Directors’ Duties Don’t Stop at the Battlefield: Governance Obligations During Geopolitical Instability – a UAE law perspective (United Arab Emirates)

Release Date

May 2026

I. Introduction: When the Boardroom Goes Silent

When conflict escalates in a region and supply chains fracture, boards instinctively shift into preservation mode, i.e. preserve cash, protect employees, renegotiate contracts, manage the press. This is rational and necessary. What is less rational, and frequently observed in practice, is the implicit assumption that legal obligations pause alongside normal commercial activity.

They do not.

The UAE sits at the nexus of global trade, energy markets, and geopolitical fault lines. Its corporate ecosystem spans mainland companies governed by federal law, entities incorporated across numerous economic free zones, and entities incorporated in the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM), the principal financial freezones, operating under common law-influenced frameworks. Also included are multinational subsidiaries operating across all of these regimes. Across each of these environments, the current regional conflict emphasises the importance of doubling down on good governance.

This article examines the key legal obligations that fall on directors of UAE onshore, DIFC and ADGM incorporated companies during periods of geopolitical disruption. It should be noted that companies incorporated in other economic free zones within the UAE may be subject to additional or distinct directors’ duties under the regulations of the relevant free zone authority; however, for the purposes of brevity, this article addresses only the onshore, DIFC and ADGM regimes.

II. The Legal Framework: Four Jurisdictional Layers

Understanding directors’ duties in the UAE primarily requires navigating four overlapping legal regimes.

A. Onshore UAE: The Commercial Companies Law

The foundational statute governing onshore companies is Federal Decree Law No. 32 of 2021 on Commercial Companies (the “CCL”), which took effect on 2 January 2022, replacing the prior Federal Law No. 2 of 2015. The CCL was most recently and significantly amended by Federal Decree Law No. 20 of 2025 (the “2025 CCL Amendments”), effective from November 2025.

Under the original CCL, directors’ core governance obligations included duties of due care and diligence, prohibitions on self-dealing and related-party conflicts, joint and several liability for unlawful profit distributions, and, critically, a provision rendering void any attempt in the company’s constitutional documents to exempt directors from personal liability. These obligations remain operative under the 2025 CCL Amendments.

The 2025 CCL Amendments raise the governance bar for UAE companies. Key changes include: (i) clearer rules on the removal, resignation, and reconstitution of directors and boards, including mandatory notification to the competent authority within 30 days and a statutory six-month continuity period where a board’s term has expired without reconstitution; (ii) the introduction of share classification structures for limited liability companies, allowing for different economic and voting rights among stakeholders, adding complexity to directors’ decision-making in stressed and distressed scenarios; and (iii) new provisions enabling companies to transfer their registration between competent authorities or between free zones and the mainland, which directors may need to consider as part of restructuring and contingency strategies. These procedural and structural reforms heighten the importance of directors exercising sound judgment and maintaining robust governance practices, particularly during periods of financial difficulty when the risk of governance failures is most acute.

Public Joint Stock Companies’ (“PJSCs”) directors are also subject to additional governance requirements imposed by the UAE’s Capital Market Authority’s (“CMA”) under the Corporate Governance Code for Public Joint Stock Companies (Chairman of the Board of Directors of SCA No. (03/R.M) of 2020, as subsequently amended) (the “PJSC Governance Code”). In addition to the general duties described above, the CCL imposes specific constraints on PJSC directors, which include the prohibition on PJSC loans being extended to board members and their close relatives; the requirement of authorisation in the articles or a special resolution for long-term loans, mortgages, compromises and arbitration agreements; and personal liability for fraud, abuse of power or violations of the CCL or the company’s articles, with joint liability where the decision was taken unanimously.

B. Dubai International Financial Centre (“DIFC”): Companies Law (DIFC Law No. 5 of 2018)

Companies incorporated in, or operating from, the DIFC are subject to DIFC Law No. 5 of 2018 (the “DIFC Companies Law”) and the DIFC Law No. 7 of 2018. The laws introduced a codified, prescriptive set of directors’ duties similar to the UK Companies Act 2006.

