TRW & Co · Banking and finance
Guarantees Under UAE Law After the New Civil Code
A guarantee UAE law will enforce now follows the new Civil Transactions Law in force since 1 June 2026. Joint liability must be agreed expressly, creditors generally pursue the debtor first, and a guarantor is discharged unless court proceedings against debtor and guarantor start within six months of the debt falling due. Here is how to draft and enforce one.
Key pointDemand letters and restructuring talks do not stop the six-month clock under the new civil code: a creditor must start judicial proceedings against both the debtor and the guarantor, and for instalment loans that clock may run from each missed payment.
At a glance
New code since June
Federal Decree-Law No. 25 of 2025 replaced the 1985 Civil Transactions Law on 1 June 2026 and rewrote the main rules on suretyship guarantees.
Six-month claim rule
Under Article 1006 a guarantor is discharged unless judicial claims against both debtor and guarantor begin within six months after the debt falls due.
Joint liability not implied
A guarantor is jointly liable only if the guarantee says so expressly; otherwise the creditor generally must pursue the debtor first.
Bank guarantees differ
Independent on-demand bank guarantees and performance bonds are payable on a compliant demand and follow their own terms and banking rules.
Old templates need review
Waivers of time limits in pre-2026 forms are widely considered ineffective against the new mandatory rule, so portfolios and templates should be audited.
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A guarantee UAE law will enforce is now shaped by the new Civil Transactions Law, which replaced the 1985 code on 1 June 2026 and changed several rules that lenders, landlords and suppliers relied on for decades. A guarantor is no longer presumed jointly liable, the creditor must generally pursue the debtor first, and a guarantor is discharged if court proceedings against both debtor and guarantor do not start within six months after the debt falls due.
This guide explains how personal and corporate guarantees work under the new law, how they differ from bank guarantees and performance bonds, what must now appear in the document, and how to enforce one. It is written for credit teams, CFOs, founders asked to sign personal guarantees, and anyone holding a guarantee drafted under the old code. As of October 2026, courts have not yet built a body of decisions on the new provisions, so conservative drafting and disciplined enforcement matter.
The short answer: what a guarantee UAE law recognises now requires
Five points summarise the new position for ordinary suretyship (kafala) guarantees given onshore.
- Joint liability must be express. Unless the guarantee clearly states that the guarantor is jointly liable with the debtor, the default favours the guarantor.
- Debtor first. A guarantor who is not jointly liable can require the creditor to pursue the debtor, and in some cases the debtor's assets and other security, before turning to the guarantor.
- Six-month claim window. Under Article 1006 of the new code, the guarantor is discharged unless the creditor starts judicial claim proceedings against both debtor and guarantor within six months after the debt falls due. Commentators widely treat this as a mandatory rule that cannot be waived in advance.
- Loss of security discharges. If the creditor's conduct causes the loss of other security, the guarantor is released to the corresponding extent.
- Bank guarantees are different. Independent on-demand guarantees issued by banks are governed by their own terms and banking rules, not by the accessory suretyship model.
The legal framework
The Civil Transactions Law
Federal Decree-Law No. 25 of 2025, the new Civil Transactions Law, contains the general rules on suretyship: how a guarantee is formed, the guarantor's rights against the creditor and debtor, the effect of multiple guarantors, and how a guarantee ends. It applies to guarantees given onshore and in ordinary free zones. It also lowered the age of majority to 18 Gregorian years, which affects who has capacity to guarantee. For the wider changes, see our article on the new UAE Civil Transactions Law.
The Commercial Transactions Law
The Commercial Transactions Law governs banking operations, including letters of guarantee issued by banks, and contains its own rules on commercial obligations. Commentators have noted that the new civil code treats suretyship for a commercial debt as a civil act, which may affect limitation arguments banks previously made under commercial law. That interaction is still untested.
Companies law and capacity
Corporate guarantees also engage the Commercial Companies Law and the company's constitutional documents: who may sign, whether shareholder approval is needed, and whether the guarantee falls within the company's objects. Related-party guarantees can be restricted, particularly for public joint stock companies.
