Corporate and Commercial – Afridi & Angell

DIFC broadens access to Prescribed Companies and introduces a CSP-led compliance regime

The Dubai International Financial Centre (DIFC) has enacted the Prescribed Company Regulations 2026 (the 2026 Regulations), which came into force on 24 July 2026 and amend and restate the Prescribed Company Regulations 2024 (the 2024 Regulations).

The 2026 Regulations remove the qualifying requirements that previously restricted access to the prescribed company regime and introduce a compliance framework centered on corporate service providers (CSPs).

The recent amendments follow the updates to the regime in 2020, 2022 and 2024 since its introduction in 2019. The DIFC observed during the consultation process that opening the regime to all applicants was considered appropriate in light of the UAE corporate tax regime and the UAE’s adherence to global tax reporting standards such as the OECD’s Common Reporting Standard and the US FATCA.

The key changes introduced through the 2026 Regulations are set out below.

Wider access to the regime

Under the 2024 Regulations, an applicant was required to satisfy at least one of four eligibility routes to incorporate or continue a Prescribed Company in the DIFC:

(i) be controlled by one or more GCC Persons^[1], Registered Persons^[2] or Authorized Firms^[3];

(ii) hold or control GCC Registrable Assets^[4];

(iii) pursue a Qualifying Purpose^[5]; or

(iv) have a director who is an employee of a CSP that had an arrangement with the DIFC registrar.

Where a Prescribed Company relied on the GCC Registrable Asset or Qualifying Purpose routes, its objects and activities were restricted accordingly, and it had six months from licensing to demonstrate to the DIFC registrar that it held or controlled the relevant asset or had begun pursuing the relevant purpose.

Under the 2026 Regulations, the qualifying requirements are no longer conditions to the incorporation or continuation of a Prescribed Company. As a result, any natural or corporate person anywhere in the world may establish a Prescribed Company.

Instead, the 2026 Regulations now require that a non-exempt Prescribed Company (discussed below) must appoint a CSP to act on its behalf for its registered office and the statutory functions specified in the 2026 Regulations.

Exempt Prescribed Companies

A Prescribed Company is exempt if it is controlled by (i) a Registered Person; (ii) an Authorized Firm; (iii) a Government Entity^[6]; or (iv) a Publicly Listed Entity^[7]. It is worth noting that a “Registered Person” no longer includes a Prescribed Variable Capital Company and a Foundation. Consequently, a Prescribed Company which is controlled by a Prescribed Variable Capital Company or a Foundation does not meet the criterion for an exempt Prescribed Company and will be required to appoint a CSP (unless it separately qualifies as an exempt Prescribed Company).

An exempt Prescribed Company is not required to appoint a CSP, although it may engage a CSP to perform some or all of the duties and obligations of a CSP prescribed under the 2026 Regulations, provided that the arrangement does not relieve either party from any obligations imposed by the 2026 Regulations or applicable law.

A non-exempt Prescribed Company incorporated before 24 July 2026 is required to appoint a CSP within six months of such date, or within a longer period determined by the DIFC registrar on application by the Prescribed Company. Failure to appoint a CSP within such period may result in the imposition of a fine not exceeding USD 20,000. In addition, Prescribed Companies that fail to appoint a CSP within this timeframe risk losing their prescribed company status.

The CSP-led compliance framework

During the consultation process, the DIFC described a CSP as the primary compliance and administrative interface between the Prescribed Company and the DIFC registrar.

The 2024 Regulations permitted the DIFC registrar to enter into arrangements with CSPs under which a CSP could lodge documents and fees and perform specified checks, verifications and certifications in relation to incorporation and continuation of a Prescribed Company. The 2026 Regulations replace such arrangement-based model with express statutory duties. For a non-exempt Prescribed Company, the CSP is required to lodge any documents or forms and pay fees for the incorporation or continuation of a Prescribed Company; make filings and provide documents, forms and notices required to be provided by the Prescribed Company; and maintain current and readily accessible copies of records that the Prescribed Company is required to maintain under the 2026 Regulations or applicable law.

A Prescribed Company is required to provide the documents and information required for the CSP to perform its duties under the 2026 Regulations. Failure to do so may result in the imposition of a fine not exceeding USD 100,000.

The appointment of a CSP is required to be notified to the DIFC registrar in the prescribed form and should include the CSP’s consent. If the CSP ceases to act for a Prescribed Company (whether by resignation or dismissal), the CSP is required to notify the DIFC registrar within ten days from the date of cessation of its services, failing which, the CSP may be liable to a fine not exceeding USD 2,000.

Holding activity, financial services, registered office and workforce

Under the 2024 Regulations, the license of a Prescribed Company established for a Qualifying Purpose was restricted to the activities specific to such Qualifying Purpose, while the license of a Prescribed Company established for any other permitted purpose was restricted to the activity of a holding company. Under the 2026 Regulations, the license of a Prescribed Company is restricted to the activity of a holding company. The consultation paper on the 2026 Regulations confirms that, despite broader access, a Prescribed Company is intended to remain a passive holding vehicle.

The 2026 Regulations further stipulate that a Prescribed Company shall not be used to establish a Fund in the DIFC without the DFSA’s authorization.

An Exempt Prescribed Company may use an affiliate’s registered office, while a non-exempt Prescribed Company must use the registered office of its appointed CSP. The 2026 Regulations clarify that a Prescribed Company is not permitted to maintain a workforce whether through employees or any other arrangement.

