses and transaction documentation accurately reflect all material matters relevant to the transaction.
5. Framework Agreements Receive Statutory Recognition (Article 138)
Framework agreements and master agreements are now expressly recognised under the New UAE Civil Code. Unless the parties expressly or implicitly agree otherwise, the terms of such agreements automatically form part of future contracts concluded pursuant to them.
This provides welcome certainty for businesses operating under long-term commercial arrangements, including procurement programmes, supply agreements, distribution arrangements, technology partnerships and strategic alliances.
Businesses should nevertheless review existing framework agreements to ensure they clearly define the extent to which their provisions are intended to apply to future transactions and identify any provisions intended to be excluded.
6. Corporate Authority and Execution Powers (Article 614)
The New UAE Civil Code introduces a more structured framework governing agency and authority.
It distinguishes between acts of management and acts of disposition. Unless specific authority is granted, a general authority does not ordinarily extend to acts of disposition, including settlements, mortgages, arbitration agreements and other significant transactions identified in the legislation. The New UAE Civil Code also restricts representatives from contracting with themselves without express authorisation.
These provisions have important implications for corporate governance, transaction execution and internal approval processes.
Companies should therefore review:
- delegated authority matrices;
- board and shareholder resolutions;
- powers of attorney;
- signing authorities; and
- internal approval procedures.
Ensuring that authorised signatories possess appropriate authority before executing significant transactions will reduce execution risk and minimise the possibility of subsequent challenges.
7. Modernisation of Corporate Structures (Article 603)
The New UAE Civil Codeexpressly recognises a number of concepts that already exist under UAE corporate legislation whilst introducing additional provisions affecting professional companies, partner inspection rights and dissolution.
These reforms further align the law with existing corporate practice, and reduce historical inconsistencies between the Civil Code and the Commercial Companies Law.
Companies considering restructuring, succession planning, family business transition or joint venture arrangements should review their constitutional documents and governance frameworks in light of these developments.
8. Modernised Assignment Rules Facilitate Financing and Corporate Restructuring (Article 405 – Article 424)
The New UAE Civil Code modernises the assignment regime by permitting contractual rights to be assigned without debtor consent unless contractually restricted. Security interests attached to assigned rights transfer automatically with those rights. Conversely, transfers of debt continue to require creditor consent, with silence now deemed to constitute refusal rather than acceptance.
These reforms will be particularly relevant for financing transactions, receivables financing, securitisations, business transfers, portfolio acquisitions, intra-group restructurings and debt restructurings.
Parties should nevertheless ensure that notification requirements are properly observed and that creditor consents are actively obtained whenever debt transfers are contemplated.
Practical Action Points for Business Legal Teams
The New UAE Civil Code provides an important opportunity for businesses to undertake a comprehensive review of their governance frameworks and transactional documentation. In particular, businesses should consider:
- reviewing standard form commercial contracts, including NDAs, heads of terms, shareholders’ agreements, share purchase agreements (SPAs) and framework agreements;
- strengthening due diligence and disclosure procedures to comply with the new statutory disclosure obligations;
- updating legal due diligence checklists and disclosure protocols;
- updating board resolutions, delegated authority matrices and powers of attorney to ensure appropriate authority exists for significant corporate transactions;
- implementing internal protocols governing negotiations, documentation and disclosure throughout transaction lifecycles;
- enhancing document retention policies to preserve negotiation records and evidence of material disclosures;
- maintaining clear records demonstrating good faith negotiations and informed board decision-making;
- providing training to directors, management, legal and commercial teams regarding the new statutory obligations and associated litigation risks;
- reviewing corporate structures and governance arrangements in light of the new provisions affecting professional companies, partner rights and corporate authority; and
- undertaking periodic legal audits of transaction precedents and governance documentation to ensure continued compliance as judicial interpretation of the New Law develops.
Conclusion
The New UAE Civil Code represents far more than a legislative update. It reshapes the legal framework governing business transactions by introducing mandatory pre-contractual obligations, enhancing contractual certainty, modernising rules relating to authority and corporate structures, and creating new legal considerations surrounding disclosure and exploitative conduct.
The practical impact of many of these reforms will ultimately depend upon how the UAE courts interpret and apply the New UAE Civil Code in the coming years. Nevertheless, the legislation already establishes higher standards of transparency, disclosure and transactional governance.
For business lawyers, in-house counsel and boards of directors, compliance will require more than simply updating precedent documents. It calls for a broader reassessment of transaction management, governance procedures and internal compliance frameworks. Businesses that proactively adapt their documentation, governance practices and transactional processes will be better positioned to mitigate legal risk and navigate the evolving corporate landscape in the UAE.
If you would like more information on this topic, or have any questions, please contact Bilal Snaineh, Partner, Corporate at b.snaineh@hadefpartners.com.
This article is intended for general informational purposes only and does not constitute legal advice. Readers should seek independent legal counsel in relation to their specific circumstances.