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As part of the United Arab Emirates’ continued efforts to strengthen its legislative environment and reinforce its position as a leading legal and business hub, the State has enacted Federal Decree-Law No. (25) of 2025 on the Civil Transactions Law, which is scheduled to enter into force on 1 June 2026.

The new law represents a significant step towards modernising the legal framework governing civil transactions, ensuring its alignment with evolving local realities, international standards, and established judicial practice. It introduces a number of important reforms that will have a direct impact on individuals, businesses, and the broader commercial landscape. The most notable of these developments are outlined below.

Empowering Individuals and the Youth

One of the most significant reforms introduced by the new law is the reduction of the age of majority to 18 years, instead of 21 years under the repealed law. This change enables individuals to exercise full civil capacity at an earlier stage and aligns civil responsibility with criminal responsibility under a unified standard. In the same spirit, the law reduces the age at which a minor may apply for judicial authorization to manage their own funds from 18 years to 15 years, reflecting a clear policy direction aimed at empowering emerging young talents and enabling earlier participation in financial and business activities.

Greater Flexibility in Company Ownership and Structure

The new law expressly permits the establishment and ownership of a company by a single person. While this concept is already recognised for commercial companies under the Commercial Companies Law, its express inclusion in the Civil Transactions Law confirms the possibility of establishing and owning a civil company by a single individual, offering greater flexibility in structuring non-commercial ventures.

The law also introduces an express provision governing the dissolution of an indefinite-term company upon the withdrawal of a partner, subject to notification of the remaining partners and the absence of fraud or intent to cause harm. Importantly, and in order to preserve economic continuity, the law allows the remaining partners to agree on the continuation of the company following such withdrawal. Where the company consists of only two partners, the remaining partner may continue the company alone, but only in cases where the law permits conversion of the subject company as a single-person company.

Clear Limits on Managers’ Authority upon Liquidation

In clear and strict terms, the law provides that the authority of the company manager terminates immediately upon dissolution of the company. Any acts carried out thereafter expose the manager to personal liability for the obligations arising from such acts, reinforcing accountability and protecting creditors and stakeholders.

Regulation of Professional Companies

The new law introduces a comprehensive regulatory framework for professional companies, permitting their establishment between licensed professionals and foreign professional companies, thereby encouraging the exchange of national and international expertise and enhancing professional practice.

It also allows professional companies to be established between licensed professionals and other natural persons who are not practitioners of the relevant profession. However, due to the special nature of professional companies, the law prohibits a partner from being a founder or partner in more than one professional company, or from working for another professional company, in order to prevent conflicts of interest. The law further establishes personal liability for partners in respect of their professional errors towards the company and the other partners, while maintaining the professional company’s liability towards third parties for errors committed by its partners.

Distinction Between Civil and Commercial Companies

The legislator has codified a clear and consistent criterion for distinguishing between civil companies and commercial companies in line with the recent precedents issued by the higher courts of UAE. A company is deemed civil if its activity is non-commercial, and commercial if its activity is commercial, or if it adopts one of the legal forms of commercial companies even where its activity is non-commercial. In such cases, the commercial company remains subject to the provisions of the Commercial Companies Law.

Addressing Exceptional Circumstances and Contractual Imbalance

In response to the recent global issues such as the COVID-19 pandemic and inflationary pressures, the new law specifically addresses the issue of contractual imbalance between contractors and employers caused by exceptional circumstances beyond the parties’ control. Despite the subject mechanisms being available under the previous law, courts are now expressly and specifically empowered to restore contractual equilibrium through a range of measures, including extending the performance period of a contract for works, increasing or reducing remuneration, or terminating the contract. Inclusion of an expressly clarified provision in this regard provides legal certainty and is expected to positively impact the construction and real estate development sectors.

Strengthened Protection in Guarantees and Suretyship

Unlike the previous law, which allowed creditors to sue either the debtor or the guarantor in any order, the new law prohibits the creditors to pursue the guarantor alone before pursuing a claim against the principal debtor first, provided that the guarantor invokes this defence. The law further prohibits enforcement against the guarantor’s assets until and unless the debtor’s assets have first been exhausted subject to the guarantor guiding the creditor to the debtor’s assets, except where the guarantor is jointly liable with the debtor which suggests that the new law does not prevent the creditor from jointly pursuing a claim against both the debtor and the guarantor together. This approach reflects principles of fairness and legal logic by ensuring that liability is pursued at its source before burdening the guarantor.

Enhanced Protection for Minors and Consumers

The law amends the rule governing financial transactions entered into by a discerning minor that involve both benefit and detriment, such as sale and purchase agreements. Such transactions are now voidable in the minor’s interest, rather than being suspended pending guardian approval, thereby offering greater protection against exploitation.

Consumer protection has also been strengthened by extending the period for discovering hidden defects in sold goods to one year from the date of receipt, instead of six months under the repealed law.

Increased Transparency in Property Rights

A new provision regulates the right of Musataha which grants a person the right to construct a building on land owned by another, requiring its registration with the competent authorities as a condition of validity. Failure to register renders the right null and void, enhancing transparency in property records and protecting rights holders from fraud and forgery.

In addition, the law introduces a new type of claim titled “action to stop new works”, enabling possessors of real property to seek the suspension of works that threaten their possession.

While time will ultimately determine how these provisions are interpreted and applied in practice by the courts and competent authorities, the new Civil Transactions Law reflects a progressive and well-balanced legislative vision. It reinforces the UAE’s commitment to legal certainty, economic resilience, and social development by modernising key civil law principles and responding to contemporary legal and commercial challenges. Also, by introducing greater flexibility in company structures, strengthening protections for minors, consumers, and guarantors, addressing contractual imbalance arising from exceptional circumstances, and lowering the age of majority to empower youth to participate more actively in economic life, the law further consolidates the UAE’s position as a leading destination for investment, business, and legal excellence.