Companies Law Reform in the United Arab Emirates

Federal Decree-Law No. 20 of 2025 (the “Decree”), which came into effect on 15 October 2025 and amends Federal Decree-Law No. 32 of 2021 on Commercial Companies (the “Companies Law”), represents the most substantial reform of the corporate framework in the United Arab Emirates (“UAE”) in recent years. The amendments made pursuant to the Decree are reshaping how companies and investors approach structuring and governance in the UAE market. This high-level insight provides a brief overview of the most notable amendments to the Companies Law as imposed by the Decree and its practical implications.

Multiple Share Classes for Limited Liability Companies

The Decree now expressly permits limited liability companies (“LLCs”) to issue different classes of shares, addressing a longstanding limitation that previously required sophisticated equity structures to be established in free zones or offshore jurisdictions.

Pursuant to the Decree, LLCs are able to issue shares with differing rights with respect to voting, dividend entitlements, liquidation preferences, and redemption rights. Whilst the detailed implementing Cabinet Decision is still pending as of January 2026, early adopters are already engaging with the Ministry of Economy and Tourism and relevant authorities to structure these arrangements.

Statutory Recognition of Drag-Along and Tag-Along Rights

The Decree introduces express statutory recognition of drag-along and tag-along right mechanisms standard in common law jurisdictions but previously lacking explicit legal basis under UAE civil law.

These rights may now be incorporated into constitutional documents rather than relying solely on private shareholders’ agreements, providing greater certainty of enforcement. This is particularly significant for private equity and venture capital investors who have historically structured investments through offshore holding companies to access these protections.

Corporate Re-Domiciliation

The Decree establishes a statutory framework for re-domiciliation of companies between jurisdictions within the UAE. Companies can transfer registration from one licensing authority to another while maintaining legal personality, corporate history, and all existing rights and obligations.

Permitted transfers include movements between Emirates, from mainland to free zones, and involving financial free zones (i.e., the Dubai International Financial Centre and the Abu Dhabi Global Market). All contracts, assets, liabilities, licenses, and legal proceedings are preserved during migration. Detailed procedural requirements are expected to be published in the coming months, though preliminary guidance suggests a streamlined approval process is envisioned.

Free Zone Status and Recognition of UAE Corporate Nationality

Under the Decree it is clarified that companies incorporated in free zones may establish branches and representative offices onshore, and any company incorporated anywhere within the UAE, including free zones, would be recognised as a UAE entity for legal purposes.

This codifies the “dual license” regime and resolves structural uncertainties. The confirmation of UAE nationality for free zone companies is particularly significant for government contracting, tendering processes, and regulated activities requiring national status.

Private Placements for Private Joint Stock Companies

The Decree permits private joint stock companies (“PrJSCs”) to offer securities via private placement with Securities and Commodities Authority approval, providing a regulated alternative to initial public offerings. The statutory one-year founders’ lock-up period will not apply to PrJSCs offering shares through private placement, providing greater flexibility for early-stage exits.

Practical Implications

For Private Equity and Venture Capital Investors: The Decree significantly enhance the attractiveness of onshore UAE structures for private equity and venture capital transactions. Investors should consider whether existing offshore structures could be simplified or whether future investments can be made directly into onshore entities without sacrificing governance protections.

For Existing Companies: Companies with drag-along, tag-along, or class rights currently in shareholders’ agreements should assess whether to update constitutional documents to benefit from enhanced legal certainty, particularly for joint ventures where enforceability has historically been a concern.

For Family Businesses: Multiple share class provisions offer improved flexibility for succession planning and intergenerational wealth transfer. Non-voting or limited-voting shares may assist with governance transitions while preserving economic interests.

For Groups Considering Restructuring: The re-domiciliation framework creates opportunities for corporate group optimisation in terms of regulatory efficiency, cost, and market access.

Current Status and Next Steps

As of January 2026, market participants are actively engaging with implementing authorities to clarify procedural requirements, particularly regarding multiple share classes and re-domiciliation mechanics. Companies should monitor forthcoming Cabinet Decisions and regulatory guidance, review constitutional documents to incorporate new statutory tools, evaluate group structures for simplification opportunities, and engage early with regulators for planned transactions.

Conclusion

The amendments made pursuant to the Decree represent a significant step forward in modernising the UAE’s corporate framework. By introducing tools previously available only in common law jurisdictions, the Decree reduces the need for complex multi-layered structures and enhances the attractiveness of onshore UAE companies for sophisticated investors.

As implementing regulations emerge over the coming months, companies and investors can leverage these reforms to achieve governance and financing objectives that previously required offshore or free zone structures.