The DIFC and ADGM
Guarantees governed by DIFC or ADGM law follow common-law principles closer to English law, where guarantees and indemnities are distinct and extensive waivers of guarantor defences are routine. The federal six-month rule does not govern those documents, but a guarantor's onshore assets may still need to be reached through onshore enforcement.
Types of guarantee compared
The word "guarantee" covers instruments with very different legal effects. The label matters less than the wording.
| Type | Nature | Main legal source | Key risk for the beneficiary |
|---|---|---|---|
| Personal guarantee by a founder or shareholder | Accessory suretyship | Civil Transactions Law | Six-month claim window; debtor-first rule unless joint liability is express |
| Corporate or parent company guarantee | Accessory suretyship | Civil Transactions Law and Commercial Companies Law | Authority, corporate approvals and corporate benefit |
| Bank on-demand guarantee or performance bond | Independent undertaking | Its own terms, banking rules and the Commercial Transactions Law | Strict compliance of the demand with the guarantee's wording |
| Counter-guarantee | Guarantee of the guarantor's obligation | Civil Transactions Law or banking terms | Order of recourse unless joint liability is agreed |
| Guarantee governed by DIFC or ADGM law | Common-law guarantee or indemnity | Financial centre contract law | Enforcing onshore against onshore assets |
Accessory versus independent
An accessory guarantee rises and falls with the debtor's obligation: if the debt is invalid, reduced or extinguished, so is the guarantee. An independent on-demand guarantee is payable on a compliant demand without proof of default, subject only to narrow exceptions such as manifest fraud. Commentators consider that the six-month rule, on a strict reading, applies to accessory suretyship rather than to independent bank guarantees, although some recommend protective filings where the wording is ambiguous.
Drafting a guarantee UAE courts will enforce
Templates drafted under the 1985 code should be treated as out of date when preparing any guarantee UAE law will now govern. The clauses below now carry most of the weight.
- Express joint liability. State plainly that the guarantor is jointly liable with the debtor and that the creditor may claim against the guarantor without first pursuing the debtor or other security. Use the Arabic term for joint liability in the Arabic version.
- Clear scope and cap. Identify the guaranteed obligations, any maximum amount and whether future and fluctuating debts are covered.
- Authority evidence. For corporate guarantors, attach board and, where needed, shareholder resolutions and confirm signatory powers.
- Governing law and forum. Decide deliberately between onshore law and courts, DIFC or ADGM law and courts, or arbitration, bearing in mind where the guarantor's assets are.
- Realistic waivers. Advance waivers of the six-month rule are widely considered void. Keep other waivers, but do not rely on them to fix the timing problem.
For loans repaid in instalments, the six months may run from each missed payment, not only from acceleration. Credit teams should diarise a deadline for every unpaid instalment and every drawdown on a revolving facility, and escalate early rather than letting restructuring talks run past the window.
Enforcing a guarantee: the process
Enforcing a guarantee UAE law governs onshore now depends heavily on timing. A disciplined sequence avoids losing the guarantor.
- Fix the due date. Identify exactly when each guaranteed amount fell due, including instalments and accelerated sums. The six-month period starts the day after.
- Review the guarantee wording. Confirm whether joint liability is express, whether the guarantee is accessory or on-demand, the governing law and the forum.
- Serve demands. Send formal demands to the debtor and guarantor. Demands alone are unlikely to stop the six-month clock, but they set up the claim.
- Start judicial proceedings against both. File against debtor and guarantor together within the window. Where an arbitration clause applies, take advice on parallel protective steps, as the position is untested.
- Use summary routes where available. If the debt is fixed and documented, a payment order may be faster than a full claim; security cheques may be presented under the cheque execution rules.
- Protect assets. Consider precautionary attachment or other interim relief where the guarantor may move assets.
- Execute the judgment. Enforce against the guarantor's assets through the execution court, and coordinate with any other security held.
The guarantor's rights under a guarantee UAE law governs
The new code is not only about creditor deadlines. It also sets out what a guarantor can do before and after paying, and those rights shape negotiations on both sides.