Conclusion and action points

The 2026 Regulations recast the Prescribed Company regime around wider access and CSP-led compliance. The removal of the former eligibility gateways materially broadens the potential applicant base, while the mandatory CSP framework introduces a formal compliance interface for non-exempt Prescribed Companies.

New applicants and existing Prescribed Companies should assess the exempt status eligibility, their CSP appointment, registered office arrangements and ongoing information and filing obligations prior to the six-month transitional period ending on 24 January 2027 so as to mitigate the risk of the imposition of a fine and revocation of the company’s prescribed company status. ■

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[1] The 2024 Regulations defined a GCC Person as (a) a natural person who is a citizen of a GCC Member State; (b) a body corporate or body unincorporate, including a company, partnership, or unincorporated association, that is controlled by one or more natural persons who is a citizen of a GCC Member State; (c) a body corporate that has any class of its securities listed on a securities exchange in the GCC; or (d) a Government Entity.

[2] The 2024 Regulations defined a Registered Person as a body corporate incorporated, registered, or continued within the DIFC, excluding (a) a Prescribed Company or a Non-Profit Incorporated Organisation incorporated or continued in the DIFC.

[3] The 2024 Regulations defined an Authorized Firm as a person who holds a licence from the DFSA or a Recognised Financial Services Regulator to carry on one or more Financial Services, excluding a Representative Office.

[4] The 2024 Regulations defined a GCC Registrable Asset as an asset or property interest that must be registered with a GCC Authority to establish legal ownership, secure rights, or encumbrances against it, and to provide public notice of such interests, including: (a) land and real property; (b) shares in companies; (c) partnership interests; (d) intellectual property; and (e) aircraft and Maritime Vessels.

[5] The 2024 Regulations defined Qualifying Purpose as any of the following: (a) an Aviation Structure; (b) a Crowdfunding Structure; (c) an Intellectual Property Structure; (d) a Maritime Structure; or (e) a Structured Financing.

[6] The 2026 Regulations define a Government Entity as any of (a) the federal government of the UAE, the government of Dubai or the government of any UAE Emirate; (b) a government of a Recognized Jurisdiction; (c) a person Controlled by any of the government entities listed in (a) or (b); or (d) a person in which a government entity listed in (a) owns (directly or indirectly) an interest of at least twenty five percent (25%), or such other percentage approved by the DIFC authority.

[7] The 2026 Regulations define a Publicly Listed Entity to mean a body corporate that has any class of its securities listed on a securities exchange in a Recognized Jurisdiction.

UAE Competition Law – Guidelines on Relevant Market Definition

In July 2026, the UAE Ministry of Economy & Tourism (the Ministry) published its Guidelines on Relevant Market Definition (the Guidelines), issued within the framework of Federal Decree-Law 36 of 2023 on the Regulation of Competition (Federal Competition Law 2023), its Executive Regulations and the decisions issued in implementation thereof.

The Guidelines do not replace the applicable legal framework. Rather, they set out the minimum common methods, stages and procedures that may be adopted when defining the relevant market as part of any economic concentration (merger control) filing as well as across all competition enforcement contexts beyond merger control. The Guidelines provide that they are to act as a primary reference point for the establishment of the relevant market however, it is also noted that irrespective of such methodologies and principles, the relevant market must always be assessed on a case-by-case basis.

The Guidelines follow the introduction of revised merger control thresholds in 2025 and the adoption in April 2026 of implementing regulations for the Federal Competition Law 2023.

An EU-aligned, two-dimensional approach

Consistent with the definition of “relevant market” in Article 1 of Federal Competition Law 2023, and in general reflecting the methodology of the European Commission, the Guidelines define the relevant market by reference to two dimensions: (i) the relevant product market; and (ii) the relevant geographic market. The Guidelines expressly draw on international competition law including European Commission decisions and adopt the analytical tools familiar to EU practitioners, most notably the hypothetical monopolist (SSNIP) test.

A notable modernisation is the express recognition that the geographic dimension may be physical, digital or virtual, so that digital platforms and online marketplaces may themselves constitute a relevant geographic scope.

(i) The relevant product market

The relevant product market comprises all goods or services that, by reference to their price, characteristics and intended use, are regarded by customers or users as substitutable to satisfy a particular need or at least a substantial part of it. Product substitutability is treated as fundamental for defining the relevant products and market.

To assess substitutability, the Guidelines endorse:

➢ the hypothetical monopolist or Small but Significant and Non-Transitory Increase in Prices (SSNIP) test, asking whether a small but significant, non-transitory price increase (typically 5–10% above competitive levels) would result in demand switching to potential substitute products available within the geographic area or to products available in other geographic areas. The more the entity is unable to raise the prices of its products in the market, the stronger the indication that it is subject to competitive pressures. Consequently, potential substitutes that generate these competitive constraints should be included when defining the relevant market;

➢ the price elasticity of demand test, assesses the degree of demand-side substitution, reflecting the inverse relationship between the price of a product and the quantity demanded. The Guidelines note that although price is the most important element in defining the relevant market, it is not the only element as consumer choices may also be based on factors such as quality and consumer preference; and

➢ the SSNDQ test (a small but significant, non-transitory decrease in quality) a test adopted by the European Commission in its assessment of disputes relating to the quality of digital services where competition turns on quality rather than price. It is however acknowledged in the Guidelines that this test does have practical difficulties given that it lacks a definitive method for measuring product quality.

Beyond price, the Guidelines list a range of verification criteria including product characteristics, intended use, customer preferences, evidence of past substitution, switching costs and barriers (such as exclusivity arrangements, network effects and regulatory approvals), and price differentiation between customer segments. Supply-side substitutability is treated as a secondary input to market definition relevant only where the competitive response is immediate and effective.

