TRW & Co · Disputes & Arbitration
Shareholder Disputes in the UAE
Shareholder disputes in the UAE arise over control, deadlock, dividends, information and exit. The remedies depend on whether the company is onshore, in a free zone or in the DIFC or ADGM, and they changed with the 2025 Commercial Companies Law amendments and the Civil Transactions Law in force since 1 June 2026. This guide explains the options and the steps.
Key pointSince the 2025 amendments, drag-along and tag-along rights are recognised for LLCs but remain subject to statutory pre-emption, so a shareholders' agreement without a pre-emption waiver can leave an exit right unenforceable.
At a glance
Share classes for LLCs
Federal Decree-Law No. 20 of 2025 allows LLCs to issue share classes with different economic and voting rights, changing how control disputes are framed.
Deadlock board route
Where shareholders cannot agree board appointments, the emirate's licensing authority may appoint independent non-shareholder directors for up to one year.
Drag and tag rights
The 2025 amendments recognise drag-along and tag-along rights in constitutional documents, but in LLCs their exercise remains subject to pre-emption.
New civil code
Federal Decree-Law No. 25 of 2025 has applied since 1 June 2026, restating partnership rules on withdrawal, continuation and dissolution.
Unfair prejudice remedy
DIFC and ADGM company laws let shareholders petition for relief against unfairly prejudicial conduct, with a buy-out at fair value the usual outcome.
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What shareholder disputes in the UAE involve
Shareholder disputes in the UAE are conflicts between the owners of a company, or between owners and the people running it, about control, money, information or exit. They range from a two-founder LLC where one partner has stopped cooperating, to a joint venture deadlocked on budget, to a minority investor who believes the majority is diverting value through related-party contracts.
Most of these disputes begin as commercial disagreements and become legal ones when someone blocks a resolution, withholds dividends, removes a manager, refuses to sign at the licensing authority or tries to sell. Because many UAE companies need shareholder or manager signatures for routine licensing and banking steps, a dispute can freeze the business long before anyone files a claim.
The applicable rules depend on where the company is established. Mainland and most free zone companies follow the Commercial Companies Law and their constitutional documents, with disputes going to the onshore courts or arbitration. Companies in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) are governed by English-style company laws with remedies such as unfair prejudice petitions, heard in those centres' courts.
The legal framework for shareholder disputes in the UAE
The Commercial Companies Law and the 2025 amendments
Mainland companies are governed by the Commercial Companies Law (Federal Decree-Law No. 32 of 2021), which sets the rules on general assemblies, managers' and directors' duties and liability, share transfers and pre-emption, and dissolution. The relationship between LLC partners is largely contractual, so the memorandum of association and any shareholders' agreement matter as much as the statute.
Federal Decree-Law No. 20 of 2025, issued in October 2025, amended the law in ways that directly affect disputes. LLCs may now issue different classes of shares with different economic and voting rights. Drag-along and tag-along rights are expressly recognised in constitutional documents, although in an LLC their exercise remains subject to the statutory pre-emption regime. Constitutional documents can also deal with succession, allowing remaining shareholders or the company to acquire a deceased shareholder's shares, with valuation by court-appointed experts if the price is disputed.
The amendments also address deadlock at board level. Where shareholders cannot agree on board appointments, the licensing authority of the relevant emirate may appoint independent, non-shareholder directors for up to one year. That is a significant new lever for a frustrated shareholder, and a reason to keep governance documents current.
The new Civil Transactions Law
Federal Decree-Law No. 25 of 2025 replaced the 1985 Civil Transactions Law on 1 June 2026 and applies to companies where the Commercial Companies Law is silent. Its partnership provisions address a partner's withdrawal from an indefinite-term company, the remaining partners' ability to agree to continue, and the end of a manager's authority on dissolution, after which the manager acts at personal risk. Under the old code, courts were divided on whether a majority could ask the court to expel a partner from an LLC, so precedent from before June 2026 should be read with care. Official texts are on the UAE Legislation portal.
