UAE's New Commercial Companies Law: Adapting Your Business to 2026 Reforms

Federal Decree-Law No. 20 of 2025 rewrites significant portions of the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021). The amendments were issued on 1 October 2025, published in the Official Gazette on 14 October 2025, and entered into force the following day. They introduce tools that were previously unavailable to mainland companies: multiple share classes for LLCs, statutory recognition of drag-along and tag-along rights, a framework for corporate re-domiciliation, and mechanisms to resolve governance deadlocks.

For companies operating onshore, these changes narrow the gap between mainland structures and the more flexible regimes available in DIFC and ADGM. But several features depend on implementing regulations that have not yet been issued. This guide covers what is now possible, what remains pending, and what businesses should do while waiting for the rules to take shape.

Who Should Pay Attention

The amendments affect mainland LLCs, private joint stock companies, and any free zone entity conducting business outside its designated zone. Family businesses, venture-backed startups, joint ventures with institutional investors, and groups considering restructuring their UAE presence should review their corporate documents against the new framework.

For guidance on selecting the right company structure in the UAE, see our UAE company formation guide.

The Core Changes

Multiple Share Classes for LLCs

Before the amendment, mainland LLCs could only issue shares with equal rights. Every shareholder held the same entitlements to voting, dividends, and liquidation proceeds, regardless of their investment size or role in the business. This forced sophisticated investors to either accept a one-size-fits-all structure or route their investment through a free zone holding company.

Article 76 now permits LLCs to issue shares divided into different classes. These can vary by:

• Voting rights: Founders can retain control through high-vote shares while issuing low-vote or non-voting shares to investors
• Dividend priority: Preferred shares can receive distributions before ordinary shares
• Liquidation preferences: Investors can secure priority return of capital if the company winds up
• Redemption rights: Shares can be structured as redeemable at predetermined prices or upon specific events
• Other rights, privileges, or restrictions: The language is deliberately broad

The classes must be set out in the Memorandum of Association and recorded in the Commercial Register. The Cabinet will issue detailed rules governing the categories of shares, conditions attached to each class, and the procedures for implementation.

What this means in practice: The law now provides the legal architecture for mainland LLCs to accommodate investor-style terms: Series A, B, and C funding rounds with distinct rights for each class, employee share schemes with restricted shares, and family structures that separate economic interests from governance control. These arrangements previously required offshore or free zone holding vehicles. However, the process for implementing these structures depends on Cabinet regulations that have not yet been issued.

What to watch: Until implementing regulations are issued, the exact scope remains uncertain. Companies planning to introduce multiple share classes should monitor Cabinet decisions closely and avoid embedding arrangements that may need revision once the detailed rules emerge.

Drag-Along and Tag-Along Rights

These mechanisms have been standard in shareholder agreements for years. Drag-along rights allow a majority shareholder to compel minority shareholders to participate in a sale. Tag-along rights allow minority shareholders to join a sale initiated by a majority holder on the same terms. The challenge has been enforceability, particularly when the rights were contained only in a shareholders' agreement rather than the company's constitutional documents.

Article 14 now expressly permits LLCs and private joint stock companies to include drag-along and tag-along provisions in their Memorandum of Association or Articles of Association. Embedding these mechanisms in the constitutional documents gives them stronger legal footing and reduces reliance on side agreements that courts have occasionally questioned.

The pre-emption complication: For LLCs, statutory pre-emption rights remain in force under Article 80 of the CCL. Any share transfer to a third party must first be offered to existing shareholders, who can dispute the offer price and trigger a formal valuation process supervised by the competent authority.

This creates a potential conflict. A minority shareholder could invoke pre-emption rights to delay or obstruct a sale, even where drag-along provisions exist. The amendment does not explicitly override this mechanism.

Practical advice:

• Include a waiver of pre-emption rights in the shareholders' agreement alongside the constitutional provisions
• Structure drag-along clauses to coexist with, rather than assume they replace, statutory pre-emption
• For complex multi-party ventures where exit certainty is paramount, ADGM and DIFC structures may still offer cleaner execution

For companies navigating shareholder arrangements and corporate governance, our corporate law practice advises on structuring these provisions.

