Civil Law and UAE: Fraudulent Conveyance Rules

1. Introduction

Fraudulent conveyance refers to a transaction through which a debtor transfers, gives away, conceals, or otherwise disposes of assets in a manner that prejudices creditors or reduces the assets available for enforcement.

In UAE civil law, the closest traditional concept is the action for non-enforceability of the debtor's disposition against the creditor, commonly associated with the actio pauliana.

The basic idea is:

A debtor cannot deliberately or improperly reduce the asset pool available to creditors and thereby defeat legitimate claims.

The remedy does not necessarily mean that the transaction is universally cancelled. The central concept is often non-enforceability against the prejudiced creditor.

2. Current UAE Law: Important 2026 Update

The UAE's Federal Decree by Law No. 25 of 2025 promulgating the Civil Transactions Law came into force on 1 June 2026, replacing Federal Law No. 5 of 1985. The new Code reorganises the rules concerning creditor protection and debtor dispositions. (UAE Legislation)

For dispositions made under the current Code, the principal provision is Article 344, titled the claim for non-enforceability of the debtor's disposition against the creditor.

Article 344 provides, in substance, that a creditor whose right has become due may ask the court to declare a debtor's disposition non-enforceable where the disposition:

diminishes the debtor's rights;

increases the debtor's obligations;

results in bankruptcy or insolvency; or

aggravates bankruptcy or insolvency.

For transactions for consideration, the current rule requires the debtor to be bankrupt or insolvent and the beneficiary of the disposition to have been aware of that condition.

For certain gratuitous dispositions, the protection is stronger: the disposition may be non-enforceable against the creditor even if the beneficiary acted in good faith and the debtor did not commit fraud. (UAE Legislation)

Important: Older UAE cases generally discuss the corresponding provisions of the 1985 Civil Code, particularly Articles 396–400. Those provisions should not simply be quoted as the current article numbers because the 2025 Code reorganised the subject.

3. What Is a Fraudulent Conveyance?

A fraudulent conveyance can include transactions such as:

transferring a villa to a relative;

gifting shares to a family member;

transferring money to a related company;

selling assets to an affiliated entity;

moving valuable assets outside the UAE;

transferring assets at an artificial price;

creating a sham sale;

concealing the real beneficial owner;

transferring assets after a creditor's claim arises;

restructuring ownership to frustrate enforcement.

The transaction does not necessarily have to contain an explicit statement saying that the debtor intended to defraud the creditor.

The court may examine the surrounding circumstances.

4. The General Principle of Creditor Protection

The traditional UAE Civil Code treated the debtor's property as the general security for the debtor's creditors.

That principle remains important conceptually under the modern framework.

The basic relationship is:

Debtor's Assets

↓

General Asset Pool

↓

Creditors' Security

↓

Debtor Disposes of Assets

↓

Asset Pool Reduced

↓

Creditor's Enforcement Position Weakened

↓

Non-Enforceability / Other Appropriate Remedy

This prevents the debtor-creditor relationship from becoming meaningless merely because the debtor transferred assets to another person.

5. Fraudulent Conveyance vs Ordinary Asset Disposal

A debtor does not lose the right to deal with property merely because creditors exist.

Ordinary transactions may remain perfectly legitimate.

For example:

selling an asset at market value;

paying ordinary business expenses;

purchasing replacement assets;

paying legitimate debts;

conducting ordinary commercial transactions.

The issue arises where the transaction has the legally relevant effect of prejudicing creditors and satisfies the applicable statutory conditions.

Therefore:

Asset disposal ≠ fraudulent conveyance.

The court must examine the legal requirements.

6. Current Article 344: Core Rule

Article 344 of the 2025 Civil Transactions Law is particularly important.

It identifies several situations in which a creditor can seek non-enforceability.

First — Disposition for Consideration

For a transaction involving consideration, non-enforceability requires:

the disposition diminishes the debtor's rights or otherwise prejudices the creditor's enforcement position;

the debtor is bankrupt or insolvent; and

the person receiving the disposition knew of the debtor's bankruptcy or insolvency.