Free zone companies
Companies in free zones other than the DIFC and ADGM are governed by the relevant free zone's companies regulations, which are often modelled loosely on common-law concepts but generally lack a developed unfair prejudice remedy. Their disputes usually go to the onshore courts of the emirate or to arbitration. The free zone authority's own rules on share transfers, director changes and licence renewals can become pressure points, because a refusal to sign may stall the licence. Check the authority's procedures early, as they often determine how quickly a resolution can be implemented.
DIFC and ADGM company law
DIFC companies are governed by the DIFC Companies Law (DIFC Law No. 5 of 2018), and ADGM companies by the Companies Regulations 2020 within the ADGM legal framework. Both offer an unfair prejudice remedy that allows a shareholder to petition the court where the company's affairs are conducted in a way that unfairly prejudices its interests, without a minimum shareholding. Courts can regulate the company's conduct, authorise proceedings in its name or order a buy-out, and a buy-out at fair value is the most common outcome in practice.
Arbitration and courts
Shareholders' agreements often refer disputes to arbitration under the Federal Arbitration Law or institutional rules such as those of DIAC. Matters involving registry acts or public order may still need a court, and interim measures can be sought from the courts in support of arbitration. Dubai Law No. 2 of 2025 also established a mediation centre within the DIFC Courts.
The disputes we see most often
Deadlock
Two equal shareholders or JV partners cannot pass resolutions on budgets, appointments or financing, and the company stalls. Without a deadlock mechanism, the options narrow to negotiation, the new board-appointment route or dissolution.
Minority oppression
A majority approves related-party contracts, dilutive issues or management fees that drain value, or excludes a minority from information. The available remedy depends heavily on whether the company is onshore or in the DIFC or ADGM.
Founder exit and valuation
A co-founder leaves, and the parties disagree on whether and at what price shares must be sold. Pre-emption, good and bad leaver terms and valuation mechanics drive the outcome.
Manager misconduct
A manager or director acts beyond authority, competes with the company or mismanages funds. Claims may lie against the manager personally, and removal may need a general assembly or court.
Nominee and side arrangements
Informal arrangements, often from before full foreign ownership was permitted onshore, conflict with the registered shareholding. These disputes turn on evidence and on what the law allowed when the arrangement was made.
Dividend and information disputes
Profits are retained or not distributed, or accounts are withheld. Rights to information and to declared dividends are usually enforceable, but undeclared profits are harder to claim.
Family companies deserve a special mention. Many UAE businesses are owned by families across two or three generations, and a shareholder dispute may also be a succession dispute, an inheritance question or a disagreement about the role of in-laws. The 2025 amendments allow succession arrangements in constitutional documents, which gives families a tool to plan ahead. See family business governance.
For JV-specific structuring, see joint ventures in the UAE, and for the duties that underpin many claims, directors' duties and liability.
Choosing a route: negotiate, mediate, arbitrate or litigate
The right route depends on what the client wants: to stay and fix governance, to leave at a fair price, or to buy out the other side. Each route also has a different speed, cost and level of confidentiality, which matters in a business that must keep trading through the dispute.
| Route | Best for | Strengths | Limitations |
|---|---|---|---|
| Negotiated buy-out | Most disputes, especially founder exits | Fast, private, preserves value | Needs leverage and a credible valuation |
| Mediation | Relationships worth saving; family companies | Confidential and flexible; DIFC Courts mediation centre available | No binding outcome unless settled |
| Arbitration | Shareholders' agreements with arbitration clauses | Confidential, specialist tribunal, enforceable award | Cannot bind non-parties or act on public registers |
| Onshore courts | Mainland companies without arbitration clauses; registry acts | Binding on registries and third parties; expert appointment | Public, slower, Arabic language, expert-driven |
| DIFC or ADGM Courts | Financial-centre companies | Unfair prejudice remedy, English-language common-law procedure | Jurisdiction limited to the centre's companies and agreements |
| Licensing authority route | Board-appointment deadlock after the 2025 amendments | Independent directors appointed for up to one year | Temporary; does not resolve underlying ownership |
These routes are not exclusive. Many shareholder disputes in the UAE are settled through a buy-out negotiated in the shadow of an arbitration or court claim, with interim relief securing the position in the meantime. See mediation and settlement and interim relief in the UAE.