Corporate Re-domiciliation

Article 15 bis introduces a statutory framework for companies to transfer their registration from one competent authority to another while preserving their legal personality. This means:

• Moving between Emirates (Dubai to Abu Dhabi, for example)
• Transferring from mainland to a free zone, or from a free zone to the mainland
• Migrating between free zones
• Re-domiciling into the UAE from a foreign jurisdiction

The company retains its corporate history, contracts, licences, rights, and obligations. There is no need to dissolve the old entity and incorporate a new one.

Conditions for re-domiciliation:

• Both the original and destination registries must permit the transfer
• Shareholder approval is required (special resolution or absolute majority, depending on company type)
• No legal obstacles such as pending dissolution, violations, or register blocks
• Private joint stock companies need additional approval from the Ministry of Economy or the Securities and Commodities Authority
• The decision must be published

Why this matters: Companies that incorporated in a particular emirate or zone years ago may find that their current operations no longer align with that jurisdiction's advantages. A logistics company that set up in a free zone for tax efficiency might now want mainland access to GCC customs and trade treaty benefits. A tech startup that began onshore might want to move to ADGM for its common law framework. Previously, this required asset transfers, novation of contracts, and effectively starting over. The new framework preserves continuity.

Pending details: The Cabinet will issue regulations governing the process, including transfers involving ADGM and DIFC. Until those regulations appear, the practical steps for re-domiciliation remain unclear.

Governance and Deadlock Resolution

The amendments address day-to-day governance challenges that often paralyse closely held companies.

Manager resignation: A manager's resignation becomes effective 30 days after submission if the shareholders take no action, unless the Memorandum of Association or appointment contract provides otherwise. This prevents a situation where a manager is stuck in limbo because shareholders cannot agree on whether to accept the resignation.

Notification and replacement: Companies must notify the competent authority within 30 days when a manager's term expires and appoint a successor within the same period.

Board continuity: Boards can continue operating for up to six months after their term lapses to maintain operational stability while a replacement is arranged.

Deadlock intervention: If shareholders cannot agree on new board appointments, the competent authority (such as the Department of Economy and Tourism in Dubai) can appoint independent, non-shareholder directors for up to one year. This is a safety valve that prevents companies from becoming ungovernable when shareholders are at an impasse.

Practical implications: These rules give parties leverage in deadlock situations. A shareholder who refuses to participate in board appointments now faces the prospect of an externally appointed board. This should incentivise negotiation before matters reach that point.

Free Zone Companies Operating Onshore

The amendments clarify how the CCL applies when free zone companies conduct activities outside their designated zone. Free zone entities remain governed by their own regulatory frameworks while operating within the zone. However, when they set up a branch or representative office on the mainland, or otherwise carry out activities onshore, that branch must comply with the CCL and other UAE laws applicable to mainland companies.

The amendments also confirm that free zone companies have UAE nationality for the purposes of UAE law. This resolves a long-standing ambiguity that complicated cross-border structuring and national treatment in contracts and dispute resolution.

For free zone businesses with mainland exposure: Review your compliance framework to ensure alignment with the CCL for onshore activities. The focus has shifted from where the company is incorporated to where it actually conducts business.

Private Placements for Private Joint Stock Companies

Private joint stock companies can now offer securities via private placement on UAE financial markets, subject to conditions and controls to be issued by the Securities and Commodities Authority. This provides a regulated capital-raising channel without requiring conversion to a public joint stock company or listing on a stock exchange.

The amendment also allows the Ministry of Economy to amend or waive the 12-month founders' lock-up on share disposals in certain cases. Where securities are offered by private placement and listed on a UAE market, the lock-up no longer applies automatically.

For growth-stage companies: This creates a pathway for institutional capital raising that sits between informal funding rounds and a full IPO. Watch for SCA guidance on eligibility, disclosure requirements, and investor qualification criteria.

