When to Restructure Your UAE Company

Most companies in the UAE were set up to solve an immediate problem: get a licence, open a bank account, hire staff, start trading. The structure made sense at the time. But businesses change. Revenue grows, new shareholders come in, tax obligations emerge, and what worked as a two-person free zone startup no longer works as a 50-employee operation trading across the GCC.

Restructuring is not a sign that something went wrong. It is a normal part of a company's lifecycle. The question is not whether your structure will eventually need to change, but whether you will make that change proactively (on your own terms, with tax relief and regulatory support) or reactively (under pressure from a tax audit, a shareholder dispute, or a regulatory breach).

The UAE's legal framework has recently made restructuring significantly easier. Federal Decree-Law No. 20 of 2025, which took effect on 1 January 2026, introduced statutory redomiciliation between mainland and free zones, multiple share classes for LLCs, and simplified conversion between company forms. Companies have until 30 June 2026 to update their constitutional documents. At the same time, the corporate tax regime (now in its second full year) is forcing businesses to re-examine whether their structure is tax-efficient, compliant, and defensible under transfer pricing rules.

This article identifies the seven situations that most commonly trigger a restructuring for UAE companies, and explains the legal tools available for each.

1. Your structure does not work under corporate tax

This is the most common restructuring trigger we see. Many UAE businesses were set up before 1 June 2023, when there was no federal corporate tax. Structures that made sense in a zero-tax environment now create problems.

The free zone company that no longer qualifies for 0%. A free zone entity qualifies for the 0% rate as a Qualifying Free Zone Person (QFZP) only if it meets strict conditions: adequate substance in the free zone, qualifying income only, and proper segregation of mainland and free zone revenue. If a company's revenue increasingly comes from mainland customers or services performed outside the zone, it risks losing QFZP status. The penalty is severe: 9% on all income (not just the non-qualifying portion) for the current year and the next four years.

Multiple entities with unstructured related-party transactions. Many family businesses and SME groups operate through several entities (a mainland LLC, a free zone company, perhaps a DIFC entity) with money and services flowing between them on an informal basis. Under the transfer pricing rules (Articles 34-36 of Federal Decree-Law No. 47 of 2022 and Ministerial Decision No. 97 of 2023), all related-party transactions must be priced at arm's length. If aggregate related-party transaction values exceed AED 40 million, or connected-person transactions exceed AED 500,000, detailed disclosure is required. Restructuring to consolidate entities, formalise intercompany agreements, or establish a holding company can reduce both tax exposure and compliance burden.

Groups not using available relief. The corporate tax law provides for qualifying group relief on intra-group asset transfers (Article 26) and business restructuring relief for mergers and spin-offs (Article 27). Both are available on a no-gain, no-loss basis if conditions are met: the entities must be resident persons, use the same financial year and accounting standards, and the transfer must have a valid commercial rationale. There is a two-year clawback if the transferred asset or shares are subsequently disposed of. Businesses restructuring now can take advantage of these provisions, but only if the restructuring is planned with the conditions in mind.

For a practical walkthrough of the filing obligations these structures create, see our article on corporate tax filing mistakes UAE companies make. For transfer pricing documentation specifically, our guide to preparing TP documentation for the FTA covers the thresholds, methods, and filing requirements.

When to act: Before your next tax return. If your current structure creates unnecessary tax exposure or transfer pricing risk, restructuring after the tax period has closed is more expensive and harder to defend.

2. You want to move between jurisdictions without starting over

Before 2026, moving a company from a free zone to the mainland (or between free zones, or between Emirates) generally required liquidating the old entity and incorporating a new one. That meant new licences, new bank accounts, new contracts, new visa applications, and a gap in trading history.

The 2025 CCL amendments changed this. Companies can now transfer their registration (redomicile) between mainland authorities, between mainland and free zones, and between free zones, while preserving their legal identity, assets, liabilities, contracts, and corporate history. The implementing procedures are still being developed by individual authorities, but the statutory framework is in place.

Common redomiciliation scenarios we advise on:

• A DMCC company whose business is now primarily mainland-facing, and which can no longer satisfy QFZP substance requirements
• A mainland LLC that wants to move to the DIFC or ADGM to access a common law framework, international arbitration, and regulated financial services licensing
• A company registered in one Emirate that has relocated its operations to another and wants to align its corporate registration with its physical presence
• A group with entities in multiple free zones that wants to consolidate into a single jurisdiction

Redomiciliation requires shareholder approval, regulatory clearance from both the departing and receiving authorities, and careful review of existing contracts. Finance agreements, leases, and material commercial contracts may contain change-of-jurisdiction clauses that require notification or consent. Employee visas must be transferred. The process typically takes six to eight weeks once documentation is complete, though complex structures take longer.

