Business Partnership Disputes In The UAE: Rights, Remedies And Legal Options

Starting a business with a partner often begins with shared goals, trust and a clear idea of how the company should grow. Problems usually arise later, when the business becomes profitable, responsibilities change, money is handled differently than expected, or the partners no longer agree on important decisions.

A partnership dispute in the UAE that business owners face can affect much more than the relationship between the partners. It may interrupt daily operations, freeze important decisions, affect employees and suppliers, or even threaten the future of the company. Understanding the legal position early can therefore make a significant difference.

Why Do Business Partnership Disputes Arise?

Not every disagreement becomes a legal dispute. However, certain issues regularly create serious problems between business partners and shareholders, including:

• disagreement over profit distribution or business expenses
• withdrawal of company funds without proper approval
• unequal involvement in the management of the business
• exclusion of one partner from company decisions or information
• misuse of company assets or business opportunities
• disagreement over salaries, management fees or benefits
• breach of the Memorandum of Association or shareholders’ agreement
• transfer or proposed sale of a partner’s shares
• introduction of a new investor without agreement
• competition with the company
• deadlock where the partners can no longer make decisions
• disagreement over the value of a partner’s shares when one partner wants to leave

The legal solution will depend heavily on the company’s legal structure and the agreements between the parties.

What UAE Law Applies?

Commercial companies in the UAE are principally governed by Federal Decree-Law No. 32 of 2021 on Commercial Companies, as amended. The law contains rules relating to company management, partners and shareholders, managers’ responsibilities, company accounts, transfer of interests and the operation and dissolution of companies. It also provides for liability of LLC managers in circumstances involving matters such as fraudulent acts, improper use of powers and violations of applicable law or the company’s constitutional documents.

There are also contract issues. The Civil Transactions Law (Federal Decree-Law No. 25 of 2025) (effective 1 June 2026) which provides for provisions regulating contractual obligations and remedies available where one party fails to comply with an agreement

For this reason, the Memorandum of Association, shareholders’ agreement, side agreements and written resolutions can become extremely important when a dispute develops.

Business Partner Dispute Dubai: What Should Be Checked First?

Before taking formal action in a business partner dispute Dubai, the first step should usually be to understand what was actually agreed.

Review the Memorandum of Association and any shareholders’ or partnership agreement. Important clauses may deal with management powers, voting rights, profit allocation, restrictions on share transfers, non-compete obligations, exit arrangements and dispute resolution.

The company’s financial records should also be examined. Bank statements, invoices, payment approvals, accounting records, shareholder resolutions and correspondence may help establish how the company was managed and whether money was used properly.

WhatsApp messages, emails and other electronic communications should not automatically be dismissed as informal. UAE evidence legislation expressly recognises electronic evidence, subject to the applicable requirements concerning its authenticity and production.

Mrs. Awatif Al Khouri also stresses the importance of looking at the company’s written structure before allowing a disagreement to escalate. A dispute that appears to be about personalities may, after reviewing the documents, actually concern voting a clear contractual obligation.

Settlement, Court or Arbitration?

Many partnership disputes can be resolved without ending the business. The parties may agree to revise management responsibilities, restructure ownership, arrange a buyout, settle outstanding financial claims or establish clearer approval procedures.

Where settlement is not possible, the dispute may proceed through the competent court.

The parties should also check whether their agreements contain an arbitration clause. Under Federal Law No. 6 of 2018 concerning Arbitration, parties may agree in writing to submit disputes to arbitration. Where a valid arbitration agreement covers the dispute, this can affect whether the matter should proceed before the ordinary courts or through arbitration.

Jurisdiction also matters. A mainland Dubai company may be subject to a different dispute forum from a company established within a financial free zone or another jurisdiction with its own legal and regulatory framework.

Protecting the Business While the Dispute Continues

Partners should try to separate the dispute from the day-to-day survival of the company. Important records should be preserved, financial transactions carefully documented and major decisions made through the proper corporate process.

It is equally important to avoid emotional decisions such as withdrawing funds, blocking access, transferring assets or making commitments on behalf of the company without proper authority. Actions taken during the dispute may later become an important part of the case.

Conclusion

Business partnership disputes can become expensive when disagreements over money, management and ownership are allowed to continue without a clear strategy. The starting point should be the company’s legal structure, its Memorandum of Association, any shareholders’ agreement, financial records and the actual conduct of the parties.

As Mrs. Awatif Al Khouri highlights, addressing the legal and commercial issues at an early stage can help protect both the business and the interests of those involved. Whether the solution is negotiation, restructuring, a partner buyout, arbitration or court proceedings, the objective should be to resolve the dispute while limiting unnecessary disruption to the company.

FAQ’s

1. What causes business partnership disputes in the UAE?

Business partnership disputes can arise from disagreements over profit distribution, management decisions, financial contributions, misuse of company funds, breaches of the memorandum of association, unauthorised transactions, conflicts of interest, partner withdrawals, ownership percentages or the direction of the business.

2. What laws govern business partnership disputes in the UAE?

Depending on the company’s structure and the nature of the dispute, partnership disputes may be governed by Federal Decree-Law No. 32 of 2021 on Commercial Companies, the company’s memorandum of association and other contractual documents. Civil or contractual issues may also fall under Federal Decree-Law No. 25 of 2025 Promulgating the Civil Transactions Law, which has been in force since 1 June 2026.

3. Can one business partner take legal action against another partner in the UAE?

Yes. A partner may be able to bring legal proceedings where another partner has breached contractual, statutory or management obligations and caused loss to the company or other partners. The available claim will depend on the company’s legal form, the partnership documents, the conduct complained of and the evidence available.

4. What can I do if a business partner is withholding profits or company funds?

A partner should first review the company’s financial records, memorandum of association, shareholder or partnership agreements and relevant resolutions. Depending on the circumstances, legal remedies may include demanding accounts, challenging improper transactions, seeking payment of amounts due, claiming compensation or commencing court or arbitration proceedings.

5. Can a partner be removed from a company in the UAE?

Removal of a partner is not automatically available whenever a disagreement occurs. The process depends on the company’s legal structure, its memorandum of association, applicable legislation and the grounds relied upon. For example, the Commercial Companies Law contains specific rules concerning company management, partner voting and amendments to the memorandum of association.

6. How can a business partnership dispute be resolved in the UAE?

Partnership disputes may be resolved through negotiation, settlement, mediation, arbitration or litigation, depending on the dispute-resolution clause and circumstances. Before commencing proceedings, it is important to review the company’s constitutional documents, agreements, financial records, correspondence and evidence of the alleged misconduct or financial loss.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.