Directors of DIFC companies are subject to seven (7) principal statutory duties:

Duty to act within powers: Directors must act only within the powers conferred by the company’s constitutional documents and for the purposes for which those powers were conferred.
Duty to promote the success of the company: Directors must act in good faith in the manner most likely to promote the success of the company for the benefit of its shareholders, having regard to broader stakeholder interests, long-term consequences, and the company’s reputation.
Duty to exercise independent judgment: Directors must exercise their powers independently and may not agree in advance to vote in a particular way at the behest of a third party.
Duty to exercise reasonable care, skill and diligence: Directors must meet the higher of a subjective standard (their actual knowledge and experience) and an objective standard (what is reasonably expected of a person in their role).
Duty to avoid conflicts of interest: Directors must avoid situations where their personal interests conflict or may conflict with those of the company.
Duty to declare interests in transactions: Directors must disclose any personal interest in a proposed or existing transaction or arrangement as soon as reasonably practicable.
Duty not to accept benefits from third parties: Directors must not accept benefits from third parties by reason of their position, unless acceptance cannot reasonably give rise to a conflict of interest.

Breach of any of these duties constitutes a contravention of the DIFC Companies Law, the consequences of which include personal civil liability, disqualification from directorship, and fines. Neither operational disruption nor geopolitical force beyond the director’s control provides a defence against failure to comply with these obligations.

C. Abu Dhabi Global Market (“ADGM”): Companies Regulations 2020

Companies incorporated in the ADGM are governed by the ADGM Companies Regulations 2020 (“ADGM Regulations”), which set out a common-law-based corporate framework and codify seven general directors’ duties. Those duties are broadly similar to the directors’ duties applicable under the DIFC Companies Law; however, the two regimes are separate and should be read and applied according to their own respective legislation. Accordingly, the consequences of a breach of directors’ duties under the ADGM Regulations should be analysed by reference to the ADGM regime, as discussed in Section VIII below.

D. Civil Law Framework: Federal Law No. 5 of 1985 and the New Civil Transactions Law (Effective 1 June 2026)

Under the UAE’s foundational civil law statute, Federal Law No. 5 of 1985 (the “Civil Code”), directors are subject to a number of essential obligations that underpin the governance framework applicable to UAE companies as a whole. Directors are required to exercise due care and diligence for the benefit of the company, acting with the standard expected of a prudent person in comparable circumstances. They must operate strictly within the scope of authority conferred upon them by the company’s constitutional documents, corporate resolutions, and applicable commercial customs. Directors are further obligated to act with honesty and integrity, prioritising the best interests of the company and its shareholders, and must ensure compliance with all applicable laws and regulations. These principles, derived from the Civil Code, operate in conjunction with the duties imposed under the CCL and form part of the broader legal framework within which directors’ conduct is assessed.

Federal Decree Law No. 25 of 2025 (the “New Civil Code”) repeals and replaces the Civil Code in its entirety. The New Civil Code takes effect on 1 June 2026, which will make it one of the most consequential legislative transitions to occur during the current conflict. Importantly, the New Civil Code preserves and carries forward the foundational duties of care, diligence, good faith and integrity applicable to directors under the Civil Code, ensuring continuity of the governance framework described above. In addition, the New Civil Code introduces certain new obligations that are of direct relevance to directors.

For directors, the most significant development in the New Civil Code will arguably be the codification of good faith obligations across the entire lifecycle of a contract, including during negotiations. Article 121 of the New Civil Code expressly provides that all stages of negotiation must conform to the requirements of good faith, and that deliberate withholding of material information that would affect a contract’s validity constitutes an act of bad faith that gives rise to liability in damages. Article 122 extends the affirmative duty to disclose material and decisive information to both negotiating parties; notably, any contractual term purporting to limit or exclude this disclosure obligation is void, and the aggrieved party may seek annulment of the contract in addition to damages.