For businesses considering a move into one of the UAE's financial free zones, our DIFC business setup guide covers the regulatory and licensing requirements.

When to act: When the cost of maintaining a misaligned structure (duplicate licences, substance requirements you cannot meet, regulatory obligations in a jurisdiction you no longer use) exceeds the one-time cost of redomiciliation.

3. Your shareholders are changing

A change in who owns the company is one of the most legally significant events in a company's life. It touches the memorandum of association, the shareholder agreement, regulatory approvals, and often the company's bank accounts and visa sponsorship.

Bringing in a new investor. If the company is taking investment, the existing structure may not support the deal. Investors typically want preference shares, anti-dilution protection, board representation, and a clear exit mechanism. Until the 2025 CCL amendments, mainland LLCs could not issue multiple share classes. Now they can. This means an LLC can offer shares with different voting rights, economic rights, or transfer restrictions without converting to a private joint stock company. For companies that have been putting off a fundraise because the LLC structure felt too rigid, this is a meaningful change.

Buying out a partner. Partner buyouts in UAE LLCs are governed by the memorandum of association, any side shareholder agreement, and the CCL's pre-emption provisions (Article 80). If these documents do not include a clear valuation mechanism and a buyout process, the departure of a shareholder can trigger months of negotiation or litigation. Restructuring before the buyout (by updating the MOA and shareholder agreement to include a workable exit mechanism) is far cheaper than litigating after the relationship has broken down.

Shareholder death. If a shareholder dies without a succession mechanism in place, the company risks operational paralysis while heirs, probate authorities, and remaining shareholders negotiate. The 2025 CCL amendments now permit succession mechanisms to be written directly into the MOA, including priority purchase rights for remaining shareholders and company buyback of the deceased's shares. This is a restructuring that should happen before it is needed.

We covered these ownership-change risks in detail in our article on shareholder agreement pitfalls in UAE LLCs.

When to act: Before the ownership change, not during it. Restructuring under time pressure (an investor waiting to close, a partner threatening litigation, heirs demanding their share) always produces a worse outcome than restructuring when the shareholders are aligned.

4. Your business has outgrown its legal form

The entity type that was right at launch is not always right at scale.

Sole establishment to LLC. A sole establishment offers simplicity but exposes the owner to unlimited personal liability. Once the business takes on material contracts, employees, or debt, an LLC (which limits shareholder liability to capital contributions) is usually the better structure. Since the 2021 CCL reforms, a single-person LLC is available, so there is no need to bring in a nominal partner.

LLC to private joint stock company (PrJSC). If the company is planning to raise capital through private placement or is working toward an eventual IPO, converting to a PrJSC may be necessary. The 2025 CCL amendments explicitly permit private joint stock companies to offer securities via private placement on UAE markets, subject to SCA conditions. The conversion process has also been simplified under the amended CCL.

Branch to subsidiary. Foreign companies that entered the UAE through a branch office sometimes find that the branch structure limits their ability to contract independently, own property, or bid on certain government tenders. Converting the branch to a subsidiary (a locally incorporated LLC or other entity) gives it a separate legal personality but requires careful handling of existing contracts, licences, and employee relationships.

Adding a holding company. Groups with multiple operating entities often benefit from inserting a holding company at the top of the structure. Under the UAE corporate tax law, dividends received by a UAE holding company from subsidiaries in which it holds a 5% or greater ownership interest are generally exempt from tax (participation exemption). Capital gains on the disposal of qualifying shareholdings are also exempt. This makes a UAE holding structure attractive for both local groups and international businesses with regional operations.

For businesses at the formation stage weighing their options, see our guide to LLCs in Dubai. If a holding company is part of the plan, our holding company setup guide covers the DIFC, ADGM, mainland, and free zone options.

When to act: When you start turning down opportunities because your current structure cannot accommodate them. If you cannot bid on a contract because you are a branch, cannot accept investment because your LLC has only one share class, or cannot ring-fence a new business line because everything runs through a single entity, the structure is holding the business back.

5. You are preparing the company for sale or investment

Buyers and investors do not just assess the business; they assess the structure. A poorly organised corporate structure increases due diligence time, reduces the buyer's confidence, and often leads to a lower price or a demand for pre-completion restructuring at the seller's cost.

