Modernising UAE Company Law: Key Amendments to the Commercial Companies Law in 2025
The UAE has issued Federal Decree-Law No. 20 of 2025 to amend key provisions of the Commercial Companies Law (Federal Law 32 of 2021). The Commercial Companies Law applies to certain juridical persons incorporated or set up in the mainland United Arab Emirates (UAE). Companies set up in free zones continue to be governed and regulated by the respective company laws issued by the relevant free zone authorities, except to the extent they carry out any activities within the mainland UAE.
These amendments form part of a modernization drive aimed at introducing internationally recognised governance concepts into the UAE’s companies law framework. The changes are intended to enhance flexibility in corporate structuring and governance, increase legal certainty for investors, and further align mainland UAE company law with global market standards, while better integrating the onshore (mainland), free zone, and financial free zone regimes.
In this piece, the Corporate and Commercial team at Galadari Law highlights the key changes introduced by the amendments and examines their practical significance for businesses operating in the UAE.
Wider Regulatory Scope and Free Zone Alignment
The amended law explicitly applies to foreign companies with a UAE presence and to free zone companies to the extent they conduct business within the territorial jurisdiction of the UAE mainland, in addition to the commercial companies established in the UAE.
In practice, if a free zone company sets up a branch or representative office outside its zone and within the mainland UAE (i.e. “onshore”), that branch shall, in respect of such onshore activities, comply with the federal Commercial Companies Law and other UAE laws applicable to mainland companies. Free zone companies remain governed by their own zone regulations while operating within the zone’s boundaries, but outside the zone and within the mainland UAE, they fall, in relation to such activities, within the purview of the Commercial Companies Law.
This essentially means that any free zone companies operating outside of the free zone jurisdiction in mainland UAE must ensure that they are compliant with both the relevant free zone regulations and to the extent applicable, the Commercial Companies Law. A critical and long-awaited clarification has now been introduced by the amendments to the Commercial Companies Law and is expressly reflected in Article 9(3). The provision removes any residual ambiguity by confirming that any company incorporated within the territorial limits of the UAE, including companies incorporated in free zones and financial free zones such as the DIFC and ADGM, shall hold UAE nationality. This puts to rest prior speculation that free zone or financial free zone entities could be treated as “foreign” companies lacking UAE nationality. While such entities continue to be governed by the regulatory frameworks administered by their respective free zone or financial free zone authorities, their legal nationality, as a matter of UAE law, is unequivocally that of the UAE.
Shareholder Rights: Drag-Along, Tag-Along and Succession Planning
The amendments empower shareholders of LLCs and Private Joint Stock Companies (PrJSCs) to include drag-along and tag-along clauses, as well as other transfer mechanisms, directly in their Memorandum of Association (for LLCs) or Articles of Association (for JSCs). This legislative clarification is now reflected in the Commercial Companies Law, which permits the inclusion of provisions allowing one or more partners or shareholders to compel a sale of shares upon the occurrence of pre-agreed conditions, or to require other partners or shareholders to participate in a sale on identical terms.
In addition, the law now expressly recognises succession planning arrangements at the constitutional document level. Partners or shareholders may agree in advance on the treatment of a deceased partner’s or shareholder’s shares, including granting the remaining partners, shareholders or the Company a right of first refusal to acquire such shares at an agreed price, with court determination of value as a fallback mechanism in the event of disagreement with the heirs.
In practice, while drag-along, tag-along, and succession arrangements have long been implemented in mainland UAE companies through shareholders’ agreements as a matter of contract, their enforceability was occasionally challenged on the basis that they were not reflected in the Memorandum of Association or were inconsistent with statutory pre-emption mechanisms under the Commercial Companies Law. The amendments significantly reduce this uncertainty by expressly permitting such arrangements to be embedded in the Company’s constitutional documents.
At the same time, the statutory pre-emption regime under the Commercial Companies Law has not been displaced. In practice, this means that drag-along, tag-along and succession mechanisms must be carefully structured to coexist with, or expressly override, statutory pre-emption rights within the company’s constitutional documents, rather than being assumed to operate automatically by virtue of a shareholders’ agreement alone.