Leverage usually decides the outcome more than legal merit. Ask who controls the bank accounts, who holds the licence signatures, who the customers and employees follow, and who needs liquidity soonest. A shareholder with a strong legal case but no practical leverage may still need to accept a discounted exit, while a shareholder with operational control can often resolve matters on better terms. Mapping that leverage honestly at the start is one of the most valuable steps in shareholder disputes in the UAE.
Read the constitutional documents before writing a demand letter. Pre-emption periods, deadlock clauses, dispute-resolution clauses and leaver terms usually decide the shape of the dispute, and an early misstep can waive a right or trigger a deadline.
Process: managing a shareholder dispute
- Diagnose. Review the memorandum and articles, any shareholders' agreement, board and general assembly minutes, and the licensing authority's records to confirm who holds what.
- Define the objective. Decide whether the aim is to restore governance, exit, buy out the other side or recover losses, and set a budget and timetable.
- Protect the business. Secure bank mandates, licences, IT systems and key records, and consider interim relief if assets or information are at risk.
- Open a negotiation channel. Make a structured, without-prejudice proposal supported by a credible valuation, keeping options for mediation open.
- Prepare the claim. Assemble evidence, select the forum under the dispute clause and prepare the request for arbitration or statement of claim.
- Run the proceedings. Manage expert evidence on valuation and accounts, which is often decisive, and keep settlement under review.
- Implement the outcome. Complete share transfers, amend the memorandum, update the licensing authority and banks, and enforce any award or judgment.
Timelines vary widely. A negotiated exit can close in weeks once price is agreed, while contested arbitration or court proceedings with valuation experts usually run far longer, and enforcement or registry implementation adds further time. Build a realistic plan for running the business during that period, including interim governance arrangements, signing authorities and communication with banks, staff and key customers, so that the company's value is not destroyed while the shareholders argue about who owns it.
Documents and evidence
Shareholder disputes are document-heavy. Tribunals and court-appointed experts reconstruct years of decisions and transactions, and the party with the better record usually controls the narrative. Start preserving material on day one.
- Memorandum and articles of association, all amendments and the current commercial register extract
- Shareholders' agreement, side letters, nominee or trust arrangements and any loan agreements between shareholders and the company
- Board and general assembly minutes, written resolutions and notices of meetings
- Audited and management accounts, bank statements and ledgers for related-party transactions
- Correspondence and messaging between shareholders and managers, preserved in original form
- Valuation reports, offers and any prior agreed valuation mechanism
Where accounts are disputed, consider an independent forensic review early. It can reveal whether a grievance about diverted profits is well founded before significant costs are spent, and a neutral report often moves negotiations more than correspondence does.
Be careful with self-help. Accessing company systems without authority, removing records or changing bank mandates unilaterally can create liability and undermine credibility before the tribunal or court.
In shareholder disputes, the documents signed at the start decide most of the options at the end. Good governance drafting is the cheapest dispute resolution.
Risks and common mistakes
Ignoring the dispute-resolution clause
Filing in court when the shareholders' agreement requires arbitration invites a jurisdictional challenge and delay. Conversely, the memorandum of association may contain a different clause from the shareholders' agreement, and some matters, such as acts on the commercial register, may need a court. Map every relevant clause, decide which forum governs which claim, and consider whether interim relief is needed from a court even where the merits go to arbitration.