What acquirers and investors typically flag:

• Entities with no clear commercial purpose (dormant subsidiaries, legacy free zone shells)
• Informal related-party arrangements without arm's length pricing documentation
• Constitutional documents that do not reflect the actual shareholder arrangement
• Missing or outdated shareholder agreements
• Unresolved regulatory filings (licence renewals, economic substance notifications, tax registrations)
• Group structures that make tax-neutral extraction of proceeds difficult

Pre-sale restructuring typically involves cleaning up the entity chart (liquidating dormant entities, consolidating overlapping operations), ensuring all intercompany agreements are documented and arm's length compliant, updating the MOA and shareholder agreement to include standard drag-along and tag-along provisions, and resolving any outstanding regulatory issues.

The 2025 CCL amendments help here. Statutory recognition of drag-along and tag-along rights in LLCs means these provisions can now be included directly in the MOA, giving them stronger enforceability than side agreements. This is particularly relevant for private equity and venture capital transactions where exit certainty is a deal point.

Our article on due diligence in UAE M&A transactions covers the full checklist buyers use to assess targets, which is the same checklist sellers should use to prepare.

When to act: At least 6 to 12 months before you expect to go to market. Restructuring under deal pressure leads to compromises, and sophisticated buyers will investigate why changes were made so close to the transaction.

6. Regulatory requirements have changed around you

Even if nothing has changed inside the business, the regulatory environment around it may have shifted enough to make the existing structure non-compliant or inefficient.

Corporate tax substance requirements. Free zone companies that qualified for QFZP status when the regime launched may find that the FTA's expectations around adequate substance (staff, assets, operating expenditure, and core income-generating activities in the zone) have tightened through guidance and enforcement practice. If the company cannot meet the substance test, it faces a choice: invest in substance (real office space, local employees, genuine decision-making in the zone) or restructure out of the free zone.

Transfer pricing documentation. Groups with related-party transactions now face mandatory transfer pricing documentation if they cross the relevant thresholds. If the group's structure was designed without transfer pricing in mind (as most pre-2023 structures were), it may include transactions that are difficult to benchmark or defend. Restructuring to simplify the intercompany flow, consolidate functions into fewer entities, or centralise management fees through a holding company can make the transfer pricing position cleaner and more defensible.

Domestic Minimum Top-up Tax (DMTT). From 1 January 2025, multinational groups with consolidated global revenue exceeding EUR 750 million are subject to a 15% minimum effective tax rate under Federal Decree-Law No. 60 of 2023. UAE entities in these groups that were previously benefiting from the 0% QFZP rate may now face a top-up to 15%. This is prompting some multinational groups to reassess whether their UAE free zone structures still deliver a net tax benefit, or whether restructuring to a mainland entity (subject to the standard 9% rate but without the QFZP compliance burden) makes more sense.

AML and compliance. The UAE continues to tighten its anti-money laundering framework. Companies that have not designated a compliance officer, implemented a risk-based AML programme, or registered their Ultimate Beneficial Ownership (UBO) information may find that restructuring is necessary to bring the business into compliance, particularly if the current structure makes UBO identification ambiguous.

For an overview of the regulatory changes affecting UAE companies in 2026, see our article on key regulatory changes for UAE companies. For a detailed breakdown of the 2025 CCL amendments specifically, see adapting your business to the 2026 reforms.

When to act: When you become aware of the regulatory change. Restructuring in response to an audit finding or enforcement action is significantly more costly than restructuring proactively.

7. The family business needs a governance framework

A significant share of UAE businesses are family-owned or family-controlled. These businesses often grow from a single entity owned by one or two founders into multi-entity groups spanning several sectors and Emirates. The family's involvement evolves too: the second generation joins the business, some family members are active in management while others are passive investors, and the founder begins thinking about succession.

Without a formal governance structure, these transitions create conflict. Common friction points include disagreements over profit distribution, disputes about who controls hiring and strategy, resentment from family members who contribute to the business but hold minority stakes, and uncertainty about what happens when the founder can no longer run the company.

Restructuring a family business typically involves:

• Separating ownership from management by establishing a holding company that owns the operating entities, with family members as shareholders of the holding company and professional management (family or non-family) running the operations
• Issuing multiple share classes to reflect different family members' roles: voting shares for active participants, economic (non-voting) shares for passive members
• Drafting a family charter or shareholder agreement that governs profit distribution, employment of family members, dispute resolution, and succession
• Embedding succession mechanisms in the MOA, using the provisions now available under the 2025 CCL amendments
• Establishing a UAE foundation or trust (in the DIFC or ADGM) to hold the family's shares and provide long-term continuity

For families with cross-border assets or members in different jurisdictions, the structuring exercise is more complex and may involve coordination with advisors in multiple countries. Our article on family business succession and restructuring covers governance frameworks, generational transfer, and the legal structures available in the UAE.