This is important because a genuine commercial transaction for value is not automatically fraudulent.

7. Gratuitous Transactions

The current law adopts a stronger creditor-protection rule for certain gratuitous transactions.

Where the debtor makes a gratuitous disposition that:

the debtor was not legally required to make; and

is not customary,

the disposition may be declared non-enforceable against the creditor even where the beneficiary acted in good faith and the debtor did not commit fraud. (UAE Legislation)

This is a major conceptual point.

Example

A debtor owes AED 20 million.

The debtor has assets worth approximately AED 20 million.

The debtor then gifts a valuable property to a relative.

The creditor may potentially challenge the gift under the statutory non-enforceability mechanism without having to prove that the relative actually knew about the debtor's financial difficulties.

8. Dispositions for Value

A more difficult situation arises where the debtor sells an asset rather than gives it away.

Suppose:

debtor owes AED 10 million;

debtor owns a property worth AED 8 million;

debtor sells it to an associate;

the associate knows that the debtor is insolvent;

the transaction reduces the creditor's ability to recover.

The creditor may potentially invoke Article 344, provided the statutory requirements are established.

This demonstrates an important distinction:

Gift → stronger statutory protection

Commercial sale → additional requirements

9. Successive Transfers

Fraudulent conveyance disputes can become complicated where assets are transferred several times.

Example:

Debtor → Relative → Related Company → Third Purchaser

The law therefore addresses circumstances involving successors.

Article 344 contains specific conditions concerning a subsequent transferee, including knowledge relating to the debtor's fraud and the earlier transferee's awareness. (UAE Legislation)

The objective is to prevent an asset from becoming immune from creditor protection merely because it has passed through multiple hands.

10. Article 345: Creditor Action Against a Debtor Whose Assets Are Exhausted

Article 345 deals with a situation in which creditors are demanding payment from a debtor whose debts encompass the debtor's property.

In such circumstances, the debtor cannot simply dispose of property by:

gift; or

disposition for consideration,

and thereby defeat creditor recovery.

The creditors may seek a judgment declaring the disposition non-enforceable against them and may seek sale of the property with distribution of proceeds according to law. (UAE Legislation)

11. Fraudulent Conveyance and Sham Transactions

A related but distinct concept is simulation or a sham transaction.

For example:

The debtor formally "sells" a property to a brother.

But:

no genuine price is paid;

the debtor continues to possess the property;

the debtor continues receiving the property's income;

the transaction exists only on paper.

The creditor may argue that the apparent transaction does not reflect the real transaction.

This is conceptually different from a genuine transaction that is nevertheless prejudicial to creditors.

Thus:

Simulation

"The apparent transaction is not the real transaction."

Paulian / non-enforceability claim

"The transaction may be genuine, but it cannot be enforced against the prejudiced creditor under the statutory requirements."

12. Indirect Action

UAE civil law also recognises another creditor-protection mechanism traditionally called the indirect action.

Under the former Articles 392–393, a creditor could, in specified circumstances, exercise rights belonging to the debtor where the debtor failed to exercise them and that failure threatened or aggravated bankruptcy.

The benefit would enter the debtor's patrimony and therefore become available as security for creditors.

This mechanism is conceptually different from fraudulent conveyance.

Indirect action

Debtor fails to exercise an asset/right

↓

Creditor exercises debtor's right

Paulian/non-enforceability action

Debtor disposes of assets

↓

Creditor challenges the disposition

13. Fraudulent Conveyance and Insolvency Law

Fraudulent conveyance rules should also be distinguished from the UAE's insolvency and bankruptcy framework.

A transaction may potentially be examined through:

civil-law creditor protection;

insolvency law;

bankruptcy proceedings;

corporate law;

enforcement law;

criminal law, where the facts satisfy a criminal offence.

Therefore, the same asset transfer can generate several different legal questions.