(ii) The relevant geographic market

The relevant geographic market is the physical or digital location where supply and demand for a product or service meet and where competition is similar or homogeneous. Conditions are not homogeneous where undertakings face materially different regulatory, licensing, pricing or fiscal regimes across areas so that such differences justify treating the areas as separate markets. The geographic scope of the relevant market can be national, local or even smaller. Reflecting the Federal Competition Law 2023, the Ministry will treat a matter at emirate level where the undertakings concerned are present only within one emirate and the effects do not extend beyond it, and as national where they operate across, or effects extend beyond, a single emirate. Article 3 of the Federal Competition Law 2023 further extends the regime to activities conducted outside the UAE that affect competition within it.

The same substitution logic is applied geographically. The Ministry’s verification indicators include:

➢ whether a price increase in the focal area would divert demand (or supply) to neighbouring areas;

➢ transportation costs, distance and time (relevant to defining “catchment areas”), particularly for retail and distribution;

➢ customer preferences and purchasing behaviour, including national or local preferences; and

➢ the significance of imports, which may extend the market beyond the UAE only where the associated barriers are shown not to impede timely and effective supply.

Comment

The Guidelines are a welcome step towards transparency and predictability, and their close alignment with established EU methodology will reassure international parties and their advisers. For undertakings contemplating economic concentration applications, a rigorous, evidence-based market definition anchored in the Ministry’s stated tests and verification criteria will be central both to the economic report accompanying any merger control filing and to the assessment of whether the applicable thresholds are met. ■

Proposed Amendments to DIFC Funds Framework

The Dubai Financial Services Authority (DFSA) has issued Consultation Paper 173 (the Consultation Paper), proposing a review of its collective investment fund framework. The proposed changes would replace the current private fund classification framework with a more flexible, disclosure-led model accommodating multi-strategy and hybrid funds.

The Consultation Paper will be of particular interest to current fund managers, fund administrators, persons managing assets and custody providers licensed in the Dubai International Financial Centre (DIFC), as well as to prospective future applicants.

Some notable proposals are:

➢ removal of specialist class categorisations for Qualified Investor Funds (QIFs) and Exempt Funds;

➢ closure of the External Fund Manager (EFM) route for non-DFSA licensed managers;

➢ updated credit fund regime;

➢ expanded definition of what constitutes a “Fund Manager”;

➢ new employee co-investment route; and

➢ initial consultation on tokenisation and long-term investment funds.

Removal of fixed classifications

Specialist class labels (QIFs or Exempt Funds) presently determine the requirements applicable to a given fund. The DFSA considers this ill-suited to hybrid and multi-strategy mandates. It proposes to remove the specialist class requirements for Exempt Funds constituted as money market or private equity funds, and for Exempt Funds and QIFs constituted as credit funds.

Closure of the External Fund Manager route

Subject to meeting certain criteria, fund managers established outside the DIFC are permitted to manage DIFC-domiciled funds without being licensed by the DFSA. The DFSA proposes to withdraw this route. Managers of DIFC funds would need to establish a DIFC presence, transfer the fund to a locally licensed manager, or restructure. The DFSA has indicated that it will engage with current EFMs on funds in existence. Affected managers may wish to begin that engagement early.

New way of categorising credit funds

The DFSA proposes to remove the requirement that 90 percent of a fund’s property be used to provide credit in order for it to be constituted as a credit fund. A fund with a more modest strategy of credit allocation, outside the class today, may therefore be deemed to constitute a credit fund under the proposed framework. The Consultation Paper proposed that the base capital requirement for credit fund managers fall from USD 140,000 to USD 40,000, and that the application and annual renewal fees be removed.

More parties falling under the definition of “Fund Manager”

The current definition of a “Fund Manager” turns on legal accountability to unitholders and contractual obligations to the fund vehicle. The DFSA proposes to amend the Collective Investment Law 2 of 2010 (CIL) so that a person falls within the definition even where not legally accountable directly to unitholders. Existing fund managers would remain subject to the statutory duty to act in unitholders’ best interests, and the DFSA states that investor protection would not be reduced. The practical effect, however, is that persons who are not directly accountable to unitholders may fall within the definition, and therefore also be subject to the regulatory oversight of the DFSA.

Employee investment in funds

The DFSA proposes to permit employees to invest in private funds managed by their employer. Neither the minimum initial subscription – presently USD 500,000 for a QIF and USD 50,000 for an Exempt Fund – nor the net worth test for ‘professional client’ classification would apply, provided employees meet certain criteria. The relief is confined to employees of the fund manager, or of a DFSA-licensed firm authorised to conduct the regulated activity of ‘Managing Assets’, who are directly involved in executing the fund’s investment decisions or advising the manager on them. Investment could also be made indirectly through a vehicle established for that purpose, which would not constitute a “fund” for regulatory purposes, and limited to the same staff.

Next steps

The Consultation Paper requests additional feedback on two specific topics: (i) tokenisation and (ii) long-term investment funds. This may be indicative of the nature of future changes to the DIFC’s funds framework. Comments to the Consultation Paper have been requested to be sent to the DFSA by 7 September 2026.

Managers and applicants should assess whether their strategies, borrowing arrangements, authorisations and risk management documentation remain workable under the revised perimeter.