Non-Profit Companies

For the first time, the CCL recognises non-profit companies as a distinct corporate form. These entities must reinvest all revenues to advance their stated objectives and cannot distribute profits to shareholders or partners.

The Cabinet will issue regulations covering eligibility, governance, licensing, and permitted activities. This provides a formal structure for social enterprises, philanthropic initiatives, and organisations with ESG mandates that previously operated through ad hoc arrangements.

In-Kind Contributions

Shareholders can contribute assets rather than cash as capital. The amendment requires that in-kind contributions be valued by one or more valuers approved by the Ministry of Economy, at the contributor's expense. The competent authority can challenge valuations and appoint alternative valuers if necessary.

Contributions made without proper valuation are void. This strengthens capital integrity and reduces the risk of inflated valuations that have historically caused disputes in reorganisations and shareholder negotiations.

Until valuation standards are published: It remains unclear how specialised assets such as intellectual property, software, or intangible rights will be treated. Companies planning significant in-kind contributions should wait for Ministry guidance before proceeding.

Simplified LLC to JSC Conversion

The amendments streamline the conversion of an LLC into a joint stock company. Existing management can now lead the process, subject to shareholder approval and regulatory filings. The previous requirement for a founders' committee and pre-appointment of a board and auditor has been removed.

This makes conversion more practical for companies preparing for institutional investment or public listing. A general assembly must still be convened within 30 days of registration to formalise board and auditor appointments.

What Did NOT Change

The amendments modernise many aspects of the CCL, but several constraints remain in place.

Statutory pre-emption rights for LLCs: Existing shareholders retain the right to be offered shares before any transfer to a third party. This can complicate exits even where drag-along provisions exist. The amendments do not override this mechanism.

Competent authority discretion: Many procedural steps, including registration of share classes, approval of re-domiciliation, and intervention in deadlock situations, depend on how each emirate's licensing authority interprets and implements the new rules. Practice may vary between Dubai, Abu Dhabi, and other jurisdictions.

Free zone regulations inside the zone: Free zone companies remain governed by their respective zone rules when operating within the zone. The CCL applies only to activities conducted outside the zone on the mainland.

Public offering restrictions: Only public joint stock companies can make public offerings. Private joint stock companies can now conduct private placements, but this is not the same as a public listing.

Maximum shareholder limits: LLCs remain capped at 50 shareholders. Companies expecting to exceed this threshold will still need to convert to a joint stock company or use alternative structures.

Foreign ownership restrictions for strategic activities: Certain sectors still require UAE national participation in ownership or management, as determined by Cabinet resolution.

Summary of Key Changes

What Companies Should Do Now

Review Constitutional Documents

Examine your Memorandum of Association and any shareholders' agreements against the new framework. Identify provisions that could be strengthened by incorporation into constitutional documents, such as drag-along, tag-along, and succession arrangements.

Assess Structural Opportunities

If you have been using offshore or free zone holding structures primarily to access flexible capital structuring, the mainland LLC may now offer equivalent tools. Weigh the compliance, tax, and operational implications of consolidating into a single onshore vehicle.

Monitor Implementing Regulations

Several features, including multiple share classes, private placements, re-domiciliation procedures, and non-profit company rules, depend on Cabinet decisions and ministerial guidance that have not yet been issued. Avoid committing to arrangements that may need revision once the detailed rules emerge.

Plan Succession and Exit Mechanisms

The ability to embed succession clauses in constitutional documents is particularly relevant for family businesses. If your current structure relies on a shareholders' agreement to govern what happens when a shareholder dies, consider whether these provisions should be elevated to the Memorandum of Association for greater certainty.

Address Pre-Emption Right Conflicts

For LLCs with drag-along provisions, ensure your shareholders' agreement includes an explicit waiver of statutory pre-emption rights. Without this, a determined minority shareholder can still obstruct an exit.