14. Burden of Proof

Fraudulent conveyance claims are usually evidence-intensive.

The creditor may need to establish matters such as:

existence of the debt;

debtor's ownership;

existence of the disputed transaction;

value of the asset;

timing of the transaction;

debtor's financial condition;

effect on the creditor's recovery;

knowledge of insolvency where required;

relationship between transferor and transferee;

circumstances surrounding the transaction.

Relevant evidence can include:

bank statements;

title documents;

company records;

share registers;

accounting records;

valuation reports;

emails;

WhatsApp or electronic communications;

transaction agreements;

payment records;

corporate resolutions.

15. Suspicious Circumstances

Courts may need to evaluate the totality of circumstances.

Potentially relevant facts may include:

transfer to a close relative;

sale shortly before enforcement;

unusual purchase price;

absence of genuine payment;

continued possession by the debtor;

transfer to an affiliated company;

rapid successive transfers;

unexplained movement of funds;

transactions inconsistent with ordinary business practice.

But a suspicious circumstance by itself does not necessarily establish every element of a legal claim.

16. Case Law

Case 1 — Emirates NBD Bank PJSC v Almakhawi [2025] DIFC CFI 039

This is one of the most significant recent UAE/DIFC authorities for fraudulent asset dispositions.

The Bank alleged that assets had been transferred in circumstances designed to frustrate enforcement of its judgment.

The Court discussed the UAE-law provisions concerning:

the debtor's general asset pool;

the indirect action;

simulation;

the action for non-enforceability of debtor dispositions.

The Court also referred to Dubai Court of Cassation Case No. 510/2024, decided 16 January 2025, concerning the creditor's ability to protect the general security represented by the debtor's assets. (DIFC Courts)

Principle

The debtor's assets constitute an important general security for creditors, and the legal system provides mechanisms to challenge dispositions that improperly diminish that security.

Importance

This case is particularly useful for modern UAE litigation involving:

family asset transfers;

related-party transactions;

asset dissipation;

judgment enforcement.

17. Case 2 — Trafigura Pte Ltd & Trafigura India Pvt Ltd v Prateek Gupta & Ginni Gupta [2025] DIFC CFI 040

This case is especially important for cross-border asset-dissipation disputes.

The DIFC Court considered potential UAE-law mechanisms including:

indirect claims;

simulation;

the Paulian action;

enforcement against assets;

transfers potentially made to defeat creditors.

The judgment expressly discussed the UAE Civil Code provisions on simulation and the Paulian action. (DIFC Courts)

Principle

UAE law provides several possible mechanisms for protecting creditors where assets have allegedly been moved beyond the debtor's effective asset pool.

Importance

The case is particularly relevant where:

the judgment is foreign;

assets are in the UAE;

the debtor has transferred assets to relatives or related entities;

enforcement is occurring across multiple jurisdictions.

18. Case 3 — Cesfin Ventures LLC / Cessna Finance Corporation v Al Ghaith Holding Company PJSC & Others [2020–2021] DIFC ARB 017/2020 and ARB 021/2021

This dispute involved allegations concerning the disposition of assets following an arbitral award.

The claimants pursued proceedings involving alleged:

asset dissipation;

alter-ego issues;

fraudulent conveyances; and

worldwide freezing orders.

The DIFC proceedings record that New York proceedings sought, among other things, to set aside alleged fraudulent conveyances. (DIFC Courts)

Principle

Asset dissipation can create complex parallel proceedings involving:

arbitration;

court enforcement;

freezing orders;

foreign proceedings;

allegations of fraudulent conveyance.

Importance

The case demonstrates that creditor-protection litigation can become international even when the underlying debt arises from arbitration.

19. Case 4 — Sandra Holding Ltd & Nuri Musaed Al Saleh v Fawzi Musaed Al Saleh & Others [2023] DIFC CA 003

The case involved allegations concerning property transferred through corporate transactions and arguments concerning fraud, beneficial interests and breach of trust.

