Directors, Liability and Substance under the UAE Commercial Companies Law: The 2026 Reality

By 2026, the UAE Commercial Companies Law has fundamentally reshaped how the role of a company director is perceived and enforced. What was once seen as a formal or administrative position has become a core governance function with direct personal exposure.

This shift did not happen overnight, nor was it driven solely by new legislative text. Rather, it emerged through consistent enforcement and alignment with broader regulatory expectations. Today, the Companies Law operates on a clear assumption: a director is not a name on paper, but a decision-maker accountable for outcomes.

In earlier years, it was not uncommon for directors in UAE companies to play a largely nominal role. Appointment satisfied licensing or structural requirements, while real decision-making often occurred elsewhere. In 2026, this separation between legal form and operational reality has become increasingly problematic.

Regulators, banks, and counterparties now look beyond corporate registers. They assess who actually controls the business, who approves financial decisions, and where strategic direction is set. Directors are expected to demonstrate genuine involvement, oversight, and governance capacity. A lack of engagement is no longer neutral; it is viewed as a governance weakness.

Personal liability under the Commercial Companies Law extends beyond cases of fraud or deliberate misconduct. In practice, exposure often arises from inaction — failure to supervise, failure to question, or failure to align corporate decisions with the company’s actual financial and operational position. By 2026, “not knowing” is rarely an acceptable defence.

The concept of substance has therefore evolved. While physical presence and operational footprint remain relevant, substance now begins with governance. Effective decision-making, documented resolutions, clear allocation of authority, and demonstrable control over corporate affairs form the foundation of corporate credibility. A company may operate with a lean physical setup, yet still meet substance expectations if governance is coherent and verifiable.

Attempts to contractually limit or disclaim directors’ responsibility have also proven ineffective. The Commercial Companies Law prioritises statutory duties and actual conduct over internal declarations. Where directors exercise influence — or fail to exercise it when required — responsibility follows.

For businesses operating in the UAE, this has practical implications. Governance structures must reflect reality. The individuals formally appointed as directors must correspond to those exercising control. Legacy models built around convenience or speed increasingly generate risk, particularly in banking, compliance reviews, and shareholder disputes.

At Garant Business Consultancy, we regularly encounter companies that appear structurally sound yet face pressure precisely at the director level. In most cases, the issue is not illegality, but misalignment between formal roles and actual governance practices. In 2026, correcting this misalignment is essential for corporate resilience.

The Commercial Companies Law ultimately reinforces a simple principle: directorship is a function, not a title. Authority and responsibility are inseparable. Those who influence decisions must be prepared to stand behind them — legally, financially, and reputationally.

In the following publications, we will continue examining how the Commercial Companies Law operates in practice, focusing on ownership structures, shareholder rights, financial discipline, restructuring, exit planning, and liquidation — not as abstract legal concepts, but as operational realities in the UAE’s 2026 business environment.