Checklist: Adapting to the New CCL

Use this as a starting point for reviewing your corporate structure against the 2025 amendments:

• Review your Memorandum of Association for provisions that could be strengthened under the new framework (drag-along, tag-along, succession)
• Assess whether multiple share classes would benefit your capital structure or governance arrangements
• Check for pre-emption right conflicts if you have drag-along provisions in a shareholders' agreement
• Include explicit pre-emption waivers in shareholders' agreements where exit certainty is important
• Add deadlock resolution clauses to your constitutional documents before a dispute arises
• Review manager appointment terms and resignation procedures against the new 30-day rules
• Evaluate re-domiciliation options if your current jurisdiction no longer aligns with operational needs
• Monitor implementing regulations from the Cabinet and Ministry of Economy before finalising structural changes
• Update board continuity provisions to account for the six-month post-term continuation period
• Brief your shareholders on the new framework and its implications for exits and governance

Frequently Asked Questions

When did the amendments take effect?

Federal Decree-Law No. 20 of 2025 was issued on 1 October 2025 and published in the Official Gazette on 14 October 2025. It entered into force the day following publication.

Can an LLC issue non-voting shares in the UAE?

Yes. Article 76 of the amended CCL permits LLCs to issue shares with varying voting rights, including non-voting shares. However, the detailed rules for share class categories will be set by Cabinet regulation, which has not yet been issued. Until then, the practical steps for registering non-voting shares remain unclear.

Can I issue multiple share classes in my LLC today?

The statutory basis exists, but implementing regulations have not been issued. Until the Cabinet publishes detailed rules on share class categories and procedures, the practical steps remain uncertain. The Ministry of Economy has indicated that regulations are expected in 2026.

Do the amendments apply to free zone companies?

Free zone companies remain governed by their respective zone regulations while operating within the zone. However, when they conduct activities on the mainland through a branch or otherwise, those activities are subject to the CCL. The amendments also confirm that free zone companies have UAE nationality.

How do you re-domicile from DIFC or ADGM to mainland UAE?

Article 15 bis permits re-domiciliation between free zones and the mainland, but the detailed process depends on implementing regulations that have not yet been issued. Both the origin registry (DIFC or ADGM) and the destination registry must permit and approve the transfer. For financial free zones, additional approvals from the Ministry of Economy or Securities and Commodities Authority may be required. Monitor Cabinet decisions for procedural guidance.

Can I re-domicile my company from mainland Dubai to a free zone?

Yes, the statutory framework permits this. The company can transfer its registration while preserving its legal personality, contracts, and corporate history. However, practical implementation depends on both registries permitting the transfer and on forthcoming Cabinet regulations.

Do drag-along rights override pre-emption rights in LLCs?

No. The statutory pre-emption regime remains in place under Article 80. Drag-along and tag-along provisions must be structured to coexist with pre-emption rights, typically through explicit waivers in the shareholders' agreement. Without a waiver, a minority shareholder can invoke pre-emption to delay or obstruct a sale.

What happens if my company cannot appoint a new board?

If shareholders fail to reconstitute the board after the six-month continuation period, the competent authority (such as the Department of Economy and Tourism in Dubai) can appoint independent, non-shareholder directors for up to one year until the general assembly resolves the matter.

Can a private joint stock company raise capital without going public?

Yes. The amendments permit private joint stock companies to offer securities via private placement on UAE financial markets, subject to conditions to be issued by the Securities and Commodities Authority. This provides a regulated capital-raising channel without requiring conversion to a public company or listing on a stock exchange.

What is the maximum number of shareholders in a UAE LLC?

The 50-shareholder limit for LLCs remains unchanged. Companies expecting to exceed this threshold will need to convert to a joint stock company or consider alternative structures.

Conclusion

The 2025 amendments represent the most significant update to the UAE Commercial Companies Law since its enactment in 2021. They introduce tools that align mainland company structures more closely with international practice and reduce the need for offshore or free zone workarounds in many scenarios.

The practical impact depends on implementing regulations that remain pending. Companies should use this period to assess their structures, identify opportunities, and prepare for the detailed rules when they arrive.

For advice on adapting your business to the new CCL framework, contact our corporate and commercial team to discuss your specific situation.

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