The DIFC Court considered the international dimension of the allegations and emphasised that serious allegations of fraud must still be connected to the jurisdictional and remedial framework of the court. (DIFC Courts)

Principle

An allegation that a transaction is fraudulent does not automatically give a court unlimited jurisdiction over the transaction or related parties.

Importance

Fraudulent conveyance disputes can involve:

beneficial ownership;

corporate structures;

foreign assets;

trust-like relationships;

international transactions.

Jurisdiction must still be established.

20. Case 5 — Taaleem P.J.S.C. v National Bonds Corporation P.J.S.C. & Deyaar Development P.J.S.C. [2010] DIFC CFI 014

The dispute involved a substantial property transaction and allegations concerning a conflict of interest and the circumstances in which the transaction had been concluded.

The DIFC Court considered both DIFC-law contractual issues and UAE-law arguments concerning whether the transaction could be set aside. (DIFC Courts)

Principle

A transaction is not automatically set aside merely because there is a conflict of interest or an allegation of improper conduct.

The legal basis for rescission or setting aside must be established.

Importance

This is useful in fraudulent conveyance analysis because a creditor must identify the specific legal mechanism under which the transaction is challenged.

21. Case 6 — Dubai Financial Services Authority v ES Bankers (Dubai) Ltd [2014] DIFC CFI 032

This case concerned allegations of improper transfers of substantial funds and concerns about whether assets might be distributed before civil and criminal claims could be pursued.

The judgment illustrates the importance of preserving the asset pool while underlying claims are investigated and determined. (DIFC Courts)

Principle

Asset-preservation mechanisms can become important where there is a credible concern that assets may be dissipated before judgment or liquidation proceedings.

Importance

It helps explain why creditors may seek:

freezing relief;

preservation orders;

disclosure;

tracing;

enforcement measures.

22. Case 7 — Quortia Ltd v Frank Irrling [2025] DIFC CFI 117

The DIFC Court continued a freezing injunction restraining the defendant from disposing of or diminishing the value of UAE assets.

The underlying foreign proceedings included allegations of:

breach of contract;

unjust enrichment;

fraud; and

extortion.

The case demonstrates the use of DIFC judicial relief to preserve assets in support of foreign litigation. (DIFC Courts)

Principle

Asset preservation can be essential where a claimant demonstrates an adequate basis for restraining disposal pending determination of substantive proceedings.

Importance

A freezing order is not the same as a final finding that a conveyance was fraudulent. It is a protective procedural remedy designed to preserve the enforcement position.

23. Case 8 — Bank Sarasin-Alpen (ME) Ltd v Sassoon & Others [2023] DIFC CFI 009

The litigation concerned allegations that the business of a bank had been wrongfully and fraudulently transferred, directly or indirectly, to another entity.

The case demonstrates how allegations of fraudulent transfer can arise in the context of:

corporate restructuring;

directors and employees;

related companies;

liquidation;

asset transfers.

(DIFC Courts)

Principle

A corporate transfer may become the subject of civil proceedings where it is alleged that assets or business were wrongfully moved to defeat legitimate claims.

Importance

Fraudulent conveyance principles therefore extend beyond simple transfers of individual property.

24. Dubai Court of Cassation Case No. 510/2024

This authority was expressly discussed in Emirates NBD Bank v Almakhawi.

The principle identified by the DIFC Court was that the debtor's assets serve as a general guarantee for creditors, allowing creditors to monitor the debtor's assets and use legal mechanisms to protect that guarantee against fraudulent conduct or negligence. (DIFC Courts)

This is particularly important for understanding the policy behind the non-enforceability action.

25. Effect of a Successful Claim

A successful fraudulent-conveyance/non-enforceability claim does not necessarily mean:

"The transfer never existed for every purpose."

Instead, the critical consequence can be:

The transfer is not enforceable against the prejudiced creditor.

This distinction is fundamental.

Example

Debtor transfers property to A.

Creditor successfully challenges the transfer.