Relying on old case law on expulsion and dissolution
Under the 1985 Civil Transactions Law, the Federal Supreme Court and the Dubai and Abu Dhabi Courts of Cassation took different views on whether a partner could be expelled from an LLC by court order. The new civil code, in force since 1 June 2026, restates the partnership rules, and the 2025 amendments to the Commercial Companies Law added new exit mechanics. Advice based on earlier precedent should be revisited before it is relied on.
Drag and tag rights that do not work
The 2025 amendments recognise drag-along and tag-along rights, but in an LLC their exercise remains subject to statutory pre-emption. A drag right that ignores pre-emption can be challenged by the dragged shareholder. Shareholders' agreements should include a waiver of pre-emption and a detailed procedure, and the memorandum should be updated so that the rights are reflected in the constitutional documents, not only in a private contract.
Valuation without a mechanism
Many disputes collapse into a disagreement about price. Where the documents are silent, the parties face expert-led valuation in court or arbitration, which is slow and uncertain. A pre-agreed mechanism, such as an independent valuer, a formula or a shotgun clause, reduces this risk. If none exists, commission an early, credible valuation to anchor negotiations.
Neglecting directors' personal exposure
Managers and directors can face personal liability for breaches of law, the constitutional documents or their duties, and under the new civil code a manager who acts after dissolution does so at personal risk. In a dispute, directors on both sides should take independent advice on decisions such as withholding signatures, paying dividends or entering related-party transactions. See corporate governance in the UAE.
Cross-border angle
Many UAE companies are owned through holding structures in the UK, Singapore, the Cayman Islands, India or Bangladesh, and their shareholders live in different countries. A dispute about a Dubai operating company may in fact be a dispute about shares in a foreign holding company governed by foreign law, with the UAE company affected only indirectly.
That shapes strategy. Shareholder disputes in the UAE often need parallel advice on the holding company's law, on where awards or judgments will be enforced, and on assets held abroad. Family-owned groups from South Asia and the GCC add succession and personal status issues. For enforcement abroad, see arbitral award enforcement.
Where the dispute concerns a foreign holding company, its courts may offer remedies that UAE law does not, such as an unfair prejudice petition under English law or a just and equitable winding-up in other common-law jurisdictions. Conversely, a foreign judgment or award may need recognition in the UAE before it can change the shareholding of a UAE company. Choosing where to fight, and in what order, is a strategic decision best made at the outset.
How TRW & Co helps
We advise shareholders, investors, founders and boards on preventing and resolving shareholder disputes in the UAE. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Early diagnosis
We review constitutional documents, agreements and registry records to identify rights, deadlines and leverage before anyone acts.
Negotiated exits
We structure buy-outs, share transfers and settlement terms, coordinating valuation advice and implementation with licensing authorities.
Arbitration and litigation strategy
We plan and manage arbitration and court strategy with licensed advocates, including expert evidence on accounts and valuation.
Interim protection
We advise on protecting bank accounts, assets and records during a dispute, including urgent applications.
Governance repair
We redraft memoranda and shareholders' agreements to reflect the 2025 amendments, with deadlock, leaver and valuation mechanisms.
Cross-border coordination
We coordinate counsel where holding companies or shareholders sit in Bangladesh, the UK, Singapore, India or the GCC.
See our shareholder agreements page, our full practice areas, or contact us to discuss a dispute.
Checklist for decision-makers
- Do we have the current memorandum, any shareholders' agreement and the registry extract?
- Which forum governs each likely claim: arbitration, onshore courts, or the DIFC or ADGM Courts?
- Are there pre-emption, deadlock, leaver or valuation clauses, and do they reflect the 2025 amendments?
- What is our objective: stay and fix, exit, or buy out?
- Are bank mandates, licences, records and IT systems secure?
- Do we need interim relief to protect assets or evidence?
- Have directors on our side taken independent advice on their personal exposure?
- Are foreign holding companies, shareholders or assets involved?
