--- title: "Warranties and Indemnities in UAE Share Purchase Agreements" date: 2026-10-02 author: "ABS Partners" url: https://abspartners.ae/warranties-indemnities-uae-share-purchase-agreements/ --- # Warranties and Indemnities in UAE Share Purchase Agreements Posted On - 2 October, 2026 • By - [Joe Mathew](https://abspartners.ae/people/joe-mathew/) ![Warranties and indemnities in UAE share purchase agreements](https://abspartners.ae/wp-content/uploads/warranties-indemnities-uae-share-purchase-agreements.jpg) Due diligence tells a buyer what is wrong with a target. The share purchase agreement (SPA) decides who pays for it. In UAE deals, that allocation of risk sits in three tools: warranties, indemnities and, increasingly, warranty and indemnity (W&I) insurance. This article follows on from our earlier piece on [due diligence in UAE M&A transactions](https://abspartners.ae/due-diligence-uae-ma-transactions/). It explains how diligence findings are converted into contractual protection, how sellers limit their exposure, and why the new UAE Civil Transactions Law, in force since 1 June 2026, matters to both sides of the table. ## **Warranties and indemnities: two different tools** A warranty is a contractual statement of fact about the target at signing and, usually, at completion. Typical examples are that the accounts are accurate, that the company holds all required licences, and that there is no pending litigation. If a warranty proves untrue, the buyer must show breach and then prove that the breach reduced the value of what it bought. An indemnity is a promise to pay for a specific loss, dirham for dirham, if a defined event occurs. The buyer does not need to prove a loss in the value of the shares. It only needs to show that the triggering event happened. The practical rule is simple. Warranties cover the unknown. Indemnities cover the known. Where diligence uncovers a specific problem, such as an unpaid corporate tax liability, a labour claim or an expired trade licence, the buyer should not rely on a general warranty. It should ask for a specific indemnity, a price reduction or an escrow. ## **The disclosure letter** Sellers qualify warranties through a disclosure letter. Any matter fairly disclosed against a warranty cannot later found a claim for breach of it. This makes the disclosure letter one of the most negotiated documents in the deal. Buyers should resist general disclosure of the entire data room. They should insist that each disclosure is specific, identifies the warranty it qualifies, and gives enough detail to assess its impact. Sellers, in turn, benefit from disclosing early and fully. Under the new Civil Transactions Law, a party who negotiates in bad faith, including by withholding material information, can face liability for the actual damage this causes, even before any contract is signed. Anything significant that is disclosed should move from the warranty schedule to the indemnity schedule or the price negotiation. ## **Limiting the seller’s exposure** No seller gives unlimited warranties. SPAs in the UAE typically use four limitation mechanisms. | **Mechanism** | **What it does** | **Points to negotiate** | | --- | --- | --- | | De minimis | Excludes individual claims below a set amount | The threshold, and whether related claims can be aggregated | | Basket | Requires total claims to exceed a threshold before any are paid | “Tipping” (recover from the first dirham) or “deductible” (recover only the excess) | | Cap | Sets the seller’s maximum total liability | Often a percentage of the price, with higher caps for title, capacity and tax | | Time limits | Sets a deadline for notifying claims | Shorter periods for general warranties, longer for tax and fundamental warranties | Fundamental warranties, such as title to the shares and authority to sell, are usually carved out of most of these limits and capped at the full purchase price. Specific indemnities are also often excluded from the de minimis and basket, since they address losses that both parties already expect. Limitations should never protect a seller who has acted fraudulently. Under UAE law, this is not merely a drafting choice. It is reinforced by the mandatory rules discussed in the next section. ## **The new Civil Transactions Law** Federal Decree-Law No. 25 of 2025 replaced the 1985 Civil Transactions Law on 1 June 2026. For onshore SPAs governed by UAE law, four changes deserve attention. First, agreed compensation: Under the new law, a court may reduce agreed compensation only if the debtor proves it is excessive or that the obligation was partly performed. It may award more than the agreed amount only where the creditor proves fraud or gross fault. This gives fixed-sum indemnities and caps greater predictability, but sellers should expect their caps to fall away in cases of fraud or gross fault. Second, pre-contractual conduct: The law addresses good faith in negotiations, disclosure duties and confidentiality. This adds statutory weight to the disclosure process. Third, limitation periods: The new law shortens several limitation periods, and the new periods can apply to periods already running when the law took effect. SPA claim periods should be checked against these statutory periods. Fourth, mandatory law: Parties to cross-border deals should not assume that a foreign governing law will displace mandatory UAE rules. Many sophisticated buyers therefore use ADGM or DIFC holding structures, where English common law principles on warranties and indemnities apply more predictably. ## **W&I insurance in deals** W&I insurance transfers warranty risk from the seller to an insurer. In a buy-side policy, the most common form, the buyer claims directly against the insurer for losses caused by a breach of warranty. This lets a seller, often a private equity fund or family group, exit cleanly with a low or nominal cap. The buyer, meanwhile, gets a creditworthy counterparty and avoids suing a seller it may continue working with. The product has become more common in Gulf transactions as international sponsors and funds have increased activity in the region. It has limits, however. Insurers do not cover matters the buyer already knows about, forward-looking statements, or areas where diligence was thin. Known risks still need specific indemnities or price adjustments. Insurers also scrutinise the quality of the diligence reports, so a well-documented diligence process directly affects the cover available. ## **Practical takeaways** For buyers: - Convert every material diligence finding into a specific indemnity, escrow or price adjustment, not a general warranty. - Reject general data-room disclosure and require specific, warranty-by-warranty disclosure. - Align SPA claim periods with the limitation periods under the new Civil Transactions Law. For sellers: - Disclose early, fully and specifically, both to qualify warranties and to manage pre-contractual liability. - Negotiate a clear package of de minimis, basket, cap and time limits, and expect fraud and gross fault to sit outside it. - Consider whether W&I insurance can support a cleaner exit. [Corporate & Commercial](https://abspartners.ae/practice-areas/corporate-commercial/)[Mergers & Acquisitions](https://abspartners.ae/practice-areas/mergers-acquisitions/) --- ## About ABS Partners > ABS Partners is a top-tier legal consultancy firm specializing in corporate, regulatory, and advisory services, delivering expert solutions for complex legal disputes with excellence and integrity. --- ## Important Links **Column 1** - [People](https://abspartners.ae/people/) - [Services](https://abspartners.ae/practice-areas/) - [Industries](https://abspartners.ae/practice-areas/) - [Insights](https://abspartners.ae/insights/) **Column 2** - [About Us](https://abspartners.ae/about/) - [Updates](https://abspartners.ae/news/) - [Careers](https://abspartners.ae/careers/) - [Contact Us](https://abspartners.ae/contact-us/) --- ## Follow Us - [LinkedIn](https://www.linkedin.com/company/100311808/) - [Facebook](https://www.facebook.com/profile.php?id=61552819263833/) - [Instagram](https://www.instagram.com/abs.partners/) - [YouTube](https://www.youtube.com/channel/UCepnubj-V_jSapMmZEtnWAw) ---