The UAE has introduced a significant change to its corporate legal framework through Federal Decree-Law No. 20 of 2025, which came into force on 15 November 2025. This law amends and brings a shift in the existing UAE Commercial Companies Law (Federal Law No. 32 of 2021) in order to accelerate the country’s efforts to modernize its business environment and bring into line more closely with international best practices.
The amendments mark a notable shift from the traditional civil law-centric approach towards the adoption of concepts found in common law jurisdictions. It focusses on strengthening corporate governance, expanding shareholder rights, improving capital structuring flexibility, and enhancing corporate mobility within the UAE.
Key Amendments Introduced by Federal Decree-Law No. 20 of 2025
Free Zone Companies: The law clarifies compliance for branches of free zone companies operating onshore, confirming their status as UAE national companies. This change aligns with the UAE’s dual licensing framework and reduces regulatory uncertainty for free zone entities seeking to operate in the mainland.
Non-Profit Companies: Introduction of non-for-profit companies (NFPs) allows for structured social ventures, pending further regulations on governance and activities.
Share Capital and Shareholder Rights: The amendments modernize share capital structures for both Limited Liability Companies (LLCs) and Public Joint Stock Companies (PJSCs). These changes bring UAE company law closer to global standards, particularly in terms of flexibility and investor protection, though existing statutory pre-emption rights remain.
Drag-Along and Tag-Along Rights: Drag-along and tag-along rights are contractual and statutory mechanisms used in company law and shareholders’ agreements to regulate how shares can be sold, especially when there is a mix of majority and minority shareholders. They are designed to balance control, exit flexibility, and minority protection. These rights can now be included in company’s MOA/AOA, facilitating exits for majority shareholders while ensuring minority shareholders can participate in sales.
Succession of Shares: Companies can now include succession clauses in their MOA/AOA, enabling transitions upon a shareholder’s death, although court involvement may delay its execution.
Multiple Classes of Shares: LLCs can issue different classes of shares with varying rights relating to voting, dividends, and liquidation, enhancing flexibility in capital structuring. The full operational scope of this amendment will depend on forthcoming Cabinet regulations.
In-Kind Contributions: In-kind contributions are contributions made to a company’s share capital in a form other than cash. New valuation standards for in-kind contributions will improve transparency, protect shareholders, and ensure fair valuation through the appointment of accredited valuers.
Governance Continuity in LLCs: The law allows for the appointment of third parties to the board or management of an LLC in certain circumstances. This measure is designed to ensure business continuity and reduce the risk of operational paralysis caused by shareholder disputes.
Corporate Re-domiciliation within the UAE: Companies can now transfer their registration between jurisdictions within the UAE including onshore and free zone authorities, without losing their legal identity, facilitating strategic relocations.
Conversion to Public Joint Stock Companies: The process for converting to a Public Joint Stock Company is simplified. The amendment allows the existing management to oversee the conversion process, reducing procedural complexity and administrative burden.
Comparison of New Amended Law and Old Law
Category |
Federal Decree‑Law 32/2021 |
Federal Decree‑Law 20/2025 |
| Corporate Mobility | No unified mechanism for transferring companies between onshore, free zones, and financial free zones. | Introduces full corporate mobility, allowing companies to transfer between licensing authorities with continuity of legal personality |
| Share Classes & Capital Structuring | Limited flexibility; preferred and redeemable shares allowed but with constraints. | Expands new share classes, convertible instruments, and more flexible capital increase/reduction mechanisms |
| Shareholder Arrangements | Drag‑along/tag‑along rights not expressly recognized; relied on contractual practice. | Law now expressly recognizes drag‑along, tag‑along, voting agreements, and shareholder covenants |
| Minority Shareholder Protection | Basic protections existed but limited in scope. | Strengthened rights to call meetings, challenge abuse of majority power, and enhanced related‑party transaction controls |
| Corporate Governance | General governance obligations; less clarity on management continuity during restructuring. | Clearer rules on board duties, conflict‑of‑interest disclosures, and management continuity during mergers, conversions, and transfers |
| Corporate Transformations | Mergers, demergers, and conversions allowed but procedures were less streamlined. | Introduces streamlined, internationally aligned procedures for mergers, demergers, conversions, and cross‑jurisdictional transformations |
| Non‑Profit Companies | No dedicated legal category under the CCL. | New category of non‑profit companies added under amended Article (8), subject to Cabinet regulation |
| Jurisdictional Boundaries | Ambiguity between onshore vs. free zone vs. financial free zone authority. | Amendments clarify jurisdictional boundaries and regulatory overlap, improving certainty for investors |
| In‑Kind Contributions | Valuation rules existed but were less detailed. | More robust rules for valuation of in‑kind contributions and appointment of accredited valuers |
Conclusion
The amendments to the UAE Commercial Companies Law mark a meaningful step towards a more flexible and investor-friendly corporate regime. By formally recognising modern shareholder rights and governance practices, the law reduces uncertainty, supports smoother exits, and strengthens minority protections. For businesses, these changes present an opportunity to update corporate documents, align shareholder arrangements, and build structures that better support growth, stability, and long-term confidence in the UAE market.
We, Ayesha Al Dhaheri Advocates and Legal Consultants, are handling cases for and against the commercial companies depending on the nature of the cases. If you require any assistance or have any related inquiries, please feel free to contact us. Our team of expert lawyers will provide you with professional guidance every step of the way.