For directors overseeing transactional negotiations (mergers and/or acquisitions), financing discussions, renegotiations with suppliers or lenders, or restructuring conversations during the current period of instability, these provisions are not merely contractual considerations but could be construed as governance obligations. A director who instructs management to withhold material information from a counterparty in the context of a distressed negotiation may expose the company to liability under the New Civil Code from 1 June 2026 onwards. Whilst these provisions impose obligations and liability on the contracting parties themselves, and do not expressly create personal liability for directors, directors should nonetheless be aware of the potential risk for the company.

The New Civil Code also introduces enhanced hardship provisions and preserves the force majeure framework, providing courts with explicit authority to modify, reduce, or terminate contractual obligations where performance has become objectively impossible or excessively onerous due to unforeseeable public events. This framework affects how boards must approach contractual risk review and disclosure during the current crisis.

III. Core duties and how to apply them in times of Geopolitical Instability

A. Duty of Due Care

The duty of due care is not ordinarily measured against what a director knew in hindsight; it is measured against what a reasonably diligent director in the same position should have known and done at the relevant time. In the current regional context, this could translate into a responsibility on boards to:

actively obtain comprehensive legal and financial briefings on the company’s exposure to geopolitical risk across its entire contractual portfolio;
review, rather than delegate, the assessment of force majeure and hardship positions under material contracts and engage experts to discuss the outcome of such assessment;
obtain independent legal advice on war, terrorism and political risk carve-out provisions in the company’s insurance policies; and
conduct assessments on sanctions-related counterparty exposure, including indirect exposure through intermediaries and payment channels.

A board that relies only on management’s verbal assurance that “things are under control” without independent evidence of review may not be regarded having discharged its duty of due care adequately. Board members should remember that in a crisis environment, the consequences of reliance on inadequate information are heightened.

B. Acting in the ‘best interests’ of the Company

The CCL requires directors to act in the best interests of the company. The DIFC Companies Law and ADGM Regulations have long required directors to “promote the success” of the company, a formulation that is broader than mere short-term financial interest and extends to employees, commercial relationships, long-term consequences, and community impact.

In a geopolitical crisis, this duty creates tension with several common board responses:

Capital flight or hasty re-domiciliation: A decision to restructure corporate entities at speed, without proper legal and tax analysis, may serve the risk appetite of certain shareholders but may not be in the best interests of the company as a legal entity.
Premature force majeure declarations: Declaring force majeure incorrectly or prematurely may itself constitute a breach of contract, exposing the company to a repudiation claim. A decision to declare force majeure should be a board-level governance decision, not an operational one.
Information asymmetry in investor communications: Directors of public companies who selectively disclose or fail to disclose, material information about geopolitical impacts on the business may be breaching both their duty to the company and their obligations under securities regulations.

C. The practice of maintaining Records

Record-keeping is, in practice, one of the most frequently overlooked aspects of corporate governance in the UAE, and one of the most consequential when things go wrong. The obligation to maintain accurate board minutes, related party transaction records, and prescribed governance disclosures is not new in principle, but enforcement has historically been inconsistent; the DIFC Companies Law and the ADGM Regulations reinforce this through their respective Registrar’s expanded inspection powers, which permit it access to company records on demand.

In a crisis environment, the practical consequence is that a director who made reasonable decisions based on available information, but who cannot evidence that the decisions were informed and deliberated upon, will struggle to defend himself against a subsequent claim that the board acted improperly. The contemporaneous documentary records, i.e. board minutes, legal advice memoranda and risk assessments, are the director’s primary protection.

Directors should ensure that:

Board meetings are held with the proper quorum and notice, even if conducted remotely due to travel disruption.
Minutes record not merely the decisions taken, but the information considered, the questions asked, the advice received, and the options evaluated.
Any reliance on management recommendations is documented together with the basis for the board’s acceptance of that recommendation.
A conflicts-of-interest register is maintained and updated, particularly given that crisis environments often produce related-party transactions that would not arise in normal circumstances.

IV. Operational Disruption vs. Structural Challenges

One of the most consequential errors a board can make in a crisis is conflating operational disruption with structural failure. There may be materially adverse legal consequences of mischaracterising the nature of the challenge facing the company.