Defences derived from the debt
Because ordinary suretyship is accessory, a guarantor can generally raise the defences the debtor could raise: that the debt is invalid, has been paid, has been reduced or has been varied without the guarantor's agreement. Creditors amending a facility should therefore obtain the guarantor's written confirmation that the guarantee extends to the amended terms. Under a guarantee UAE law treats as accessory, a variation agreed only with the borrower is a classic source of disputes.
Recourse and subrogation after payment
A guarantor who pays the guaranteed debt in full steps into the creditor's shoes and can pursue the debtor, including through the creditor's security. A guarantor who pays only part generally cannot compete with the creditor for the balance until the creditor has been paid in full. Founders who give personal guarantees should understand that their recovery from the company will often rank behind the bank.
Several guarantors and counter-guarantees
Where several guarantors sign without agreeing joint liability, the code allocates liability between them rather than leaving each fully exposed, and the order of recourse also matters for counter-guarantees. Creditors who want each guarantor liable for the whole debt, or who want to call a counter-guarantor directly, must say so expressly. A well-drafted guarantee UAE courts will read the way the parties intended therefore states joint liability among guarantors as well as with the debtor.
An illustrative scenario
Illustrative only; generic parties. A trading company has a term loan from a UAE bank, guaranteed personally by its founder under a form signed in 2023. The borrower misses an instalment in July 2026, and the parties begin restructuring talks. By November, no proceedings have been filed.
Because the guarantee was formed before 1 June 2026, its validity is assessed under the old code. But commentators consider that time periods still running on 1 June 2026, and debts falling due afterwards, may be caught by the new six-month rule. The bank's standard waiver of time limits may not help. The prudent step is to file against both borrower and founder before six months have passed from the July instalment, even while negotiations continue, and to document the restructuring separately.
For the founder, the same analysis cuts the other way: a guarantor who has not been sued within the window may have a discharge argument worth raising.
Common mistakes and risks
Relying on an old-code template
Many guarantees in circulation were drafted on the assumption that joint liability would be implied in commercial contexts and that time-limit waivers were effective. Under the new code, joint liability must be agreed expressly and the six-month rule is widely treated as mandatory. Review templates now, update the English and Arabic versions together, and re-paper material guarantees when facilities are amended, extended or refinanced.
Letting negotiations run the clock
Restructuring discussions, standstills and informal payment plans do not by themselves stop the six-month period. Creditors that wait for talks to fail can find the guarantor discharged. File protectively within time and agree any standstill in a form that preserves the claim, or take an acknowledgment and fresh guarantee as part of a documented restructuring.
Suing only the guarantor
The new wording refers to proceedings against both the debtor and the guarantor. A claim against the guarantor alone, perhaps because the debtor is insolvent or abroad, risks a discharge argument. Join both where possible, and document any obstacle to joining the debtor, such as liquidation, so the reason can be shown to the court.
Ignoring corporate authority
A corporate guarantee signed by a manager without board authority, or outside the company's objects, invites a validity challenge. Ask for resolutions, check the memorandum and articles, and confirm the signatory's powers on the commercial register. For group guarantees, consider whether the guaranteeing company receives a real benefit from the transaction.
Releasing other security without consent
Because a guarantor is released to the extent the creditor's conduct causes other security to be lost, a lender that releases a mortgage or lets a registry filing lapse can reduce its guarantee recovery. Obtain the guarantor's written consent to releases and keep security perfected. See our guide to taking security over assets.
Cross-border guarantees
International lenders often take English-law guarantees from UAE-based parents and founders. English law will govern the contract, but enforcement against UAE assets still requires recognition of an English judgment or arbitral award in the UAE. Arbitration, or a DIFC or ADGM forum, can simplify that path. The guarantor's capacity and corporate authority are also assessed under the law of its place of incorporation or residence.
Conversely, a UAE-law guarantee given by a parent in Bangladesh, India, Singapore or the UK may need to be enforced abroad. The six-month rule then matters twice: once for the UAE claim and again for any foreign proceedings that depend on it. For financing structures more broadly, see our banking and finance practice.