Afridi & Angell is well placed to assist fund managers, fund administrators and applicants in assessing the impact of the Consultation Paper, in preparing consultation responses, and in undertaking the licensing and restructuring work that may follow. ■

UAE Competition Law-Prescribed Fees Announced

The United Arab Emirates (UAE) Federal Cabinet has now issued Cabinet Decision 105 of 2026 (the Cabinet Decision) On Fees Prescribed for the Implementation of Federal Decree-Law 36 of 2023 Regulating Competition (the Law). The Cabinet Decision sets (for the first time) fees payable for requests filed pursuant to the Law.

Service fees

The following fees have been prescribed:

➢ Exemption request under Article 5 of the Law – restrictive agreements: AED 5,000

➢ Exemption request under Article 6 of the Law – dominant position: AED 5,000

➢ Exemption request under Article 7 of the Law – economic dependency: AED 5,000

➢ Exemption request under Article 8 of the Law – price reduction: AED 5,000

➢ Economic concentration clearance request: 0.02% of the total annual sales value of all establishments participating in the concentration, capped at AED 150,000

➢ Objection to an economic concentration: AED 1,500

➢ Grievance against decisions issued pursuant to the Competition Law: AED 500 (refundable if the grievance is accepted)

Entry into force

The Cabinet Decision shall be published in the Official Gazette and shall come into force 30 days after the date of its publication. The Cabinet Decision was signed by His Highness Sheikh Mohammed bin Rashid Al Maktoum, President of the Council of Ministers, on 12 June 2026 but we await confirmation of the Cabinet Decision’s inclusion in the Official Gazette. ■

UAE Competition Law – Implementing Regulations Issued

In April, the United Arab Emirates (UAE) Federal Cabinet introduced Cabinet Decision 59 of 2026 On the Implementing Regulation of Federal Decree-Law 36 of 2023 Regulating Competition (the 2026 Decision).

Current position

Until the 2026 Decision enters into force on 20 July 2026, the current merger control framework contained in UAE Federal Cabinet Decision 37 of 2014 continues to apply.

Parties contemplating transactions that may constitute an economic concentration should therefore continue to assess notification requirements under the currently applicable framework during this interim period.

Helpfully, the 2026 Decision contains guidance on important procedural aspects of the merger control review process implemented by the Ministry of Economy (the Ministry). These procedural clarifications are discussed further below.

Stages of review

The Ministry’s review process consists of two stages.

Stage 1 – Formal review

During this stage, the Ministry assesses whether the notification is complete and whether all required documents and information have been provided.

Where deficiencies or missing information are identified, the Ministry may request the notifying parties to provide additional information or documentation.

Stage 2 – Substantive review

Once the filing is formally accepted, the substantive review period commences.

The standard review period is 90 days, which may be extended by an additional 45 days where necessary. The Ministry has also indicated that an expedited review process may be available in cases where the transaction does not raise competition concerns and the filing is complete.

The Ministry may hold meetings with the parties during the substantive review stage in order to clarify particular aspects of the transaction or relevant market dynamics.

Required documents

The notification must be accompanied by various supporting documents, including:

➢ constitutional documents of the relevant parties, duly certified;

➢ draft transaction agreement or relevant transaction documents;

➢ audited financial statements for the last two financial years of the relevant parties and their branches, duly certified;

➢ details of the shareholders or partners of each relevant entity and their ownership interests; and

➢ a report addressing the economic aspects of the transaction, including its anticipated positive effects on the relevant market and any proposed measures intended to mitigate potential adverse competitive effects.

The Ministry has further indicated that submissions marked as “confidential” will be treated confidentially, provided that non-confidential summaries are also submitted.

When is a notification required?

Entities involved in mergers, acquisitions, or other forms of economic concentration (i.e. any transaction resulting in the full or partial transfer of ownership or usufruct rights in assets, rights, stocks, shares, or obligations, granting an establishment or group of establishments direct or indirect control over another) will be required to file an application with the Ministry if either of the following thresholds is met:

1. Turnover threshold: this threshold was originally included as a trigger for the requirement to make a merger clearance filing pursuant to the introduction of the new Federal Competition Law in late 2023 however, the turnover amount was not at that time clarified. The Cabinet Decision 3 of 2025 on the Ratios Related to the Implementation of Federal Decree Law 36 of 2023 Regulating Competition provides that the total annual sales of the relevant entities in the “relevant market” within the UAE must exceed AED 300 million (approx. USD 81.7 million and EUR 79.2 million) during the previous fiscal year; or

2. Market share threshold: the total market share of the relevant entities exceeds 40% of total sales in the “relevant market” within the UAE during the previous fiscal year.

The Ministry’s new notification and review process is expected to become operational during the second half of July 2026, following the entry into force of the 2026 Decision. ■

Capital of Capital: Inside the UAE’s Art Law Framework

The world’s most ambitious cultural art district is rising on Saadiyat Island, as is the legal framework behind it.

Dubbed the “capital of capital”, Abu Dhabi is home to the only Louvre museum outside of France. It is situated within the Saadiyat Cultural District alongside the newly opened Zayed National Museum and the Natural History Museum. Before 2027, this exclusive list of neighbours will be joined by Guggenheim Abu Dhabi, which is expected to be the largest Guggenheim museum worldwide. Frieze is set to bring its internationally acclaimed art fair to the Emirate in November of 2026.

This is indicative of the scale of capital inflow into the UAE – and particularly Abu Dhabi – in recent years, as well as the UAE’s positioning of arts and culture as a matter of national importance. Perhaps less visibly, it may also be connected to the enactment of UAE Federal Decree-Law 29 of 2024 on Empowering the Arts Sector (the Art Law).