By enabling shareholders to pre-agree on voluntary and involuntary transfer scenarios, including transfers triggered by death, the amended law reduces the risk of deadlock or litigation, thereby making the UAE a more attractive environment for investors who expect such modern governance tools.
Easier Company Conversions
The amendments make it clear that a company may convert from one legal form to another (for example, from an LLC to a public joint stock company (PJSC), or a PrJSC to a PJSC) without losing its legal identity. Notably, if an LLC or PrJSC chooses to convert into a PJSC, the process is streamlined: the company does not need to go through a brand-new incorporation or form a founders’ committee as traditionally required for a new PJSC.
Taken together, these changes reinforce the concept of corporate continuity and materially reduce the time, cost, and administrative complexity associated with converting to a joint stock structure, thereby making corporate reorganisations and capital market transitions more efficient under UAE law.
Mobility Through Re-domiciliation
Re-domiciliation is widely recognised under the companies’ regulations of several free zones in the UAE and could be undertaken for a variety of reasons, for example, shifting business to a free zone or another Emirate while maintaining the legacy of the juridical body, or re-domiciliation to a free zone due to tax efficiencies (or satisfying conditions to avail any exemptions under the corporate tax law).
However, re-domiciliation of a company to or from mainland UAE was not straightforward. For example, any attempts to re-domicile a company incorporated in mainland UAE to a free zone would require consent/no-objection certificate from the relevant competent authority in the mainland UAE. However, in practice, there has been no known procedure or mechanism to procure such consent. This inability halted any attempts at redomiciling.
In the above context, a groundbreaking change is the introduction of a statutory mechanism for re-domiciliation (also called delocalisation or continuation) of companies. The new Article 15 bis allows a company to transfer its registration from one jurisdiction to another within the UAE, for example, moving from one Emirate’s authority to another (e.g. Dubai to Abu Dhabi), or from a free zone to the mainland (and vice-versa), while maintaining the same legal entity.
In other words, a company can change its “home” registration without dissolving and reincorporating. The law sets conditions for such a move including that: both the original registry and the destination registry must permit it and approve the transfer, any required shareholder approval (a special resolution or majority consent of owners) must be obtained, and there should be no legal obstacles like pending dissolution or violations on the company’s record. PJSCs need additional approval from the Ministry or Securities and Commodities Authority (SCA) when re-domiciling. Once approvals are in place, the decision to transfer must be published as required by the authority so that creditors or interested parties are informed. This not only reduces administrative burden but also expands the free movement of businesses within the UAE, making it easier to restructure groups and optimize corporate setup. It effectively creates a unified national market where companies can choose the most suitable domicile within the country as circumstances change.
Establishment of a Non-Profit Company Framework
One of the most significant changes is the introduction of the non-profit company as a recognized legal form. The new law allows companies to be incorporated for non-profit purposes, meaning any profits must be reinvested into achieving the company’s stated objectives rather than distributed to shareholders. In essence, this creates a formal corporate vehicle for charities, foundations, social enterprises, and other ventures that aim to serve public or community interests.
The availability of non-profit companies provides an institutional model for social and developmental initiatives to operate with flexibility and transparency and aligns with the UAE’s goals of fostering sustainable development and social impact. Such non-profit companies will be subject to further Cabinet-issued rules regarding their permitted activities, governance, and any special exemptions. Therefore, the precise details and more importantly, the effectiveness of this newly introduced framework require further action by the legislature in the form of a Cabinet decision.
Governance and Management Continuity
The amendment clarifies rules on the resignation, removal, and continuity of managers and boards in mainland LLCs, addressing situations where management becomes stalled. A key change in Article 85(4) strengthens continuity when shareholders cannot agree on appointments.
Previously, an expired board of managers could stay in place for six months and the new appointments had to be made by the shareholders upon the lapse of such period, failing which the competent authority could intervene, but only by appointing a director from among the shareholders, which was often ineffective in cases of deadlock. The revised article now allows the competent authority to appoint a non-shareholder as an interim director or manager, enabling independent or qualified third parties to run the company for up to one year until shareholders resolve the impasse.
