Legal Implications When a UAE Partner Secretly Starts a Competing Business

Partnerships in the UAE are built on trust, transparency, and shared commercial goals. However, when a business partner secretly establishes a competing company, it is considered a serious breach of legal and fiduciary duties. Such actions not only damage the existing business but also expose the partner to significant legal consequences under UAE law.

Breach of Fiduciary Duty Under UAE Law

Partners in a UAE commercial entity owe a duty of loyalty and good faith to one another. The UAE Commercial Companies Law clearly states that a partner cannot engage in competing activities without consent from other partners.

Secretly starting a rival business may constitute:

• Conflict of interest
• Misuse of company opportunities
• Violation of contractual and statutory obligations

If proven, the offending partner may be required to hand over profits made from the competing activity and compensate the business for financial loss.

People can also read: Understanding Your Rights During Police Investigation in the UAE

Misuse of Confidential Information and Trade Secrets

The risk becomes more severe when the partner uses internal resources to benefit the competing company. UAE law strictly prohibits the unauthorized disclosure or exploitation of:

• Client databases
• Business strategies
• Financial information
• Trade secrets and proprietary data

Such conduct may trigger civil claims, criminal penalties, and regulatory action, especially under cybercrime and privacy regulations.

Contractual and Commercial Consequences

Most partnership and shareholder agreements include non-competition and non-solicitation clauses. Violating them can lead to:

• Termination or removal as a partner
• Court-ordered cessation of competing business activity
• Freezing of shares or financial rights
• Claims for damages and loss of revenue

If no formal agreement exists, UAE courts may still intervene based on principles of good faith and unfair competition.

How Businesses Can Respond Legally

When suspicion arises, timely action is crucial. The affected partners may:

1. Gather Evidence: Emails, financial records, client communications, licensing documents.
2. Issue a Legal Notice: Formally demand cessation of competing activities.
3. File Civil Claims: For damages, profit recovery, or breach of duty.
4. Seek Precautionary Measures: Such as travel bans, asset attachment, or injunctions if justified.
5. Initiate Removal Proceedings: Depending on company structure and governing documents.

Early legal intervention often prevents further financial and reputational harm.

How TLG: The Legal Group Supports Clients in These Situations

Under the guidance of founder Saif Al Shamsi, TLG: The Legal Group provides specialized support to partners facing internal competition and breach of duty cases. The firm assists by:

• Reviewing partnership or shareholder agreements to identify enforceable rights
• Advising on available claims under UAE Commercial Companies Law
• Securing evidence of competing activity without breaching privacy laws
• Initiating legal notices, negotiations, or dispute resolution proceedings
• Representing clients in court or arbitration for compensation and partner removal
• Drafting stronger future agreements with non-compete and confidentiality protections

TLG’s experience in handling sensitive internal disputes ensures matters are approached strategically and discreetly.

Conclusion

A partner secretly launching a competing business is more than an ethical violation—it carries serious legal consequences in the UAE. Businesses that respond quickly, understand their rights, and seek expert legal guidance are better positioned to protect their interests, preserve company stability, and prevent long-term disruption.