The Art Law creates and regulates “Art Institutions”, which are defined as non-profit legal entities licensed to engage in activities related to the arts sector. “Art” is loosely defined as a product of human creativity and talent that translates emotions and inner sentiments or expresses perceptions, whether in an audible, visual or written form. Activities related to antiquities are not covered by the Art Law.

It is important to note that Art Institutions, including museums, foundations and similar institutions, must be non-profit in purpose. Ancillary revenue generating activities – including cafes, gift shops and ticketed programming – may be permitted to operate, provided that surpluses flow back into the institution. Galleries, dealers, advisories and other commercial entities are regulated by different UAE laws (including those applicable in its various free zones) and warrant separate analysis. They are also not able to benefit from certain tax, customs and import/export exemptions that may be available to Art Institutions under the Art Law. Regardless of the underlying objective, unless appropriately licensed, any entity seeking to engage in art activities (whether for-profit or not) must be appropriately licensed in the UAE.

Interestingly, the Art Law moves to designate Art Institutions as regulated entities subject to their own licensing, funding, corporate governance, taxation, profit distribution, insurance, intellectual property and reporting rules. Both the asset (“Art”, which is given a legal definition, including appropriate exclusions) and the market on which it operates (whether through non-profit “Art Institutions” or other commercial entities) are now brought within the realm of a defined regulatory framework and subject to designated licensing rules and governing authorities.

All Art Institutions must appoint a director who reports to a non-remunerated, non-permanent board of trustees. Subject to the board of trustees’ oversight, the director will be responsible for preparing internal annual budgets and accounts, as well as submitting annual budget summaries, performance evaluation reports and final accounts to the UAE Ministry of Culture. The Art Law also contains rules as to the eligibility of directors, trustees and founders. The requirements that apply to regular commercial entities are less stringent than those that apply to Art Institutions.

Certain UAE free zones, in addition to tax incentives, also offer art-grade storage facilities. Artworks stored within certain free zones may be transacted without physically moving them, reducing logistic, fiscal and customs pressure. The Dubai Free Port, for example, now contains a super vault combining world-class custody and security services with efficient airside customs exemptions. This is one of only a few in the Middle East.

Collectively, these measures have contributed to positioning the UAE as a jurisdiction that not only promotes arts and culture, but also allows professionals and enthusiasts alike to participate predictably in the multi-billion-dollar global art market – recognising that art is a matter of enjoyment and sentimental value as much it is a regulated asset class.

Nevertheless, follow-on legislation is expected to be implemented in the near term that will further elaborate upon the requirements set out in the Art Law. These developments are expected to affect commercial entities as well as non-profit Art Institutions.

Museums, galleries, dealers, patrons, advisors and collectors are therefore encouraged to monitor forthcoming developments, as well as their own activities in the UAE. This should allow them to assess how they may be affected by a market that is being regulated at the same pace as growing.

Afridi & Angell is in its sixth decade at the forefront of legal practice and is well placed to work with collectors, institutions, patrons and enthusiasts to navigate the art landscape in the UAE – from licensing and structuring to acquisitions, tax, and the finer details that come with each. ■

The New UAE Civil Code: Contract Formation, Consent, and Good Faith

The UAE’s new Civil Transactions Law (the New Code), coming into force on 1 June 2026, fundamentally changes the legal landscape for anyone doing business in the UAE — and the consequences of getting it wrong could be significant. For the first time, the law imposes express statutory obligations on parties engaged in pre-contractual negotiations: negotiate in bad faith, withhold information that is material to the other side’s decision, or misuse confidential information obtained during the process, and you may be liable even where no contract is signed. In short, contractual risk in the UAE now begins well before the contract is concluded, and businesses that continue to treat the negotiation phase as consequence-free do so at their peril.

1. What has changed

The New Code introduces, for the first time, an express statutory framework regulating party conduct at the pre-contractual stage. The New Code:

➢ requires that the proposal, conduct, and termination of negotiations be carried out in good faith (Article 121(1));

➢ imposes liability for negotiating, or terminating negotiations in bad faith (Articles 121(3) and 121(4));

➢ obliges the disclosure of information that is of “decisive importance to the other party’s consent” (Decisive Information) (Articles 122(1) and 122(2));

➢ allocates the burden of proof such that the party alleging concealment must prove it, while the other party must prove disclosure (Article 122(3));

➢ provides that clauses seeking to limit, waive, or exclude the obligation to disclose Decisive Information are null and void, and grants the aggrieved party the right to seek annulment of the contract (Article 122(4)); and

➢ imposes liability for the unauthorised use or disclosure of confidential information obtained during negotiations or through the contract (Article 123).

Significantly, the New Code also regulates circumstances where a contract is not formed. The New Code provides that:

➢ negotiations do not, in themselves, oblige the parties to conclude a contract (Article 121(2));

➢ a party acting in bad faith may be liable for the actual damage caused to the other party, but does not extend to lost opportunities or lost profits (Article 121(3)); and

➢ clauses seeking to limit, waive, or exclude the obligation to disclose Decisive Information are null and void (Article 122(4)).

2. What was the position before

The current (and soon to be replaced) Civil Code does not contain an equivalent express statutory regime dealing with pre-contractual negotiations. The issue therefore fell to be addressed through general principles and case precedent rather than by a dedicated legislative framework.

Previously, Dubai Court of Cassation case no. 267/2016 (Civil) treated negotiations as a factual act which did not, by itself, create legal obligations. A party was generally free to withdraw from negotiations. Liability could nevertheless arise where the withdrawal was accompanied by fault, in which case the liability was treated as tortious (i.e. an Act Causing Harm as defined in the Civil Code) rather than contractual.