The result may permit the creditor to treat the property as available for enforcement notwithstanding the transfer.

The remedy is therefore focused on protecting the creditor's enforcement position.

26. Benefit of the Judgment

Under the traditional UAE framework, where a disposition was declared non-enforceable, creditors prejudiced by the disposition could benefit from that decision.

This reflects the collective nature of the debtor's general asset security.

The new Code continues the basic creditor-protection approach, although the statutory structure has been reorganised.

27. Time Limits

Time limits are particularly important.

Under the former 1985 Civil Code, Article 400 provided a limitation framework for the action for non-enforceability, including:

three years from knowledge of the relevant ground; and

an ultimate fifteen-year period from the relevant act. (Legal Advice Middle East)

The 2025 Civil Transactions Law reorganises these provisions, so the limitation period applicable to a particular transaction must be determined by reference to the new Code and, importantly, the date on which the disposition occurred.

This matters because the new law entered into force on 1 June 2026.

Therefore:

Do not automatically apply the current limitation provision to a pre-1 June 2026 transaction without analysing the transitional provisions.

28. Fraudulent Conveyance and Good Faith

Good faith operates differently depending upon the nature of the disposition.

For certain transactions for value, the recipient's knowledge of the debtor's insolvency is expressly relevant.

For qualifying gratuitous transactions, the current Article 344 provides protection to creditors even where the beneficiary acted in good faith and the debtor did not commit fraud. (UAE Legislation)

Thus:

Fraudulent intent is not necessarily an essential element of every creditor non-enforceability claim.

This is an important examination point.

29. Fraudulent Conveyance and Related-Party Transactions

Transactions involving:

spouse;

children;

siblings;

shareholders;

directors;

parent companies;

subsidiaries;

controlled companies

may receive particular factual scrutiny.

But:

Related-party transaction ≠ automatically fraudulent conveyance.

The court must still apply the relevant statutory requirements.

Evidence of:

market value;

actual payment;

timing;

insolvency;

business purpose;

possession;

control

may become important.

30. Fraudulent Conveyance and Corporate Personality

A company is ordinarily a separate legal person.

Therefore, the fact that:

Debtor Company → Related Company

does not automatically mean that the two companies are legally identical.

A claimant may need to establish an appropriate legal basis for:

setting aside a transaction;

tracing assets;

establishing beneficial ownership;

piercing the corporate veil where legally available;

pursuing directors;

pursuing recipients.

The Trafigura litigation demonstrates the difficulty of combining creditor claims with arguments concerning beneficial ownership and corporate structure. (DIFC Courts)

31. Fraudulent Conveyance and Freezing Orders

A creditor concerned about imminent asset dissipation may seek a freezing injunction.

The purpose is preventive.

It seeks to stop the defendant from:

removing assets;

transferring assets;

diminishing their value;

concealing property.

Cases such as Quortia v Irrling demonstrate this protective function in the DIFC. (DIFC Courts)

However:

Freezing order ≠ final fraudulent-conveyance judgment.

The claimant must still establish the substantive claim.

32. Fraudulent Conveyance and Simulation

These are closely related but legally distinct.

33. Fraudulent Conveyance and Unjust Enrichment

Unjust enrichment may provide another civil-law route where property or money has been transferred without lawful cause.

However, unjust enrichment should not simply be substituted for the specific creditor-protection mechanism where the facts fall within the statutory non-enforceability framework.

The appropriate cause of action depends on the facts.

34. Fraudulent Conveyance and Direct Harm

A creditor may sometimes plead that persons involved in the asset transfer directly caused harm.

But this requires careful distinction between:

contractual liability;

non-contractual civil liability;

creditor-protection remedies;

insolvency remedies.

A creditor should identify the precise legal basis for each claim.

35. Evidence Required in Practice

A strong claim may involve:

Financial Evidence

audited accounts;

bank statements;

loan records;

debt schedules.

Property Evidence

title deeds;

valuation reports;

transfer records.

