Federal Decree-Law No. (25) of 2025 promulgates a new UAE Civil Transactions Law, in force on 1 June 2026. It replaces the 1985 law in full. For founders, in-house counsel, and operators across the UAE, several long-standing drafting habits no longer survive the new text, and three concepts — pre-contractual disclosure, hardship, and adhesion-clause modification — are now firmly part of the contract analysis.
Here are five corporate housekeeping items every UAE business should address before the in-force date.
1. Civil companies — single-shareholder route and prohibited partner-economics
Article 603(2)(a) of the new law authorises, in line with applicable legislation, the formation or ownership of a civil company by a single person. Article 603(2)(b) authorises reinvestment of net profits. The two-or-more-persons conception of the 1985 law is no longer a Civil Code barrier.
Two clauses are squarely off the table for civil-company partner agreements:
- A clause giving a partner a fixed sum of profit is void (Article 611).
- A clause depriving a partner of profit, or exempting them from contributing to losses, is void (Article 612).
Founders should also remember Article 617(2): non-manager partners' right to inspect books and request reports cannot be contracted away.
2. Professional companies — a new chapter with real teeth
Articles 645–654 give professional services firms — law, audit, engineering consulting, medical — an explicit Civil Code home. The provisions that bite hardest:
- One-firm rule (Article 650): a partner cannot be a founder or partner in more than one professional company, nor be employed by another.
- Manager liability cannot be contracted around (Article 651(3)): any provision permitting exemption of a current or former manager from personal liability is void.
- Dissolution risk (Article 654): the regulator may dissolve the firm where all partners cease to meet the conditions for practising the profession.
- Permanent loss of licence (Article 653): treated as withdrawal by operation of law, but the partner retains entitlement to client-contract proceeds until the next-year financial statements.
Professional firms should audit their partnership deeds and indemnity protocols before 1 June 2026.
3. Non-compete clauses — read Article 851 carefully
Article 851 validates a post-termination non-compete only where:
- the employee was of full legal age at contracting; and
- the restriction is limited in time, place, and type of work to what is necessary to protect the legitimate interests of the employer.
The employer may not invoke the non-compete where they rescinded or refused to renew without any act on the employee's part justifying it, or where the employer committed an act justifying the employee's rescission.
Article 852 separately empowers the court to annul or amend a penalty clause for breach of non-compete where it becomes a means of compelling the employee to remain. Standard non-compete language drafted at the high end of enforceability deserves a refresh.
4. Employee inventions — Article 853
The default in Article 853 is that an employee retains rights to inventions, with three carve-outs:
- where the nature of the work required the employee to devote effort to inventive activity;
- where the employee used the employer's materials, tools, or facilities to reach the invention; or
- where the employment contract expressly provides for assignment.
Where the invention is of serious economic significance, the employee may claim special compensation. Any agreement depriving the employee of this special compensation is void.
For technology, design, and engineering firms, IP-assignment clauses should be refreshed against this regime. Express assignment language remains valuable, but the special-compensation entitlement cannot be excluded.
5. Suretyship templates — the 6-month creditor-action rule
Article 1006 of the new law is a quiet but consequential provision. The surety is released from the suretyship if the creditor does not initiate proceedings against the debtor and the surety within 6 months from the day following the maturity of the debt.
Standard surety arrangements that rely on a long passive watch over the principal debt are exposed. The credit-control protocol behind every surety should ensure proceedings are commenced within the 6-month window. Article 1005 separately provides a pro-tanto release of the surety to the value of any securities the creditor loses.
Two related housekeeping items:
- Article 1028 prohibits the surety from taking consideration for the suretyship — strip any such language from intra-group surety arrangements.
- Article 1009 confirms the default position: the creditor cannot have recourse against the surety alone except after recourse against the debtor, unless the surety is joint and several with the debtor.
A note on negotiations
The new pre-contractual disclosure regime at Articles 121–123 — bad-faith liability in negotiations, a positive duty to disclose information of decisive importance, and statutory protection for negotiation confidentiality — applies across the board. Any clause that excludes or limits the disclosure duty is void (Article 122(4)). NDAs and term sheets should be refreshed.
The hardship doctrine at Article 224, mirrored into the construction context at Article 829(3), is similarly non-excludable.
Related Civil Code 2025 guides
Published 18 May 2026. General information only — not legal advice. Contact us for matter-specific advice.