Similarly, while concepts such as misrepresentation, deceit, and bad faith were not foreign to UAE law, the current Civil Code does not contain a statutory duty to disclose material information during negotiation. Nor does it expressly address the unauthorised use or disclosure of confidential information obtained during negotiations as part of a dedicated pre-contractual framework.

The prior position was therefore less structured. Pre-contractual conduct sat in a grey area governed by broad principles, with less certainty as to the source, content, and limits of liability.

3. Why the change matters

Litigation risk

Parties may no longer assume that, absent a signed contract, the negotiation phase is inconsequential. If a party negotiates without genuine intention, withdraws in bad faith, withholds information of decisive importance, or misuses confidential information obtained during negotiations, there is now a clearer statutory route by which liability may be advanced. This may be particularly relevant in failed transactions where one party has incurred material costs in reliance on negotiations that later collapse.

Article 122(3) is also likely to be important in practice. Once concealment is alleged, the other party will need to prove disclosure. This is likely to increase the significance of contemporaneous records of what was disclosed, when, and to whom.

Therefore, these provisions are likely to generate disputes regarding:

➢ what amounts to “bad faith” in the negotiation context;

➢ what information is sufficiently “decisive” to require disclosure;

➢ when ignorance or reliance may be presumed;

➢ how actual loss is to be proved and distinguished from non-recoverable expectation loss; and

➢ whether certain types of differently worded contractual clauses can be considered as limiting, waiving or excluding obligations to disclose material and decisive information; and

➢ the extent to which entire agreement clauses, non-reliance wording, or clauses providing that the contract supersedes prior negotiations may affect claims based on pre-contractual conduct, without excluding mandatory statutory duties under the New Code.

In high-value transactions, this is likely to become a live area of litigation. The negotiation process itself may now become part of the pleaded case, and part of the evidentiary battleground.

Contract drafting impact

As clause limiting, waiving, or excluding the duty to disclose material and decisive information are null and void under the New Code, parties will need to review how they use entire agreement clauses, non-reliance wording, disclaimers, and other standard boilerplate protections. Such clauses may still serve a legitimate function, but they cannot override mandatory obligations imposed by the New Code.

The same applies to confidentiality. Many commercial parties rely on stand-alone NDAs, confidentiality undertakings, or restricted circulation protocols. Article 123 appears to add a statutory layer to that position. That increases the importance of ensuring that confidential information is properly identified, access is controlled, and negotiation documents are prepared on the assumption that misuse of information may later attract legal consequences.

Judicial discretion

Concepts such as good faith, decisive information, presumed ignorance, justified reliance, and unauthorised use of confidential information are inherently fact-sensitive. Their practical content will depend on judicial interpretation. The courts will likely be required to decide where legitimate commercial behaviour ends and actionable bad faith begins.

This is especially so in cases involving partial disclosure, strategic silence, exploratory negotiations pursued for informational advantage, or withdrawals engineered at a late stage after one party has incurred material time and cost.

The availability of annulment as a remedy for breach of the disclosure obligation is also likely to add weight to these disputes, particularly where the allegedly undisclosed information materially affected the other party’s decision to enter into the contract.

The New Code therefore gives the courts a more explicit mandate to scrutinise the contracting process itself, not merely the final written agreement.

4. Practical takeaways

Do’s

➢ approach negotiations on the basis that the pre-contractual phase may now carry direct legal consequences, and that entire agreement clauses, non-reliance wording, disclaimers, and other standard boilerplate protections may not have the same effect that they previously did;

➢ consider carefully whether information in your possession is of material and decisive importance to the counterparty’s consent and document analysis made in this regard;

➢ document negotiation stages, assumptions, reservations, and qualifications clearly;

➢ use confidentiality agreements and internal access controls when sharing sensitive information; and

➢ consider using structured disclosure processes, including disclosure schedules, tracked Q&A processes, and maintain records of disclosed materials.

Don’ts

➢ assume that the absence of a signed contract eliminates legal risk;

➢ rely on broad disclaimers or non-reliance wording to exclude pre-contractual exposure;

➢ use negotiations to obtain confidential information without a genuine transaction purpose; or

➢ terminate negotiations in a manner that could later be characterised as abusive, misleading, or opportunistic.

For businesses and their advisers, the practical message is clear. Contractual risk may now arise well before signature. Parties should therefore negotiate, disclose, and document accordingly. ■

Amendments to the UAE Federal Companies Law – Key Changes

The UAE recently introduced Federal Decree-Law 20 of 2025 (the CCL Amendment) amending several provisions of Federal Decree-Law 32 of 2021 regarding commercial companies (the Companies Law). Certain key provisions of the Companies Law have been amended in order to: give clarity on its scope; introduce common law principles and rules surrounding non-profit companies, as well as flexibility in structuring shareholding arrangements. These amendments came into effect on 15 October 2025.

Applicable to free zones

The CCL Amendment provides that the provisions of the Companies Law apply to branches or representative offices of free zone companies established on mainland UAE (i.e. outside of the free zone areas). The Companies Law does not apply to companies incorporated in UAE free zones where the relevant free zone’s laws and regulations contain specific provisions disapplying the provisions of the Companies Law.

Most free zones of the UAE have their own laws and regulations. However, if a free zone’s laws and regulations do not contain specific provisions excluding the provisions of the Companies Law, the provisions of the Companies Law may apply in addition to its own laws and regulations. Furthermore, there are certain free zones in the UAE that do not have their own laws and regulations and, in those cases, the provisions of the Companies Law may apply. When addressing any corporate law issues, it is crucial for a free zone company to consider if the Companies Law will apply to that free zone company and the impact of those provisions on its company.