Most of the immediate impacts of the current conflict, travel disruption, workforce constraints, communication delays, supply chain interruptions, elevated insurance premiums, are primarily operational in nature. They affect how a company functions but do not undermine the legal integrity of the company’s legal structure itself. Holding company structures, in particular, are not dependent on day-to-day operational activity and remain legally intact notwithstanding operational pressures on subsidiaries.

This distinction matters because directors who misidentify operational pressure as structural vulnerability may:

initiate unnecessary restructuring that triggers tax liabilities, contractual change-of-control provisions, or regulatory notifications; or
dissolve entities or terminate arrangements hastily without considering whether the decision is in the long-term interests of the company.

The optimal legal approach is to calibrate the response to the nature and severity of the risk, i.e. operational challenges should be met with operational measures, while structural challenges demand structural remedies. The latter require careful legal analysis, independent board-level deliberation, and documented decision-making and must not be undertaken in haste.

V. Duties towards employees during times of Geopolitical Instability

Directors have legal obligations not only to the company and its shareholders but also to its employees. Under UAE Labour Law (Federal Decree Law No. 33 of 2021 on Labour Relations), several employer obligations remain in full force during periods of geopolitical disruption:

The fundamental duty to provide a safe working environment is unaffected by external conflict. Directors must ensure that risk assessments are conducted, that security considerations are addressed in working arrangements, and that employees are not required to travel to locations where safety cannot reasonably be assured.
Salaries must be paid in full and on time (and failure to do so can lead to potential violation of the Wage Protection System and related penalties). There is no automatic right to reduce or withhold salaries due to external events; any such measure requires employee consent and must fall within narrow statutory exceptions.
The legal framework in the UAE does not impose an obligation on employers to relocate or repatriate employees during a crisis, therefore directors should carefully distinguish between the obligation to repatriate upon termination, which is express and statutory, and any broader welfare-based obligation to arrange evacuation during an ongoing crisis.

Directors of companies established in the DIFC and the ADGM should bear in mind that those jurisdictions operate freestanding, common-law-influenced employment regimes that apply as the primary governing employment law for in-zone employees, rather than UAE Labour Law for in-zone employees. DIFC employees are governed by DIFC Law No. 2 of 2019 and ADGM employees by the Employment Regulations 2024 (replacing the ADGM Employment Regulations 2019 with effect from 1 April 2025). While the substantive obligations most relevant in a crisis broadly track those imposed onshore under the UAE Labour Law as described above, the underlying frameworks differ in important respects, including the contractual basis of the employment relationship, the calculation and protection of end-of-service gratuities, the procedural requirements for lawful termination, and the forum in which claims are pursued (the DIFC and ADGM Courts respectively, rather than the onshore labour courts). Directors of DIFC and ADGM employers should therefore ensure that crisis-period decisions on workforce continuity, remote working, salary deferrals or restructuring are calibrated to the regime that actually governs the contract, rather than to UAE Labour Law as a default.

Directors who fail to address employee welfare obligations in a documented manner risk claims being raised against the company and reputational damage A board that has not reviewed its employment risk exposure in the context of the current conflict, including business continuity arrangements for employees, remote working policies, and evacuation protocols where applicable, may be construed as not discharging their duty of care in a comprehensive manner.

VI. Framework for Board Action in times of Geopolitical Instability

The following framework represents a recommended good practice guide for board engagement during the current period of geopolitical instability. It does not derive from any single statutory or regulatory instrument but rather reflects the practical application of the legal obligations discussed in this article. It is not exhaustive, and specific legal advice should be obtained for individual circumstances.

1. Immediate Actions (Within 72 Hours of Escalation in Geopolitical Instability)

a.) Convene a meeting of the senior executive management with proper notice. Document attendance and confirm the authority to convene remotely if required.

b.) Establish a dedicated ‘Special Situations Group’ comprising relevant members of senior executive management, legal counsel, and key operational leads to assess the company’s exposure to the crisis, coordinate the company’s response, and provide ongoing reporting to the board.

c.) Consider force majeure and hardship positions across all material contracts.

d.) Direct management to conduct a conflict exposure assessment across supply chain, counterparty credit, sanctions screening, insurance coverage, and regulatory notifications.

e.) Confirm that the company’s money laundering reporting officer has been briefed on the conflict’s implications for the company’s anti-money laundering (“AML”) risk profile, compliance with applicable legal requirements as stipulated within the law, including exposure to potentially sanctioned counterparties and related risks and ensure that such confirmation is documented.