When to act: Before the second generation is fully involved, or at any point where the family's relationship to the business is changing. The hardest restructurings are the ones attempted after a family dispute has already started.

Quick reference: matching the situation to the tool

Getting the sequence right

Restructuring involves multiple workstreams that must be coordinated. A common mistake is treating it as a single legal step (file a form, get a new licence) when it is actually a sequence of interdependent decisions.

A typical restructuring sequence:

First, define the commercial objective. What is the restructuring meant to achieve? Tax efficiency, investor readiness, governance, operational simplification, or jurisdictional alignment? The objective determines the structure.

Second, model the tax position. Before moving any entity, asset, or contract, understand the corporate tax, VAT, and transfer pricing consequences. Check whether group relief or business restructuring relief applies. Confirm that the restructuring will not trigger a clawback on a prior relief election.

Third, review existing contracts. Identify any agreements that contain change-of-control, change-of-jurisdiction, or assignment clauses. Bank facilities, property leases, government contracts, and key customer agreements often require consent before a restructuring can proceed.

Fourth, obtain shareholder approval. The MOA will specify the majority required for material changes. If the restructuring involves issuing new share classes or changing the company form, special resolutions may be needed.

Fifth, execute the regulatory filings. This includes applications to the relevant licensing authority (DED, free zone, DIFC, ADGM), notification to the FTA for corporate tax and VAT purposes, updating commercial registers, and transferring employee visas if the sponsoring entity changes.

Sixth, update the constitutional documents. The MOA and any shareholder agreement should reflect the new structure, including any new share classes, governance provisions, and exit mechanisms introduced as part of the restructuring.

If you are considering restructuring your UAE company and want advice specific to your business, ownership structure, and commercial objectives, contact our corporate and commercial team. We advise businesses at every stage, from pre-transaction planning through regulatory execution. For companies that need to wind up entities as part of a restructuring, our guide to company liquidation in Dubai covers the voluntary and compulsory processes.

This article is published by Kayrouz & Associates for general information purposes. It does not constitute legal advice and should not be relied upon as such. For advice on your specific circumstances, please contact our team.

FAQ

Can I move my company from a free zone to the mainland without liquidating it? Yes. The 2025 CCL amendments introduced a statutory redomiciliation framework that allows companies to transfer registration between mainland and free zone jurisdictions while preserving legal identity, contracts, and corporate history. The detailed procedures vary by authority and are still being implemented in practice, but the legal basis is now in place.

Is there a deadline to update my company's constitutional documents under the 2025 CCL amendments? Companies have a six-month transition period from 1 January 2026 to update their memoranda of association and governance frameworks to comply with the amended CCL. Full compliance is expected by 30 June 2026. Even if full compliance is not mandatory for all provisions, updating early allows you to take advantage of the new tools (multiple share classes, succession mechanisms, drag-along and tag-along rights).

Will I pay corporate tax on assets transferred between my group companies during a restructuring? Not necessarily. The UAE Corporate Tax Law provides qualifying group relief (Article 26) and business restructuring relief (Article 27) that can make intra-group transfers tax-neutral. Both have specific conditions (same financial year, same accounting standards, common ownership thresholds, valid commercial rationale) and a two-year clawback period. Neither relief is available if any party to the transaction is a QFZP or an exempt person.

When is the right time to convert my LLC to a private joint stock company? Conversion is typically driven by a specific commercial need: the company is planning a private placement, preparing for an IPO, or needs to issue securities that the LLC structure does not support. If you are not raising external capital or planning a public listing, an LLC with multiple share classes (now available under the 2025 amendments) may give you the governance flexibility you need without the additional regulatory obligations of a PrJSC.

Do I need to restructure if my family business has no written shareholder agreement? You do not legally need to restructure, but you are exposed. Without a shareholder agreement, the company is governed solely by the MOA and the default provisions of the CCL. These defaults may not reflect the family's actual arrangements on profit distribution, management control, or succession. Adding a shareholder agreement and updating the MOA to use the new tools available under the 2025 amendments (succession mechanisms, multiple share classes) is a restructuring worth doing before a disagreement forces the issue.

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