In a landmark legislative move underscoring the UAE’s ambition to entrench its position as a globally competitive jurisdiction for business and investment, His Highness Sheikh Mohamed bin Zayed Al Nahyan, President of the State, issued Federal Decree-Law No. (20) of 2025 amending several provisions of Federal Decree-Law No. (32) of 2021 on Commercial Companies. The amendment was published in the Federal Gazette of the UAE (Issue 809 – Annex) on 14 October 2025 and entered into force on 15 October 2025, with certain procedural provisions phased in through the transition period extending into early 2026.

This amendment represents the most significant reform of UAE corporate law since the enactment of the principal statute in 2021. It introduces governance, financing and investment tools that were, until recently, the preserve of common-law financial free zones such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM). Below is a legal practitioner-oriented analysis of the most consequential changes for companies and counsel operating onshore.

1. Multiple Share Classes in Limited Liability Companies (Article 76)

Perhaps the most commercially significant innovation is the express permission for limited liability companies to issue multiple classes of shares with differentiated rights. The previous regime imposed strict equality among shares in voting and dividend entitlements, which constrained venture capital structures and sophisticated shareholders’ agreements. Under the amended framework, an LLC may issue share classes that differ in voting rights, dividend priority, liquidation preference, or redemption features—provided that all classes are duly registered with the competent authority to safeguard transparency.

2. Statutory Recognition of Non-Profit Companies (Article 8)

For the first time, UAE corporate legislation formally recognises non-profit companies pursuing social, philanthropic, cultural or developmental objectives. Such entities are prohibited from distributing profits to partners or shareholders; any surplus must be reinvested in the company’s stated purpose. A forthcoming Cabinet resolution is expected to set out the detailed framework for incorporation, governance and supervisory compliance—opening a new institutional pathway for civil society organisations and impact-driven initiatives previously forced into less suitable corporate vehicles.

3. Drag-Along and Tag-Along Rights

The Decree explicitly codifies, for the first time at the federal onshore level, drag-along rights enabling majority shareholders to compel minority shareholders to participate in a joint exit on equivalent terms, and tag-along rights allowing minority shareholders to sell their stakes alongside the majority on the same conditions. These rights may now be embedded in the constitutional documents of limited liability companies and private joint stock companies, providing far greater flexibility for M&A transactions and substantially reducing the friction historically associated with onshore exits.

4. Re-domiciliation Between Emirates and Free Zones (Article 15)

Subject to shareholder approval and the consent of the relevant licensing authorities, companies may now transfer their legal registration and licence between Emirates, from the mainland to free zones (and vice versa), or between free zones, while preserving the same legal personality, corporate history and existing contracts. This eliminates the historic need to dissolve and re-incorporate when realigning a corporate seat with commercial strategy, licensing requirements or investor expectations—a meaningful gain in legal continuity and operational efficiency.

5. Share Succession (Article 14) and Private Placements (Article 32)

Article 14 clarifies the mechanism for transferring shares upon the death of a shareholder at an agreed price, granting the company or existing shareholders a right of first refusal to acquire the deceased’s shares. This safeguard preserves corporate stability and prevents heirs from being involuntarily inserted into active management. Article 32 permits private joint stock companies to offer their shares or other securities through private placement on UAE financial markets, subject to the controls of the Capital Market Authority—opening new financing channels without resorting to a public offering.

6. Free Zone Companies as UAE Companies (Article 13) and In-Kind Contributions (Article 78)

The amendment formally confirms that free zone companies are UAE companies, dispelling long-standing ambiguity around multi-jurisdictional structures and facilitating dealings across the mainland-free zone boundary. Article 78 further allows partners in limited liability companies to contribute shares in kind in consideration for equity, with such contributions to be valued by an accredited valuer (or as otherwise agreed between the partners), subject to approval of the value by the competent authority.

Practical Recommendations for Companies and Counsel

Existing companies are advised to review their memoranda of association and articles to capture the benefits of the new toolkit—particularly multiple share classes and drag/tag rights—and to evaluate whether their capital structures and shareholders’ agreements should be restated. Organisations with non-profit objectives should assess restructuring options under the new framework as soon as the implementing Cabinet resolution is issued. Counsel should update standard shareholders’ agreements, share purchase agreements and M&A precedents to align with the amended regime.

Mohamed Al Azazi Advocates & Legal Consultants advises on the application of Federal Decree-Law No. 20 of 2025 across existing companies and new ventures—including capital restructuring, shareholders’ agreement drafting and M&A documentation aligned with the amended framework.