Most shareholder disputes in the UAE are resolved commercially once both sides understand their real options. Our team can help you get there faster.
Frequently asked questions
01What can a minority shareholder do in a mainland UAE company?
A minority shareholder's position depends mainly on the memorandum of association, any shareholders' agreement and the Commercial Companies Law. Typical options include enforcing information and dividend rights, challenging resolutions or acts that breach the law or the constitution, claiming against managers or directors for breach of duty, and negotiating or litigating an exit. Mainland law has no general unfair prejudice remedy like the DIFC and ADGM, so contractual protections agreed at investment are especially important.
02How are deadlocks resolved in UAE companies?
First through any deadlock mechanism in the shareholders' agreement, such as escalation, mediation, a casting vote or a buy-sell clause. Since the 2025 amendments to the Commercial Companies Law, where shareholders cannot agree on board appointments the licensing authority may appoint independent non-shareholder directors for up to one year. Beyond that, the options are a negotiated buy-out, arbitration or litigation, and in serious cases dissolution. Each route should be tested against the constitutional documents first.
03Can a shareholder be forced out of a UAE LLC?
Only on a proper legal or contractual basis. Drag-along rights in the constitutional documents, leaver provisions and agreed buy-sell mechanisms can compel a sale, subject in LLCs to statutory pre-emption. Under the 1985 civil code, courts disagreed on whether a partner could be expelled from an LLC by court order. The new Civil Transactions Law, in force since 1 June 2026, restates the partnership rules, so any expulsion strategy should be reassessed under the current law.
04How are shares valued in a shareholder dispute?
If the documents contain a valuation mechanism, that usually governs. If not, valuation is negotiated or decided with expert evidence in arbitration or court. The 2025 amendments provide that where a deceased shareholder's shares are acquired and the price is disputed, the court appoints experts to determine value. In the DIFC and ADGM, a court ordering a buy-out on an unfair prejudice petition will fix a fair price. An early independent valuation helps anchor negotiations.
05Can shareholder disputes be arbitrated in the UAE?
Generally yes, where the shareholders' agreement or constitutional documents contain an arbitration clause, under the Federal Arbitration Law or the arbitration regimes of the DIFC and ADGM. Some matters, such as acts on the commercial register or issues touching public order, may require a court, and a tribunal cannot bind people who are not parties. Courts can grant interim measures in support of arbitration, and applying to them does not waive the arbitration agreement.
06What is an unfair prejudice petition?
It is a remedy available to shareholders of DIFC and ADGM companies. A shareholder can petition the court where the company's affairs are being conducted in a way that unfairly prejudices its interests, without a minimum shareholding. The court can make a wide range of orders, including regulating future conduct, authorising proceedings in the company's name or requiring other shareholders or the company to buy the petitioner's shares, which is the most common outcome in practice.
07What should I do first if a dispute with my co-shareholder starts?
Gather and read the memorandum of association, any shareholders' agreement and the current registry extract, because they define your rights, deadlines and forum. Secure the company's records, bank mandates and systems lawfully, and avoid unilateral steps that could breach duties. Decide whether your goal is to stay, exit or buy out, and get an early view on value. Then open a structured negotiation while preparing the claim and any interim relief in parallel.
Sources and official materials
- Federal Decree-Law No. 32 of 2021 on Commercial Companies — Mainland company law, as amended in 2025
- UAE Legislation portal — Official texts incl. Federal Decree-Laws No. 20 and 25 of 2025
- Federal Law No. 6 of 2018 on Arbitration — Arbitration and court support
- Federal Decree-Law No. 42 of 2022 (Civil Procedure Code) — Onshore court procedure and interim measures
- DIFC Courts: Law No. 2 of 2025 on the DIFC Courts — Jurisdiction and mediation centre
- The ADGM Legal Framework — ADGM Companies Regulations 2020
- Dubai International Arbitration Centre — DIAC Arbitration Rules
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
