Conflicts and related-party protocol in Abu Dhabi Global Market

Abu Dhabi Global Market applies its own regime for conflicts and related-party protocol, separate from the wider Emirate and from the mainland UAE courts. A director who holds an interest in a proposed transaction must disclose it to the board before a decision is taken, and the record of that disclosure sits inside the company rather than on a public register held by the Registration Authority. Get the sequence wrong and it is the transaction itself, not only the director's position, that becomes exposed to challenge.

A holding company incorporated in Abu Dhabi Global Market is finalising a services agreement with a supplier in which one of its non-executive directors holds a minority stake. The board meeting is scheduled for next week, the papers are drafted, and nobody has raised the director's interest as a separate agenda item. Whether that omission can still be corrected, and what happens to the contract if it is not, depends on a test set by Abu Dhabi Global Market's own company law rather than by general commercial practice.

This page sets out the test Abu Dhabi Global Market applies to a director's interest, what has to be recorded once it is disclosed, where a dispute over an undisclosed interest would be heard, and where a conflicts and related-party protocol review by this firm stops.

What changes in Abu Dhabi Global Market

Most conflicts-of-interest regimes in the region borrow language from English company law without adopting its case law. Abu Dhabi Global Market is different. Its Companies Regulations sit inside a common-law framework administered by ADGM's own courts, and a director's duty to avoid a conflict is treated as a fiduciary duty enforceable on ordinary common-law principles, not as a compliance checklist attached to a licence. A conflicts and related-party protocol review for a company doing business in Abu Dhabi Global Market therefore starts from the constitution and the board's own procedure, not from a government form.

A director of an ADGM company owes a statutory duty to avoid a situation in which the director has, or could have, an interest that conflicts with the interests of the company, together with a related duty to disclose any interest in a proposed or existing transaction to the board before the board acts on the matter. 01

The practical difference from a mainland UAE company is the forum. A dispute about whether a transaction should stand is not resolved by reference to the Federal Commercial Companies Law but by the ADGM Courts applying the regulations directly, which changes both the pleading and the remedy available. The equivalent protocol for a British Virgin Islands company follows a different test entirely; see conflicts and related-party protocol in the British Virgin Islands for the comparison.

The local test behind conflicts and related-party protocol in Abu Dhabi Global Market

The test the board of directors applies is whether the director has, or could reasonably be seen to have, an interest that is material to the transaction under discussion. Materiality is judged from the terms of the deal, not from the size of the director's stake. A small shareholding in a counterparty can still trigger the duty if the terms being negotiated are themselves the point in question.

Once an interest is identified, the sequence matters more than the disclosure itself. The director must disclose the interest before the board considers the matter, not after approval has already been discussed informally. A disclosure made after the fact does not cure the earlier decision, and the transaction remains open to challenge on the basis that the board reached it without being properly informed.

This is where directors' duties and personal liability intersect with the company's own exposure. A director who fails to disclose is exposed personally to a claim for breach of duty, and the period within which the company can challenge the transaction runs from the date it was concluded, not from the date the conflict comes to light. A board that only notices the omission at the next annual review may already be past the point at which the transaction can be unwound.

A board that discovers an undisclosed interest after the transaction has closed is choosing between two remedies, and both narrow with time. If your board has already approved a transaction involving a director's interest that was not put on the table beforehand, the question is how much of it can still be unwound and what stands if it cannot.

Assess your director exposure Write to info@hreithlaw.com with the jurisdiction and the structure.

Where the filing, register or forum consequence lands in Abu Dhabi Global Market

There is no separate public register of related-party transactions in Abu Dhabi Global Market. The disclosure and the board's decision on it are recorded in the minutes of the meeting at which the interest was raised, and that record is kept among the company's own registers rather than filed with the Registration Authority. 02

This does not mean the position is invisible. A beneficial owner of a counterparty with an undisclosed connection to a director can still be identified through the company's own beneficial owner register, which is a separate statutory filing from the conflicts record and is examined independently once a dispute arises. Where a related-party transaction also touches a shareholder arrangement, the enforceability question is separate again; see the jurisdiction brief on shareholder agreement enforceability in Abu Dhabi Global Market.