These changes improve corporate governance by ensuring mechanisms to fill management vacuums. The six-month extension gives shareholders time to act, but after that period the Authority may step in, preventing the company from being paralyzed by inaction.
Private Fundraising for Private Joint Stock Companies
Another notable development is that PrJSCs may now offer shares or other securities through private subscription within the UAE. Previously, only Public JSCs could invite public subscriptions, effectively requiring an IPO to access market investors.
This creates a new fundraising channel for privately held companies, allowing family businesses and growth-stage firms to raise capital and benefit from market liquidity and price discovery without assuming the full regulatory burden of a PJSC.
The ability of PrJSCs to offer their securities may, however, remain narrowly circumscribed and subject to conditions and controls to be prescribed by the SCA, in coordination with other competent federal and Emirate-level regulatory authorities.
As a logical corollary to this reform, the amendments further clarify that where a PrJSC offers its shares by way of private subscription and lists those shares on a financial market in the UAE, the statutory lock-in period applicable to PrJSCs under Article 266(1) read with Ministerial Decision No. 50/2025 shall not apply.
Flexible Share Capital Structures for LLCs
In a major liberalization, UAE limited liability companies may now create different classes of shares with varying rights and privileges. The new Article 76(4) allows LLCs to categorize partner shares into classes, with differences in voting power, dividend rights, redemption rights, liquidation preferences, or other special rights/restrictions. The Cabinet (upon the Minister’s proposal) will issue further rules governing what classes are allowed and the conditions for each, ensuring regulatory oversight of this new flexibility.
This amendment marks a major advancement in corporate finance for UAE private companies, aligning local practice with international standards and especially benefiting startups. Venture capital and private equity investors commonly require preferential share classes and special rights, and the new law now enables these venture-style structures within an LLC.
In-Kind Contributions and Valuations
The amendments tighten and standardize rules on non-cash (in-kind) capital contributions for all company types. LLC and JSC shareholders may still contribute assets, rights, or services, but such contributions must now be professionally valued by accredited valuers at the contributor’s expense. Previously, the law required such valuations to be done by a financial advisor approved by SCA even in case of LLCs, which restriction seems to have been removed. Such assessors must now be approved by the Ministry of Economy in coordination with the local authority having competence in relation to the affairs of the companies in the relevant Emirate (e.g. Department of Economy and Tourism in Dubai). This amendment may operate to provide LLCs with a wider range of assessors to choose from.
Public Joint Stock Companies – Founder Shares and Classes
The definition of a PJSC remains essentially the same, but the amendment fine-tunes the regulation of founder shareholdings. The Cabinet, based on a proposal from the SCA, will set the minimum and maximum percentage of capital that founders must subscribe to in a PJSC. This replaces the previous wording stating that the SCA may set the minimum and maximum capital.
Conclusion:
The 2025 amendments to the UAE Commercial Companies Law collectively represent a strategic leap in modernizing the country’s corporate landscape. By integrating flexibility (share classes, shareholder agreements, continuation of companies, etc.) into the existing civil law system, the reforms make it easier for businesses to operate and investors to participate in the UAE while maintaining legal stability. Companies now have more tools at their disposal: whether its structuring investment deals (through drag-along/tag-along rights and varied share classes), planning succession and exits, accessing capital markets privately, or relocating within the UAE to suit their needs. These changes reduce the need for workarounds and bring the UAE’s corporate framework closer to international best practices, thereby enhancing the country’s competitiveness as a leading investment destination.
For business owners and corporate counsel, the outcome is greater clarity and flexibility: it will be easier to configure companies in ways that attract funding, protect stakeholders, and adapt over time. Investors, both local and foreign, can take comfort in stronger governance provisions and more predictable exit options, which reduce risk. In a broader sense, the amendments reflect the UAE’s ongoing commitment to provide a flexible and robust legal environment that encourages innovation and growth in the private sector.
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Charbel Fadel
Partner |
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Faizan Daud
Senior Associate |
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Paul Baloukjy
Junior Associate |