The CCL Amendment re-affirms that free zone companies are considered to hold the nationality of the UAE. This aspect is important from the perspective of UAE corporate tax and double taxation treaties which may be entered into between the UAE and other countries.

Flexibility in shareholding and share transfers

One of the most notable changes is the introduction of shareholder-rights mechanisms. Limited liability companies (LLCs) and private joint stock companies may now include drag-along and tag-along rights in their Memoranda of Association and by-laws. Further, the CCL Amendment provides for a structured succession approach where, in the event of a shareholder’s death, remaining shareholders have a right of first refusal over the shares of the deceased shareholder, with valuation determined, by agreement, with the legal heirs or by the competent court (in the case of non-agreement). The Memoranda of Association and by-laws must include provisions regarding the right of first refusal.

Classes of shares

The CCL Amendment now permits the issuance of different classes of shares. These shares may, for example, have different rights and restrictions in terms of value, voting rights, redemption rights, priority in the distribution of profits or liquidation, etc. Memoranda of Association and by-laws of LLCs will be required to have specific provisions regarding the issuance of different classes of shares. The Cabinet will determine the categories of different classes of shares and set out the respective conditions of each category of those shares.

Companies looking at restructuring their shareholding and issuance of different classes of shares would be advised to wait for the issuance of further guidance by the Cabinet. It is worth noting that there are free zones in the UAE where the issuance of different classes of shares is currently permitted.

Re-domiciliation and cross-jurisdiction mobility

The CCL Amendment introduces the concept of re-domiciliation of companies. This new option permits a company to move its corporate registration from one jurisdiction to another without dissolving the company or creating a new legal entity. Subject to the satisfaction of certain criteria, a company may transfer its jurisdiction of incorporation from one Emirate to another or from a free zone to mainland or vice-versa.

The provisions are silent on foreign companies transferring their jurisdiction of incorporation to mainland UAE. However, there are certain free zones in the UAE where a foreign company can transfer its domicile.

Non-profit companies

The CCL Amendment specifically provides for the incorporation of non-profit companies. The net profits of a non-profit company are required to be reinvested in the company in order to achieve the company’s objectives. The profits cannot be distributed to its partners or shareholders. The Cabinet is expected to issue further clarification regarding the prescribed purposes of such non-profit companies as well as regulations governing such non-profit entities.

Improved governance mechanism

The CCL Amendment introduces a more expedient approach for resignation, removal, and continuity rules for mainland LLCs’ managers. A decision on a manager’s resignation must be taken by the shareholder(s) within 30 days of the submission of such resignation otherwise the manager’s resignation will be considered automatically effective. This period has been reduced from the initial 40 days to 30 days.

It remains to be seen if the local licensing authorities will record a resignation by a manager and remove a manager’s name from an LLC’s license in the absence of an appointment of a replacement by the shareholders.

Conclusion

The CCL Amendment is important in that it expands the scope of mainland LLCs and offers greater flexibility.

Previously, when structuring a joint venture entity with complex shareholding arrangements, shareholders tended to opt for an offshore jurisdiction or free zone for ease of doing business and flexibility. Now however, the CCL Amendment provides the option to structure these same arrangements locally without the need for a holding company structure. It will be interesting to observe how these provisions are practically implemented by local authorities. ■

UAE Introduces New Humanitarian and Sector-Specific Visa Categories

The UAE continues to reform and expand its immigration framework with the issuance of Federal Administrative Decision 74 of 2022 as amended by Federal Administrative Decision 51 of 2025 (the Decision).

This latest round of reforms introduces new visa categories, clarifies and re-evaluates eligibility conditions, and introduces more flexible humanitarian pathways for resident visas.

What’s New

1. Residence on Humanitarian Grounds Broadened

The UAE now offers a renewable one-year residence permit to foreign nationals from countries affected by war, natural disasters, or unrest without the need for a local sponsor.

Applicants must already be present in the UAE and meet certain housing and financial requirements at the time of application. While permits may be renewed after the initial first-year period, they will be automatically cancelled in the event the permit holder travels outside the UAE.

The Decision also expands family reunification options, allowing citizens and residents to sponsor a broader group of relatives, including parents and siblings. The number of individuals that can be sponsored is dependent on the sponsor’s monthly income, which should be at least AED 10,000 to sponsor up to five individuals and AED 15,000 per month to sponsor six or more. Sponsors are also required to evidence adequate housing for their relatives.

Notably, the Director General of Identity and Foreigners Affairs has the discretion to waive the financial and housing requirements set out in the Decision.

Another key update is that widows and divorcees may apply for residence for themselves and their children if they were resident in the UAE and sponsored by their husband at the time of the death or divorce. Applications must be made within six months of the death or divorce and be supported by documents such as the certificate of marriage, certificate of death or divorce, proof of sponsorship and evidence of financial solvency and adequate housing.

2. New Visa Categories to Drive Economic Activity

The reforms also introduce several new visa categories to support different industries:

i. Business Exploration Visa – For foreigners seeking to explore business opportunities in the UAE. The applicant must demonstrate financial solvency and be engaged in the relevant activity through a foreign business or as a qualified professional.

ii. Event Visa – For those attending exhibitions, festivals, or seminars. The visa must be sponsored by the host of the event.

iii. Entertainment Visa – For visitors participating in commercial gaming activities, sponsored by an entity fully licensed to organise commercial gaming activities in the UAE.

iv. Cruise Tourism Visa – A multiple-entry visa for passengers aboard cruise ships as well as permits for cruise ship workers.

v. AI Specialist Visa – Single or multiple-entry visas may be issued to professionals specialising in the field of artificial intelligence sponsored by an entity that specialises in the field of technology.

vi. Revised Truck Driver Visa – Visas for foreign truck drivers issued on a single or multi-entry basis. Applicants must be sponsored by licensed shipping or transport companies and hold health insurance.