A transaction entered into without the required disclosure is voidable at the company's own option, and a claim to set it aside, or to recover any gain the director made from it, is a matter for the ADGM Courts, applying the regulations directly rather than federal UAE company law. The window for exercising that option narrows once the counterparty has fully performed under the contract, and it closes altogether once both sides have settled the account without reservation. 03

The forum matters in practice, not only in theory. A claim brought in the ADGM Courts proceeds under a common-law procedure and precedent built specifically for the free zone, which is a different exercise from litigating an equivalent dispute in the Abu Dhabi civil courts, and the two forums do not defer to each other's findings. For a broader comparison of how personal liability attaches across offshore centres once a transaction is challenged, see the comparison of director liability in Luxembourg and Cayman.

What this service does not include in Abu Dhabi Global Market

A conflicts and related-party protocol review maps the test above onto your board's actual composition and your transaction pipeline. It does not include acting as a director, secretary, nominee shareholder or trustee for the company, and it does not include supplying, sourcing or arranging any of those roles on the company's behalf. Abu Dhabi Global Market treats the provision of company services, including acting as a director for a fee, as a regulated activity requiring its own licence, and this firm holds no such licence in any jurisdiction. The boundary is regulatory, not a matter of preference: a firm without the licence that arranges for someone else to act in that capacity carries the same regulatory exposure as if it had acted itself.

• The disclosure test your board's constitution actually applies, checked against the regulations
• A marked-up conflicts and related-party policy ready for adoption by the board
• A review of past board minutes for undisclosed interests that remain live
• An assessment of which past transactions remain within the period during which they could still be challenged

What the review does produce is a written assessment of where your board's current practice diverges from the test, a marked-up disclosure form your directors can use going forward, and a note on which past transactions, if any, are still open to challenge. For what typically changes on a board's practice once a review like this has been carried through, see this note on the changes that follow a conflicts and related-party protocol review.

A board that leaves this unaddressed is not choosing to do nothing; it is choosing to let the limitation period run without anyone checking whether it already has. Once a transaction has been fully performed on both sides, the practical remedy for an undisclosed interest closes off, regardless of when the board finally notices.

Assess your director exposure Write to info@hreithlaw.com with the jurisdiction and the structure.

Frequently asked questions

What does conflicts and related-party protocol in Abu Dhabi Global Market require in practice?

A director must disclose any interest in a proposed or existing transaction to the board before the board acts on it, and the disclosure has to be specific enough for the rest of the board to judge whether it is material. The requirement is not satisfied by a general statement that the director "may have connections" to a counterparty.

Who inside the company is responsible for conflicts and related-party protocol in Abu Dhabi Global Market?

The duty to disclose sits personally with the director who holds the interest, and the decision on whether to proceed sits with the rest of the board, valid only if the disclosure was already on the table when the decision was made. Abu Dhabi Global Market does not require a separate company secretary role to receive the disclosure; the record is a matter for whoever chairs the meeting at which it is raised.

What evidence should the board keep on conflicts and related-party protocol in Abu Dhabi Global Market?

The minutes should record that the interest was disclosed, when it was disclosed relative to the decision, the terms of the transaction as put to the board, and how the interested director's vote, if any, was handled. Keeping this alongside the company's beneficial owner register makes the connection easier to demonstrate if a counterparty later questions it.

What happens if conflicts and related-party protocol in Abu Dhabi Global Market is not addressed?

The transaction becomes voidable at the company's own option, and the director faces a personal claim for breach of duty that is separate from any question about the transaction's validity. Both routes are heard in the ADGM Courts, not in the federal UAE court system, which most boards discover only once a dispute is already underway.

How often should conflicts and related-party protocol in Abu Dhabi Global Market be reviewed?

At minimum whenever the board's composition changes or a new category of related counterparty enters the business, since the test is applied transaction by transaction rather than confirmed once and forgotten. A board that only revisits the protocol at its annual review risks discovering an undisclosed interest well after the point at which the transaction could still be unwound.