Disclosure Letter Template for the United Arab Emirates

A Disclosure Letter is an essential legal document that accompanies major corporate transactions in the United Arab Emirates, serving as a formal mechanism for sellers to qualify or create exceptions to the warranties and representations made in sale and purchase agreements. This document ensures transparency between parties while protecting sellers from potential warranty breaches by clearly outlining known issues, contingencies, or circumstances that might otherwise conflict with broad warranty statements.

When do you need this document?

You will need a Disclosure Letter whenever you are involved in mergers and acquisitions, asset sales, or significant corporate transactions where warranties and representations are provided. This document is particularly crucial when selling a business or transferring corporate assets, as it allows you to disclose specific exceptions to the general warranties you are making about the business. The letter is typically prepared alongside the main sale and purchase agreement and becomes an integral part of the transaction documentation. In UAE corporate deals, both onshore and free zone transactions commonly require disclosure letters to ensure full transparency and legal compliance.

Key legal considerations

Your Disclosure Letter must be comprehensive and specific to provide meaningful legal protection. Under UAE law, you have a duty to disclose material information that could affect the buyer's decision or the transaction value. The document should clearly reference specific warranties in the main agreement and provide detailed factual disclosures rather than general statements. You must ensure that all disclosures are accurate and complete, as incomplete or misleading disclosures can still result in warranty claims. The letter should include standard disclosures for publicly available information, specific disclosures for known issues or contingencies, and any applicable legal proceedings or regulatory matters. Consider including disclosure schedules and supporting documentation to provide comprehensive coverage of all material exceptions.

Legal requirements in United Arab Emirates

Under Federal Law No. 5 of 1985 (Civil Code), you must fulfill disclosure obligations in good faith and provide complete information about material matters affecting the transaction. Federal Law No. 18 of 1993 (Commercial Transactions Law) establishes specific requirements for disclosure in commercial dealings, mandating transparency in business transactions. For corporate transactions, Federal Law No. 2 of 2015 (Companies Law) requires directors and shareholders to disclose material information that could impact corporate value or operations. If your transaction involves DIFC entities, you must also comply with DIFC Law No. 5 of 2005 (Law of Obligations), which governs contractual disclosure duties in the Dubai International Financial Centre. Additionally, Federal Decree-Law No. 45 of 2021 (Data Protection Law) may require specific disclosures if personal data is involved in the transaction. Ensure your Disclosure Letter is signed by authorized representatives and properly witnessed according to UAE legal requirements for enforceability.