Corporate Evidence

shareholder registers;

board resolutions;

company filings.

Transaction Evidence

sale agreements;

invoices;

payment confirmations.

Communications

emails;

messages;

internal correspondence.

Expert Evidence

forensic accounting;

valuation;

asset tracing.

36. Practical Example

Assume:

Company A owes Bank B AED 50 million.

Company A owns property worth AED 40 million.

After enforcement proceedings begin, Company A transfers the property to an affiliated company.

The consideration is substantially below market value.

The recipient knows Company A is insolvent.

Company A is left without sufficient assets.

The bank could potentially examine:

whether the debt is due;

whether the transfer diminished the debtor's patrimony;

whether the debtor was insolvent;

whether the recipient knew of insolvency;

whether the current Article 344 applies;

whether the transaction is simulated;

whether insolvency legislation provides an additional remedy;

whether urgent freezing relief is appropriate;

whether the asset can be traced; and

whether enforcement can proceed against the property.

37. Legal Formula

For examination purposes, remember:

Creditor's Right + Debtor's Disposition + Prejudice to Enforcement + Statutory Conditions = Possible Non-Enforceability

For a transaction for value under current Article 344:

Disposition for Consideration + Debtor Insolvency + Recipient's Knowledge + Creditor Prejudice = Potential Non-Enforceability

For a qualifying gratuitous transaction:

Unrequired/Uncustomary Gift + Creditor Prejudice = Potential Non-Enforceability, Even Without Fraudulent Intent

38. Key Distinctions

Fraudulent Conveyance ≠ Fraud Crime

A civil creditor-protection claim can exist without necessarily establishing a criminal offence.

Fraudulent Conveyance ≠ Every Bad Transaction

The statutory requirements must be established.

Non-Enforceability ≠ Automatic Universal Cancellation

The central remedy protects the creditor against the transaction.

Freezing Order ≠ Final Liability

It preserves assets pending determination.

Related-Party Transfer ≠ Automatically Fraudulent

The surrounding circumstances and statutory conditions matter.

Insolvency ≠ Automatically Fraudulent Conveyance

Insolvency is relevant to certain statutory conditions, but the legal elements must still be established.

39. Overall Conclusion

The UAE's fraudulent-conveyance framework is fundamentally based on the principle that a debtor's freedom to dispose of property is subject to the legitimate protection of creditors.

Under the current 2025 Civil Transactions Law, effective from 1 June 2026, Article 344 is the principal modern provision concerning the non-enforceability of a debtor's disposition against a creditor. It covers dispositions that diminish the debtor's rights, increase obligations, or cause or aggravate insolvency, with different requirements for transactions for consideration and gratuitous dispositions. (UAE Legislation)

The important legal mechanisms include:

non-enforceability of prejudicial dispositions;

simulation/sham-transaction claims;

indirect actions;

asset-preservation and freezing relief;

insolvency/bankruptcy remedies;

tracing and recovery where legally available;

civil liability claims where independently established.

The leading authorities discussed above—Emirates NBD Bank v Almakhawi, Trafigura v Gupta, Cesfin/Cessna v Al Ghaith, Sandra Holding v Al Saleh, Taaleem v National Bonds, DFSA v ES Bankers, Quortia v Irrling, and Bank Sarasin-Alpen v Sassoon—illustrate the different ways UAE/DIFC courts deal with asset dissipation, creditor protection, simulation, enforcement and alleged fraudulent transfers.

Short exam formula

Debt → Debtor's Assets → Prejudicial Disposition → Insolvency/Financial Prejudice → Statutory Conditions → Non-Enforceability → Asset Preservation/Enforcement → Creditor Recovery

Important transitional point: cases applying Articles 396–400 of the 1985 Civil Code remain valuable for historical and doctrinal analysis, but transactions occurring after 1 June 2026 must be analysed under the reorganised provisions of the 2025 Civil Transactions Law, rather than simply carrying forward the old article numbering.