These visa categories reflect the UAE’s focus on innovation, tourism, and logistics in furtherance of its economic and developmental goals.

3. Visa-on-Arrival Access for Indian Nationals

The recent reforms also facilitate easier entry for Indian nationals and their accompanying family members, who may now obtain visas on arrival in the UAE if their passports are valid for at least six months and they hold a valid visa, residence permit, or green card issued by the United States of America, the United Kingdom, the European Union, Canada, Japan, Australia, New Zealand, Singapore, or South Korea.

4. Grace Periods and Validity Extensions

The Decision also introduces more flexible post-expiry grace periods, which allow residents to continue to stay in the country without incurring financial penalties after their residence permits have expired. These include a 180-day grace period for Golden, Green (issued to self-employed, skilled professionals and freelancers) and Blue (issued for individuals who have made significant contributions to the protection of the environment) visa holders, widows, divorcees and graduates. A 90-day grace period is available for skilled workers and property owners and a 30-day grace period for all other categories of visa holders.

Family members of Golden, Green and Blue visa holders are also permitted to retain their residency even if they remain outside the UAE for more than 180 days. The UAE generally requires residence permit holders to enter the country every 180 days.

Why It Matters?

The Decision reflects the UAE’s forward-looking immigration policy, commitment to harmonising talent attraction, humanitarian sensitivity, and administrative ease. In a world grappling with displacement, technological transformation, and evolving mobility norms, the UAE continues to position itself as both a safe haven and a hub of opportunity. ■

DIFC Variable Capital Company Regime

Introduction

In June 2025, the Dubai International Financial Centre Authority (DIFCA) published Consultation Paper No. 2, setting out a proposed regulatory framework for the introduction of Variable Capital Companies (VCCs) in the DIFC (VCC Regulations).

The VCC Regulations (once issued) are expected to provide for a flexible corporate vehicle for proprietary investments and are particularly well suited to private equity firms, family offices and high net worth individuals.

Overview: what is a Variable Capital Company (VCC)

A VCC is a private limited company that may be established as either a standalone entity or an umbrella structure housing multiple entities known as “cells”, with the idea being that the assets and liabilities of each cell will be ring-fenced from each other. The VCC acts as a platform for the underlying cells, centralising compliance, reporting and management functions. A distinguishing feature of a VCC is its capital flexibility, which, in contrast to traditional fixed capital companies, allows for dividends to be paid out of capital and for its capital to adjust in line with its net asset value.

Segregated Cells vs Incorporated Cells

A VCC can be established with one of two different types of cells: (i) segregated or (ii) incorporated. A VCC cannot be established with both types of cells. A segregated cell will not have a separate legal personality from the VCC, and all segregated cells (and the VCC) shall together form a single body corporate. By contrast, each incorporated cell shall be a standalone body corporate, distinct from every other incorporated cell and from the VCC itself, with each incorporated cell also having its own set of articles of association. It should be noted that, in either case, the VCC will not itself own shares in an incorporated cell and accordingly there shall be no parent/subsidiary relationship.

Whether a VCC is established with segregated cells or incorporated cells will depend on the investment (and other) objectives of the VCC. While segregated cells are anticipated to be simpler, more cost-efficient and to entail less administrative burden, incorporated cells are expected to be more easily “detached” from the VCC structure, making them the preferred option where there is a high likelihood of a future restructuring.

Flexible Share Capital

The share capital of a VCC is proposed to be equal to its net asset value (NAV). Accordingly, the share capital of a VCC shall be variable and expand or contract in line with the NAV of the VCC. This is in contrast to a traditional fixed capital company whose share capital is equal to the nominal value of each share multiplied by the number of shares issued. The payment of distributions to shareholders is also tied to NAV, allowing more flexibility when compared to fixed capital companies which permit such payments to be made from realised profits only.

VCCs are also expected to be simpler from a corporate governance perspective. The issuance and buyback of shares and the payment of distributions can all be authorised by the board of directors, negating the usual requirement for shareholder approval.

Other Key Features

> Qualifying requirements: the VCC and all of its cells must satisfy the DIFC Registrar of Companies (the Registrar) that either it is: (i) proposed to be controlled by GCC Persons, Authorised Firms or DIFC Registered Persons; (ii) is being established to hold GCC Registerable Assets; or (iii) is being established for a Qualifying Purpose. Examples of Qualifying Purposes include aviation, crowdfunding, intellectual property, maritime structures and so called “Secondaries Structures”, which have been newly introduced by the VCC Regulations as a Qualifying Purpose and are defined as: “a corporate structure established for the purpose of facilitating the transfer of investment assets, partnership interests or Securities from primary investors to secondary investors or for any subsequent transfer”;

> Share register: A VCC must keep a share register in respect of itself and each cell. A VCC may appoint a “Register Keeper” which must be a corporate service provider or someone approved by the Registrar as suitably experienced;

> Duties and liabilities of officers: the usual directors’ duties under DIFC Law 5 of 2018 shall apply to a VCC and directors of any incorporated cells, with additional duties particular to the unique legal and structural nature of a VCC.