How Legacy and Fideicommissary Clauses in UAE Wills Protect Business Continuity

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Business continuity: How 'legacy' and 'fideicommissum' clauses in UAE wills protect surviving partners in 2026.

Testamentary legacy and fideicommissary clauses allow UAE business owners to ensure surviving partners retain control while heirs receive fair financial compensation.
Non-Muslim expatriates can elect their home-country law under Federal Law No. 28 of 2005 to govern succession, enabling use of mechanisms not available under Sharia.
Recent UAE company-law reforms grant existing partners statutory priority rights to purchase deceased shareholders' stakes at agreed value.
DIFC Courts Wills Service offers a Business Owners Will covering up to five UAE shareholdings with common-law certainty for non-Muslims.
Death of a general partner triggers automatic dissolution unless Articles of Association contain continuity clauses and partners resolve to continue within 60 days.
Legacy provisions bequeath shares directly to partners, while fideicommissary substitution requires heirs to transfer shares after receiving market-value payment.

UAE Wills Framework Gains New Business-Protection Tools

The death of a shareholder can trigger commercial paralysis, forced dissolution, or protracted disputes unless continuity mechanisms are embedded in both corporate governance documents and testamentary instruments. Legal advisors in the UAE are increasingly recommending that business owners combine sophisticated will clauses with amendments to Articles of Association to ensure seamless transfer of control to surviving partners. These structures are now being underpinned by 2026 statutory priority rights and expanded frameworks offered by the DIFC Courts Wills Service and RAK ICC registration procedures.

For non-Muslim expatriates, Federal Law No. 28 of 2005 (Personal Status Law) permits testators to choose their home-country law to govern succession to UAE assets, subject to court approval. This electoral mechanism enables business owners to deploy testamentary devices such as legacy clauses and fideicommissary substitution, drawn from Roman-law tradition, that would otherwise be unavailable under Sharia principles. The intersection of foreign-law wills, UAE Companies Law, and free-zone registries creates a multi-layered planning environment where careful drafting is essential.

What Are Legacy and Fideicommissary Clauses?

A legacy clause in a will bequeaths a specific asset (such as a company shareholding) directly to a named beneficiary. In the business-continuity context, a testator who is a shareholder leaves their shares as a legacy to surviving business partners, subject to the partners paying the testator's heirs market value for those shares. Ownership transfers directly to the partners, and the family receives financial compensation without becoming co-owners of the business.

Fideicommissary substitution, rooted in Roman law, imposes a binding obligation on the first heir or legatee (the fiduciary) to transfer property to a second beneficiary (the fideicommissary) upon specified conditions or events. Under this approach, heirs temporarily inherit the deceased's shares but are legally required to transfer them to surviving partners once they receive payment. The distinction matters because heirs retain greater control and security, as the transfer occurs only when compensation is delivered.

Both mechanisms achieve the same outcome: business partners maintain continuity of ownership and control, while heirs are fairly compensated without entanglement in commercial property management. Legal commentary stresses that such clauses must be identical across partners' wills and aligned with shareholders' agreements to prevent disputes.

UAE Company Law and Shareholder Death

Under UAE federal commercial law, the consequences of a partner's death vary by entity type. General partnerships and limited partnerships face automatic dissolution unless the Articles of Association contain continuity provisions and remaining partners unanimously resolve to continue operations within 60 days, with the resolution registered at the competent authority. Sole proprietorships are generally dissolved on the founder's death, though heirs may regularise the business or convert it into another legal form.

Limited liability companies (LLCs) normally continue despite a shareholder's death, and shares pass to heirs by operation of law subject to regulatory formalities. Public joint stock companies see shares transfer to heirs, but transfers must be registered in the company's share register following statutory procedures. Free-zone authorities such as RAK ICC require notarised death certificates, succession certificates from a competent court, UAE court orders recognising heirs, and resolutions authorising continuation or share transfer.

Recent company-law reforms introduced in 2026 grant existing partners statutory priority rights to purchase a deceased shareholder's stake at an agreed value. This framework aims to reduce inheritance-driven disputes, prevent unwanted third parties from acquiring control through sales, and align statutory protections with bespoke will and shareholder-agreement provisions.

DIFC Courts Business Owners Will

The DIFC Courts Wills Service offers a Business Owners Will tailored for non-Muslim expatriates who own shares in UAE free-zone or onshore companies. This will type covers up to five separate shareholdings in any free-zone or UAE onshore company incorporated under UAE Federal Law and situated within the UAE. Business Owners Wills are prepared using an online template, and testators may designate specific beneficiaries for each shareholding, integrate the will with shareholder agreements, and ensure probate orders are enforceable via arrangements with Dubai Courts.

Eligibility requires the testator to be non-Muslim, over 21, and of sound mind, with covered assets located in qualifying jurisdictions (currently Dubai and Ras Al Khaimah). Assets outside these jurisdictions remain subject to foreign-law wills governed by Article 17 of the UAE Civil Code, requiring legalised, notarised, and translated copies of applicable home-country laws and court approval. In practice, judges may still apply Sharia if foreign will terms are inconsistent with Sharia principles or if no will exists.

Structuring Wills to Prevent Commercial Paralysis

Legal advisors emphasise that testamentary provisions alone are insufficient. Partners should execute complementary co-ownership agreements (where they hold property directly) or shareholder agreements (where a company owns the asset) that mirror and reinforce will clauses. Co-ownership agreements should include buy-out clauses triggered on death, granting surviving partners the right to purchase the deceased's share at market value, with valuation methodology and payment terms aligned precisely with the will.

Where a company holds the property, the shareholder agreement must establish clear rights for surviving shareholders to acquire the deceased's shares, with payment flowing to heirs. Appointing an independent executor to oversee valuation, payment, and share transfer protects all parties and reduces family-business friction. Professional guidance stresses that informal nominee arrangements without proper testamentary backing can be treated as invalid dispositions, exposing nominees to liability.

Commentators note that 2026 marks a period in which UAE family businesses face "the largest wealth transfer in the region's history." Without structured planning, a founder's death may fragment ownership among numerous heirs, trigger governance disputes, and cause decision-making delays. Use of ADGM and DIFC foundation structures alongside onshore and free-zone wills is increasing as families seek to anchor long-term continuity.

Balancing Partner Continuity and Heir Protection

UAE corporate and inheritance frameworks stress that even when continuity for surviving partners is prioritised, heirs retain important protections. In general partnerships, amounts owed by remaining partners to the deceased's estate become debts from the date of death. Company-law reforms and shareholder agreements ensure heirs receive fair value (often via independent valuation or agreed formulas) for shares transferred to surviving partners or the company.

DIFC Wills and similar frameworks allow testators to ring-fence business interests for partners while allocating other assets (bank accounts, real estate, investments) to family members, balancing continuity with inheritance expectations. Guidance for expatriate entrepreneurs suggests using clearly drafted wills supported by notarised legal opinions to reassure heirs they will receive liquid claims even if they do not retain direct control over operating businesses.