Disputes between partners in limited liability companies frequently raise complex legal questions, particularly where disagreements arise regarding management authority, performance of obligations, or interference with company operations. One issue that occasionally arises in such disputes is whether one partner may seek the judicial removal of another partner from the company.
In practice, parties sometimes attempt to rely on certain provisions of the UAE Civil Transactions Law (Federal Law No. 5 of 1985), which permit the expulsion of a partner in certain civil partnerships where that partner breaches their obligations or causes harm to the partnership.
This raises an important legal question: can the rules governing civil partnerships be applied to commercial companies such as limited liability companies incorporated under the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021) (the UAE Companies Law)?
Judicial Clarification
This issue was recently addressed by the Abu Dhabi Court of Cassation in Commercial Appeal No. 113 of 2026.
In this case, one partner sought to remove another partner from a limited liability company by invoking the expulsion provisions under Article 677 of the Civil Transactions Law. The lower courts rejected the request, and the matter was ultimately brought before the Court of Cassation.
The Court upheld the earlier decisions and clarified that the provisions allowing the removal of a partner under civil partnership rules cannot be applied to commercial companies.
The Court emphasised that limited liability companies are governed by a distinct statutory framework under the UAE Companies Law. Accordingly, disputes among shareholders must be resolved through the mechanisms provided by the legislation governing commercial companies, rather than through provisions applicable to civil partnerships.
Applicable Legal Framework
The Court’s reasoning reflects the clear legislative distinction between civil partnerships and commercial companies under UAE law.
Limited liability companies are primarily governed by the UAE Companies Law (Federal Decree-Law No. 32 of 2021), which regulates the formation, governance, and shareholder rights within commercial companies.
Commercial activities themselves are defined and regulated under the UAE Commercial Transactions Law (Federal Decree-Law No. 50 of 2022), which establishes the broader legal framework governing commercial dealings.
By contrast, Article 677 of the Civil Transactions Law applies specifically to civil partnerships and provides a mechanism for expelling a partner where their conduct harms the partnership. The Court confirmed that this provision cannot be extended to companies incorporated under the UAE Companies Law.
Legal Remedies Available Under UAE Company Law
Although the Civil Transactions Law cannot be used to expel a partner from a limited liability company, UAE company law provides several mechanisms for addressing disputes among shareholders.
These mechanisms arise primarily from the UAE Companies Law, as amended by Federal Decree-Law No. 20 of 2025, which modernised the UAE’s corporate framework and introduced enhanced governance and shareholder protection measures.
Under this framework, shareholder disputes may be addressed through a combination of statutory and contractual mechanisms, including:
1. Enforcement of Shareholder Obligations
Companies may enforce obligations contained in the memorandum or articles of association, including obligations relating to shareholder conduct, governance responsibilities, or compliance with corporate decisions.
2. Transfer or Disposal of Shares
Share transfer mechanisms remain a key tool for resolving shareholder conflicts. The UAE Companies Law allows shares to be transferred or disposed of in accordance with statutory procedures and the provisions contained in the company’s constitutional documents.
3. Governance and Continuity Mechanisms
Recent amendments introduced by Federal Decree-Law No. 20 of 2025 strengthen corporate governance frameworks by addressing issues such as the resignation, absence, or replacement of managers and directors. These provisions aim to prevent operational disruption and ensure continuity of corporate authority during internal disputes or management changes.
4. Structuring of Shareholder Rights
The amendments also permit companies to issue multiple classes of shares with different rights, including variations in voting rights, dividend entitlements, liquidation preferences, or conversion rights. This flexibility allows companies to structure governance and investor relationships in a manner that reduces the risk of shareholder disputes.
5. Statutory Recognition of Exit Mechanisms
Another important development is the express recognition of drag-along and tag-along rights. These provisions allow majority shareholders to compel minority shareholders to participate in a sale, or allow minority shareholders to join a transaction initiated by the majority on equivalent terms. The statutory recognition of these mechanisms provides greater certainty for corporate restructuring and exit transactions.
Together, these mechanisms provide the appropriate legal framework for managing shareholder conflicts within commercial companies.
Conclusion
The judgment of the Abu Dhabi Court of Cassation reinforces a fundamental principle of UAE corporate law: the rules governing civil partnerships cannot be applied to commercial companies.
Disputes among partners in limited liability companies must therefore be resolved within the legal framework established by the UAE Companies Law and the company’s constitutional documents, rather than through provisions designed for civil partnerships.
At the same time, the recent amendments introduced by Federal Decree-Law No. 20 of 2025 significantly enhance the tools available for managing shareholder relationships and resolving disputes. By strengthening governance mechanisms, introducing greater flexibility in share structures, and recognising modern exit rights, the UAE continues to modernise its corporate framework and align it with international investment standards.
For businesses and investors, the judgment highlights the importance of carefully drafting corporate governance provisions and shareholder arrangements to ensure that effective remedies exist should disputes arise among partners.
For advice on managing shareholder disputes, structuring governance provisions, or navigating remedies available under the UAE Companies Law, please contact Suneer Kumar at suneer@alsuwaidi.ae, Vida Grace Serrano at vida@alsuwaidi.ae or Mamdouh Tawfik at m.tawfik@alsuwaidi.ae