Divorce for entrepreneurs is rarely just about splitting assets, it can mean unraveling years of work, blurred financial ties, and even the business itself. While most entrepreneurs are used to taking calculated risks…launching a startup, investing in new markets, navigating regulatory hurdles, there’s one risk few ever plan for: what happens to the business if their marriage ends?
In the UAE, where many couples blend personal and professional lives, divorce can have far-reaching consequences beyond emotional and familial stress. Shared bank accounts, informal business arrangements, or one spouse quietly supporting the other’s venture behind the scenes can all become tangled legal knots in court.
Whether you’re a co-founder with your spouse, or simply a business owner entering marriage, understanding how the UAE handles divorce involving business assets is critical.
To help untangle the complexities, we spoke to Bassel Boutros, Senior Associate at BSA Law, who answers key questions on how entrepreneurs can protect their business interests during a divorce in the UAE. From prenuptial agreements and informal contributions to navigating Sharia and civil law, here’s what every business owner should know before saying ‘I do’ or before saying ‘it’s over.’
TE: What are the most common legal pitfalls of divorce for entrepreneurs involving business assets?
Bassel: There is no doubt that when a marriage takes place, most people don’t consider the possibility of problems or circumstances that could lead to divorce. More concerning is that they are often unaware of the legal consequences of divorce. While the negative effects of divorce are primarily emotional and familial, they also extend to finances.
During the marriage, it’s common for spouses to merge their finances whether in daily expenses or in business ventures. The lack of a clear structure defining each partner’s true ownership and their share in any joint business project represents one of the biggest challenges faced by the courts when handling divorce cases, as there is often a lack of evidence.
Moreover, the absence of prenuptial agreements governing financial relations prior to marriage presents another challenge, as the consequences are then left to the discretion of the courts and subject to conflict of laws.
TE: How do courts in the region typically handle the division of privately held companies or family businesses during a divorce?
Bassel: The issue of dividing family business assets or family-owned commercial entities during divorce is one of the most complex matters and is subject to several factors, the most important of which is the law applicable to the dispute.
In the UAE, the dispute may be governed by the provisions of Islamic Sharia law, or by the civil law governing marriage and divorce, which can be applied to non-Muslims and foreigners residing in the country.
Courts may also apply foreign laws if one of the parties request it. The percentage of each spouse’s contribution to the commercial project also plays a significant role in how the assets are divided.
The court’s discretion plays a major role in determining this, due to the unique circumstances and details of each case, as well as other factors such as: the nature of the business and factors of its success, the duration of the marriage, the reason for the divorce, the financial and family situation of both spouses, etc.
TE: What challenges arise when spouses are co-founders or have informal roles in the same business, particularly when only one is named on paper?
Bassel: As mentioned above, in such cases, the actual partner whose name does not legally appear in the company’s structure is required to present evidence to the court of their participation in the capital, their financing of the company in one way or another, or proof of their work, management, or any other in-kind contributions.
Although this may initially seem simple and straightforward, in reality, it is often very difficult to prove especially in marital relationships where spouses typically do not keep the necessary supporting documents.
On the other hand, if both spouses play a significant role and share ownership in the company, divorce can have negative repercussions on the business, including a decline in operations, management problems, and in some cases, may lead to the closure or bankruptcy of the company.
TE: How can business owners here protect their commercial interests during divorce proceedings?
Bassel: No matter how strong the relationship between the spouses is, and regardless of all other considerations, it is essential for the couple to discuss current and future financial matters before entering into a marriage contract.
The spouses should sign an agreement that governs their financial relationship prior to the marriage (prenuptial agreement), as it is often difficult to reach an agreement once problems arise.
In this agreement, the parties should clearly specify how assets will be distributed or divided in the event of divorce and distinguish between assets acquired by each party before and during the marriage. It is also important to consult with professionals to help draft a valid contract that does not include any void, unenforceable, or illegal clauses.
The second issue the parties should be mindful of is determining the applicable law for marriage and divorce, so that they are aware of the governing laws and the rules that will apply if divorce occurs. Nevertheless, conflict of laws may still arise, particularly when the spouses are of different nationalities, the marriage was concluded in another jurisdiction, or if there are assets located abroad any of which could influence the dispute.
However, it is critical for the couple to consult legal professionals to understand the legal implications and minimise potential conflicts that may arise in the event of a future divorce.
TE: Have recent legal reforms, such as new family law provisions in the UAE, made it easier or more complex to navigate divorce as a business owner?
Bassel: The laws related to civil marriage and divorce (noting that they do not apply to Muslims) introduced by the UAE are considered pioneering in the region. These laws have adopted simple and modern principles for regulating divorce and its consequences.
Both spouses have the right to file for a no-fault divorce, and agreements between them can be registered with the newly established courts.
The courts rule on each case based on its specific circumstances, the nature of the marital relationship, the financial and social situations of both spouses, in addition to other criteria and considerations.
TE: What advice do you give entrepreneurs who are entering a marriage and want to safeguard their business?
Bassel: The advice that can be given in this context is for the couple to marry in Abu Dhabi or Dubai, where the courts of the Emirate will have jurisdiction to rule on the divorce case. Additionally, the divorce procedures are fast and straightforward.
It is also recommended to sign a prenuptial agreement that governs the financial and other relations between the parties, and have it authenticated by the court.
Both partners should have some degree of financial independence during the marriage period, with clear documentation of each party’s rights and ownership percentages in any businesses or commercial ventures.
TE: How do you ensure fairness for both parties when one spouse has contributed indirectly to the growth of a business (e.g. through unpaid work, support, or early-stage funding)?
Bassel: Justice is a relative concept and is subject to several factors, the most important of which is the ability to present evidence. Merely being entitled to a right is not sufficient to obtain it; it is always necessary to secure and retain supporting and evidentiary documents for that right.
What may seem fair to one party might be far from it from the perspective of the other. However, in all cases, the court’s assessment, based on the facts, evidence, and requests presented before it, remains the most crucial element in applying the law and achieving justice.