2. Short-Term Actions (Within Two Weeks)

a.) Conduct a thorough review of all war, terrorism, government action, political risk and business interruption exclusions in the company’s insurance portfolio.

b.) Review and update the conflicts-of-interest register, with particular attention to any related-party transactions that have arisen or may arise as a result of the crisis.

c.) Prepare (or update) a business continuity plan addressing legal obligations to employees, counterparties, and regulators, and have it reviewed and approved by the board.

d.) For companies with upcoming contract negotiations, ensure that the board and relevant management are aware of the disclosure obligations imposed by the New Civil Code (effective 1 June 2026), particularly regarding information material to contract validity and performance.

e.) Establish and maintain structured channels of communication with employees to address their safety, wellbeing, and operational continuity, including regular updates on security arrangements, remote working protocols, and any measures taken by the company in response to the crisis.

3. Ongoing Obligations

a.) Board minutes must document the substance of deliberations, not merely decisions. Retain legal advice received, risk assessments provided, and the basis for board approvals. Directors who disagree with a board decision should ensure that their dissent is recorded in the minutes, as under the CCL, a director who votes against a resolution and has their objection so recorded may be absolved of liability arising from that decision.

b.) Monitor regulatory communications from all relevant regulators, including the Central Bank of the UAE, the Dubai Financial Services Authority (“DFSA”) and the Abu Dhabi Global Market Financial Services Regulatory Authority (“FSRA”), in respect of any crisis-specific guidance. Regulatory notifications must be made promptly where required.

c.) Monitor and maintain awareness of any reliefs, incentives, aid programmes, or support measures announced by government authorities and regulators in response to the crisis and ensure that the company’s eligibility for and access to such measures is assessed and acted upon in a timely manner.

d.) Ensure that the company complies with all applicable company law regimes and regulatory requirements.

VII. The Spectrum of Director Liability

A director who fails to meet the obligations described above faces a spectrum of potential consequences, depending on the nature and severity of the breach and the applicable legal regime.

Civil Liability

Under each of the CCL, the DIFC Companies Law and the ADGM Regulations, a director who breaches their duties may be held personally liable to the company for losses arising from that breach, with remedies that include compensation, and, in appropriate cases, other equitable remedies ordered by the court. The CCL expressly renders void any provision in a company’s constitutional documents that purports to exempt a director from personal liability. Similarly, the ADGM Regulations declare void any provision that attempts to exempt a director from liability for negligence, default, breach of duty, or breach of trust. Directors cannot, therefore, rely on contractual or constitutional protections to shield themselves from the consequences of governance failures.

Regulatory Sanctions

Both the UAE Ministry of Economy and the CMA have enforcement powers under the CCL. The Governance Regulations issued under the CCL specify fines not exceeding AED 10 million for violations of governance requirements. Directors of DIFC companies may be subject to fines, disqualification, and other measures imposed by the DIFC Registrar or the DFSA. Directors of ADGM companies are subject to equivalent measures imposed by the ADGM Registrar of Companies and the FSRA.

Criminal Liability

The UAE Penal Code (Federal Decree Law No. 31 of 2021) and sector-specific legislation, notably the Federal Decree Law No. 10 of 2025 on Combating Money Laundering, Terrorism Financing and the Financing of Proliferation (the “New AML Law”), read together with UAE Cabinet Resolution No. 134 of 2025 (the “Implementing Regulations”), establish a materially more developed and enforcement-oriented framework for the potential criminal exposure of directors and senior management. The regime goes beyond a straightforward actual knowledge standard. In particular, the New AML Law permits knowledge to be inferred from “sufficient indications or evidence”, lowering the evidentiary threshold by allowing reliance on circumstantial factors such as transaction patterns, inconsistencies, or unexplained financial flows, without requiring full proof of a predicate offence. In parallel, the Implementing Regulations expressly broaden the concept of “senior management” to include individuals with decision-making authority over risk management, compliance, and operational governance, thereby capturing directors and other key decision-makers within the scope of potential accountability. Critically, however, liability is not automatic and does not arise solely by virtue of position. It is contingent on a fact-specific assessment of whether senior management approved appropriate policies, ensured their effective implementation, maintained adequate oversight, and responded to identified risks. The framework thus materially elevates the risk profile for directors while remaining risk-based and evidence-driven, requiring demonstrable deficiencies in governance or control.