Checklist for creditors and guarantors
Whether you are taking or giving a guarantee UAE law now governs, work through these points.
- Is joint liability stated expressly in both language versions?
- Is the guarantee accessory or on-demand, and does the wording match the intent?
- Are corporate approvals and signatory powers on file?
- Has every due date, instalment and drawdown been diarised against the six-month window?
- Is other security kept perfected, with guarantor consent for any release?
- Do governing law and forum match where the guarantor's assets are?
- Have pre-June 2026 guarantees been reviewed for transitional risk?
A guarantee UAE law recognises remains one of the most useful credit tools in the country, but they now reward precision and punish delay. For template reviews, portfolio audits or enforcement strategy, contact TRW & Co. Where court representation is needed, we work alongside locally licensed advocates and registered DIFC and ADGM practitioners.
Frequently asked questions
01What is the six-month rule for guarantees in the UAE?
Article 1006 of the new Civil Transactions Law provides that a guarantor is discharged unless the creditor starts judicial claim proceedings against both the debtor and the guarantor within six months after the debt falls due. Commentators read this as requiring formal court proceedings rather than demand letters, and as a mandatory rule that cannot be waived in advance. For instalment loans the period may run from each missed instalment. Whether arbitration satisfies the rule is untested, so protective court filings are often recommended.
02Is a personal guarantee enforceable in the UAE?
Yes. A personal guarantee is a suretyship contract under the Civil Transactions Law and is enforceable against the guarantor's assets through the UAE courts. Under the new code, the creditor should ensure joint liability is stated expressly, must bring proceedings against both debtor and guarantor within six months after the debt falls due, and should keep other security perfected, because losing it can reduce the guarantor's liability. Personal guarantees are frequently supported by security cheques, which can be enforced separately.
03Does the new Civil Transactions Law apply to guarantees signed before June 2026?
The formation and validity of guarantees made before 1 June 2026 are generally assessed under the old 1985 code, because the new law is not retrospective. However, the transitional rules apply new time periods to periods still running on that date, and commentators consider that the six-month rule may therefore affect debts falling due around or after 1 June 2026. Creditors should audit existing guarantees and not assume that old waiver clauses will protect them.
04Do bank guarantees and performance bonds follow the same rules?
Not usually. A bank's on-demand guarantee or performance bond is an independent undertaking: the bank pays on a demand that complies with the guarantee's terms, without investigating the underlying dispute, subject to narrow exceptions such as manifest fraud. These instruments are governed by their own wording and banking rules under the Commercial Transactions Law. Commentators consider that the six-month suretyship rule does not apply to them on a strict reading, although ambiguous wording can blur the line.
05Can a guarantor insist that the creditor sue the debtor first?
Under the new code, a guarantor who is not jointly liable can generally require the creditor to pursue the debtor first, and may ask that the debtor's assets be pursued before its own, provided it identifies those assets. The creditor may also need to look to other real security first. These protections can be displaced by an express joint liability clause, which is why creditors now insist on clear wording in both the English and Arabic versions.
06What should a company check before giving a corporate guarantee?
Check that the guarantee falls within the company's objects, that the signatory has authority, and whether board or shareholder approval is required by the Commercial Companies Law or the company's constitutional documents. Consider whether the company receives a real benefit, particularly for guarantees of group or related-party debts, and whether any financing documents restrict new guarantees. The guarantor should also understand its own rights under the new code, including the six-month rule and the effect of the creditor releasing other security.
Sources and official materials
- Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law — Suretyship rules, transitional provisions and capacity
- Federal Decree-Law No. 50 of 2022 Promulgating the Commercial Transactions Law — Banking operations including letters of guarantee
- Federal Decree-Law No. 32 of 2021 on Commercial Companies — Corporate authority and approvals for guarantees
- UAE Legislation portal — Official federal legislation database
- ADGM Rules and Regulations — Common-law framework for ADGM-governed guarantees
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.
