Professional and Non-Profit Companies Under the UAE’S New Civil Transaction Law
Five months after the UAE’s new Civil Transactions Law took effect, its company provisions are proving quieter than the contract reforms but no less consequential. Federal Decree-Law No. 25 of 2025 was issued on 1 October 2025, published in Official Gazette No. 809 on 14 October 2025, and came into force on 1 June 2026, repealing the 1985 Civil Code in full. For law firms, clinics, engineering consultancies and mission-driven ventures, the company chapter changes how these businesses are classified, owned, named and held to account.
Civil or Commercial: The Threshold Question
The government’s official summary presents the corporate reforms as an effort to align civil law with commercial legislation. The key tool is Article 606. A company is civil if its activity is non-commercial. It is commercial if its activity is commercial or if it takes one of the forms recognised under the Commercial Companies Law, even when its activity is not commercial. In that second case, the Commercial Companies Law governs.
The courts were already applying this test. Codifying it still matters. A consultancy set up as a mainland LLC stays under Federal Decree-Law No. 32 of 2021, whatever it does. A partnership of engineers licensed as a civil works company sits under the new civil regime. Any structural review should therefore start with the legal form on the licence, not the description of services.
Three further changes affect civil companies in practice. A civil company may now be formed and owned by one person. Under Article 626, a partner in a company of indefinite duration may withdraw on notice, provided the withdrawal is neither in bad faith nor timed to cause harm, and that withdrawal no longer dissolves the company automatically. The remaining partners may agree to continue, and in a two-partner firm the survivor may carry on alone where single ownership is permitted. A manager’s authority also ends the moment the company is dissolved, and later acts expose the manager personally.
Take two architects running a civil company in Dubai. One relocates abroad and gives notice. Under the old Code, dissolution was the practical risk. Now the remaining architect can continue, subject to formalities with the licensing authority. But many partnership deeds still carry the old dissolution language. Left unrevised, that clause may produce an outcome nobody wants.
Professional Companies: A Dedicated Regime
Articles 645 to 654 establish a framework for professional companies, meaning companies formed by one or more licensed practitioners to carry on a regulated profession. On ownership, the law allows joint companies between licensed practitioners and foreign professional firms, and it allows participation by persons who do not practise the profession. On exclusivity, Article 650 bars a partner from belonging to more than one professional company or working for another. On liability, each partner answers personally to the firm and co-partners for their own professional errors, while the firm remains liable to third parties. A partner who permanently loses their licence is treated as having withdrawn, and Article 647 governs naming, including the death or withdrawal of a named partner.
The harder work lies in sector rules. For law firms, Cabinet Resolution No. 10 of 2025, issued under Federal Decree-Law No. 34 of 2022 on the legal profession, already regulates professional companies. It requires every partner to be licensed. Foreign partners must be international firms with a head office at least fifteen years old and a presence in at least three other countries. Only three forms are allowed: a general partnership, an LLC or a one-person LLC. Professional liability insurance is a licensing condition, and a firm must change its name within six months after a named partner dies or leaves.
So, the Civil Transactions Law contemplates non-practitioner participation, while the legal profession rules require every partner to be licensed. Which prevails? The Civil Transactions Law is a general statute. Practitioner commentary treats it as filling gaps where specialised legislation exists, and the official summary stresses respect for the licensing competence of local authorities. The better view is that the sector rule controls for law firms, and the general permission for non-practitioner investors applies only where a profession’s own rules allow it. Healthcare and engineering regulators should be checked emirate by emirate before any client brings in a passive investor.
The single-company rule needs attention too. Senior professionals often hold stakes in more than one practice, sometimes across emirates or between mainland and free zone vehicles. Those overlaps should be mapped now, not at the next renewal.
What if the Settlement Was Signed Privately?
Article 1(2) of Resolution No. 4 of 2025 Determining the Disputes Falling within the Jurisdiction of the Centre for Amicable Settlement of Disputes, issued by the President of the Dubai Courts, gives the Centre jurisdiction over applications to ratify conciliation agreements regardless of claim value.
Ratification means formal approval. It does not mean every private agreement automatically qualifies. A lawyer should assess eligibility and the required formalities. Where that route is unavailable, the appropriate claim or procedure needs separate consideration.
Non-Profit Companies: Two Tracks and an Open Gap
The Act itself establishes a dedicated framework for non-profit companies that must reinvest profits in their objectives. A parallel reform runs through Federal Decree-Law No. 20 of 2025, which amended Article 8 of the Commercial Companies Law to permit non-profit commercial companies on the same reinvestment principle.
That gives two tracks. A non-profit civil company may suit an educational or professional venture with no trading activity. A non-profit commercial company may suit a social enterprise that trades. Both are distinct from public benefit associations and foundations, which keep their own regimes.
The gap is implementation. The commercial track depends on a Cabinet decision setting permitted purposes, forms and exemptions, and practitioner commentary through 2026 has treated that decision as outstanding. Until it arrives, licensing authorities have little guidance on separating a non-profit company from a foundation, and tax treatment is unclear. Non-profit status should not be assumed to bring corporate tax exemption. Advisers should confirm the current position with the relevant authority before recommending this vehicle over a tested alternative.
What to Review Now
The law is prospective, so contracts made before 1 June 2026 generally stay under the old Code. Corporate events are different. A withdrawal, dissolution or naming change occurring after that date will be judged under the new provisions. Memoranda and partnership deeds should be checked for outdated dissolution clauses, for restrictions on a non-managing partner’s inspection rights, which practitioners note can no longer be excluded, and for naming arrangements that ignore a partner’s exit. Insurance cover should be tested against the new split of liability between partner and firm. The limitation period for professional services claims has also fallen from five years to three.
None of this overturns the professional or non-profit landscape. It gives that landscape statutory edges where few existed. Firms that align their constitutions early will avoid discovering those edges in a dispute.
Before establishing or restructuring a professional or non-profit company in the UAE, consult Dr. Sunil Ambalavelil to review the proposed ownership arrangements, partner responsibilities and applicable licensing requirements.