Disqualification

A director of an onshore company, DIFC or ADGM company who is found guilty of fraud, abuse of power or serious conflict-of-interest violations may incur both civil and criminal liability. Such conduct can result in removal from office, disqualification from future board roles and regulatory action against the director. A director of a DIFC company who has been convicted of a criminal offence involving dishonesty or moral turpitude in any jurisdiction within the preceding ten years may be disqualified from board service. A director of an ADGM company may be disqualified by order of the ADGM Court or the Registrar under the ADGM regime on grounds including conviction of an indictable offence connected with the management of the company, fraud, or unfitness in the context of an insolvent company or participation in wrongful trading. The UAE CMA’s ‘fit and proper’ criteria for public company directors, as set out in the CMA’s applicable governance regulations, include requirements of integrity, accountability, and transparency that are directly relevant to directors’ conduct in a crisis.

VIII. Conclusion

The conflict in the Middle East has reshaped trade routes, capital flows, and commercial relationships across the region, and is now in a fragile pause marked by temporary ceasefires and suspended operations. In the immediate term it is not reshaping the law. The duties that directors of UAE incorporated companies owe to their companies, their shareholders, their employees, and their regulators remain fully binding in times of geopolitical instability and during any interim ‘pause’ in hostilities, just as they are in the ordinary course. In several important respects, the legal framework that applies to directors during the current crisis is now stricter, more codified and more closely scrutinised than the framework that applied before it.

The UAE’s recent removal from the Financial Action Task Force (“FATF”) grey list in February 2024 and from the EU’s high-risk jurisdictions list in July 2025 creates a regulatory dynamic where the UAE has strong incentives to demonstrate continued effectiveness. With an upcoming on-site FATF Mutual Evaluation sometime in the middle of 2026, enforcement activity is expected to increase throughout the year. This together with the 2025 CCL Amendments and the New Civil Code’s imminent entry into force, creates a governance environment in which the consequences of board-level inaction or inadequate deliberation are more serious than they have been before.

The directors who emerge from this period without adverse legal consequence will be those who treated governance not as an administrative function to be maintained, but as an active, documented, and board-led discipline. The law has always required this. The crisis simply makes the consequences of failing to meet that standard impossible to ignore.

If you are a director, general counsel or company secretary seeking guidance on how the legal and regulatory developments discussed in this article affect your board’s obligations, or if you require assistance with governance reviews, crisis-preparedness frameworks, regulatory compliance or restructuring considerations during the current period of instability, please do not hesitate to contact Al Tamimi & Company. Our team across practice areas, including Corporate, Employment, Litigation and White Collar Crime, advises boards and senior management across all UAE jurisdictions, including onshore, the DIFC and ADGM, and provides integrated, commercially focused counsel tailored to the challenges of the current environment.

Drawing on the depth of our broader regional platform, we also offer a full suite of specialist practice areas across the MENA region, enabling us to support clients on complex, cross disciplinary mandates involving regulatory, transactional and contentious issues.

Contact Them:

For further information, please contact Andrew Tarbuck (Partner, Head of Corporate), Alyzeh Zahid (Of Counsel), Ibtissem Lassoued (Partner, Head of Compliance, Investigations & International Cooperation), Samir Kantaria (Partner, Head of Employment & Incentives), Naief Yahia (Partner, Head of Dispute Resolution), or any member of the Al Tamimi & Company team.

Key Contact

Alyzeh Zahid, Of Counsel, a.zahid@tamimi.com

Country

United Arab Emirates