Abu Dhabi Court of Cassation, Commercial Appeal No. 947 of 2023, judgment of 2 January 2024
A sole establishment is a commercial business (محل تجاري) belonging to its owner or licence holder, with no separate legal personality; its rights and obligations are his. Ownership passes to another person only by a disposition notarised and entered in the commercial register under Articles 39 to 41 of the Commercial Transactions Law, after which the transferee succeeds to its contracts (Article 42(1)). A disputed private acknowledgment cannot displace the trade licence and establish that the manager is the real owner and the licence holder a mere sponsor. Time to appeal runs from service where the party was absent from every hearing and filed no memorandum.
The UAE national registered as the owner of a sole establishment sued the man who ran it, asking the court to order transfer of the licence to another 'sponsor' and cancellation of the licence in his own name, alleging that the manager had breached their arrangement. The first-instance court dismissed the claim because the claimant was the registered owner and no legal transfer had taken place. The Court of Appeal reversed and, relying on a private written acknowledgment, declared that the manager owned the tangible and intangible elements of the establishment. The manager, who said he was only an employee and denied the acknowledgment, appealed in cassation.
The Court first held the appeal admissible although it was registered months after the appellate judgment: under Articles 153 and 178 of the Civil Procedure Law, time runs from service of the judgment on a party who did not attend any hearing or file a memorandum, and no service had been shown.
On the merits, a sole establishment is a set of assets allocated by its owner or licence holder to a commercial activity; it is a commercial business governed by the Commercial Transactions Law, has no legal personality separate from its owner and forms part of his estate. Its rights and obligations remain his unless ownership is transferred in the manner the law prescribes, by a disposition under Articles 39, 40 and 41, so that the transferee succeeds to the related contracts under Article 42(1); its elements, tangible and intangible including licences, are listed in Article 37. The licence named the claimant as holder, and the only evidence that he was a mere sponsor was a disputed private acknowledgment. The manager's earlier labour claim against the establishment as an employee, and the establishment's earlier claim against him for embezzlement, confirmed that no transfer had occurred. The Court quashed the judgment and, deciding the appeal itself under Article 186, restored the dismissal of the claim.
Arrangements in which a UAE national holds a licence while someone else runs and finances the business still surface in the courts. The judgment shows the Abu Dhabi courts treating the trade licence and the commercial register as decisive: a side letter claiming that the real owner is someone else will not, on its own, establish ownership of the business. Transfers of a business must follow the notarisation and registration procedure.
| Articles 37, 39, 40, 41 and 42(1) of Federal Decree-Law No. 50 of 2022 (Commercial Transactions Law) — text of articles 37, 39, 40, 41, 42 |
| Articles 153, 178 and 186 of the Civil Procedure Law (Federal Decree-Law No. 42 of 2022) — text of articles 153, 178, 186 |
“فالمؤسسة ليست لها شخصية اعتبارية مستقلة عن شخص مالكها أو صاحب الترخيص التجاري الخاص بها بل تعتبر عنصرًا من عناصر ذمته المالية”Short quotation from the judgment as published by the court. The full judgment is on the court’s official service.
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