Published: 2026-06-01
On 1 June 2026 the United Arab Emirates put into force Federal Decree-Law No. 25 of 2025, the largest overhaul of its civil and contract law since the original Civil Code of 1985. For founders, investors and families building a presence in the UAE, this is not an abstract legal update. It reshapes how contracts are formed, how companies can be owned, and how partners enter and leave a business. The direction is clear: more legal certainty, and a more predictable environment for capital. This guide explains what changed and why it matters when you set up a business in the UAE.
Why a new Civil Code, and why now
The 1985 Civil Code served the UAE for four decades, but the economy it governed has changed beyond recognition. Today the country hosts global funds, family offices, technology companies and a fast-growing base of relocating entrepreneurs. Federal Decree-Law No. 25 of 2025 modernises the rules that sit underneath every commercial relationship: contracts, obligations, ownership and the mechanics of ending a partnership. According to analysis by Bracewell LLP, it represents the most significant reform of civil and contract law the country has seen since the original code. The aim is to align the legal framework with the maturity of the UAE economy and to raise its attractiveness to international investment.
Good faith enters the negotiating room
Perhaps the most consequential change is the recognition of a duty of good faith at the pre-contractual stage, meaning during negotiations, before any agreement is signed. In practice this signals that parties are expected to negotiate honestly and not to mislead or abuse the process. For anyone entering a joint venture, a shareholders’ arrangement or a supplier relationship in the UAE, that is a meaningful protection. It reduces the risk of a counterparty walking away in bad faith after you have committed time and money, and it gives contracts a firmer foundation from the very first conversation.
The single-person company is recognised
The reform formally recognises the single-person company, a company owned by one individual. This matters a great deal to the profile of client Atlant Capital works with every day: the solo founder, the investor structuring a holding vehicle, the family member who needs a clean, wholly owned entity. Recognising single-person ownership in the civil framework removes ambiguity and confirms that you do not need to manufacture additional shareholders simply to hold a company. It supports cleaner ownership, simpler governance and clearer succession planning.
Clearer exits and cleaner liquidation
Businesses do not only start, they also restructure, split and wind down. The new code introduces clearer rules on how a partner exits a company and how a company is liquidated. Ambiguity around exits is one of the most common sources of disputes between founders and investors, so codifying the process is a practical benefit. When the path out is predictable, the decision to go in becomes easier. Investors can price risk more accurately, and partners can plan their eventual separation without fearing a protracted fight. Note that the finer procedural detail will be applied through practice and any implementing regulations, so specific mechanics should be confirmed case by case.
What this means for setting up in the UAE
Taken together, these changes point in one direction: greater legal certainty. Certainty is the currency that international investors care about most. A contract that is harder to abuse, an ownership structure that is formally recognised and an exit that is clearly mapped all lower the perceived risk of doing business. For a founder deciding between jurisdictions, that predictability is a genuine advantage. It also complements the UAE’s existing strengths, its tax environment, its free zones and its connectivity, by strengthening the legal bedrock beneath them.
- Contracts now carry a duty of good faith from the negotiation stage, so document your discussions and act transparently.
- A single-person company is formally recognised, useful for solo founders and holding structures.
- Partner exit and liquidation rules are clearer, so build exit terms into your agreements from day one.
- The reform took effect on 2026-06-01 and applies broadly across civil and contractual matters.
- Detailed procedures may be refined through implementing regulations and practice, so confirm specifics for your case.
How Atlant Capital can help
Legal reform is only an advantage if you structure your business to use it. Atlant Capital helps founders and investors set up companies in the UAE with ownership, contracts and exit terms designed around the new framework from the start. Whether you are forming a single-person company, drafting a shareholders’ arrangement or planning how partners will one day exit, we translate the rules into a structure that fits your goals. Explore our services or browse our business guides to see how we support each stage of setting up and running a company in the UAE.
The takeaway
Federal Decree-Law No. 25 of 2025 is more than a legal refresh. By embedding good faith in negotiations, recognising the single-person company and clarifying how partners exit and how companies are wound down, the UAE has raised the certainty and investor appeal of its business environment. For anyone weighing a move to the UAE, the message is reassuring: the ground you build on is firmer than ever.
