Florian Herkommer February 5, 2026 With Federal Decree-Law No. 20 of 2025, the UAE has implemented one of the most far-reaching updates to its Commercial Companies Law in recent years. Rather than constituting incremental adjustments, the amendments implement structural reforms. The reform agenda is clearly practice-driven. It incorporates concepts long familiar in common law jurisdictions, enhances flexibility for investors and founders, and further integrates mainland, free zone, and financial free zone jurisdictions. For businesses and advisors alike, the amendments require a reassessment of existing structures and company documentation. Capital Structuring Reforms One of the most commercially significant changes introduced by Federal Decree-Law No. 20 of 2025 is the increased flexibility in capital structuring, particularly for limited liability companies (LLCs). Multiple Classes of Shares in LLCs For the first time, pursuant to Article 76(4) of the New Law LLCs may issue different classes of shares with varying economic and governance rights, including voting rights, dividend entitlements, redemption rights, and liquidation preferences. This development especially brings mainland LLCs closer to international standards and makes them a more viable vehicle for venture capital, private equity, and complex joint venture structures that previously required offshore or financial free zone entities. In practice, the effectiveness of multi-class structures will depend on careful drafting of the memorandum of association and compliance with forthcoming Cabinet regulations, which are expected to define permissible share classes and their conditions. Valuation and Regulation of In-Kind Contributions The amendments also introduce a more formalized framework for in-kind capital contributions. Non-cash assets, such as shares in other companies, real estate, or equipment, must be valued in accordance with standards issued by the Ministry of Economy in coordination with the competent licensing authority. This enhances transparency and reduces valuation disputes, particularly in founder-led or asset-heavy businesses. However, at this stage, the implementation standards and practical valuation guidance have not yet been issued, and market participants are still awaiting further clarification from the authorities on the applicable methodology and procedural requirements. Shareholder Arrangements and Exit Mechanics The amendments significantly strengthen the legal framework governing shareholder relations, particularly in exit and succession scenarios. Drag-Along and Tag-Along Rights LLCs and private joint-stock companies (PrJSC) may now include drag-along and tag-along provisions directly in their memorandum of association or articles of association. This gives statutory recognition to mechanisms that are standard in M&A transactions, allowing majority shareholders to compel a sale and minority shareholders to participate on the same terms. Previously, drag-along and tag-along rights were typically regulated in shareholders’ agreements. These are side agreements concluded between the shareholders outside the company’s constitutional documents, i.e. they govern the internal relationship between the shareholders but do not form part of the company’s memorandum or articles of association. Shareholders agreements commonly provided for arbitration as dispute resolution mechanism, which meant that the parties could at best pursue claims for financial compensation, rather than achieving specific performance of the intended share transfer. By allowing these rights to be embedded directly in the company’s memorandum of association or articles of association, the amendments materially enhance legal certainty and enforceability. This eliminates the need for parallel contractual structures, reduces advisory and transaction costs, and, most importantly, increases investor confidence that such rights can be effectively enforced through the courts, including by way of specific performance of the intended share transfer. Succession of Shares The amendments also permit constitutional provisions regulating the treatment of shares upon the death of a shareholder. Companies may grant surviving shareholders or the company itself a right of first refusal at an agreed price, with court valuation available in the event of dispute. This reduces uncertainty and helps avoid operational disruption e.g. in family-owned businesses. Corporate Mobility and Structural Flexibility Another cornerstone of the reform is the enhanced ability of companies to adapt their legal and regulatory positioning without disrupting business continuity. Re-Domiciliation and Transfer of Commercial Registration Companies may now transfer their registration between emirates, free zones, and financial free zones while retaining their legal personality, assets, contracts, and obligations. This eliminates the need for liquidation and re-incorporation and allows businesses to realign their structure with changing regulatory, commercial, or tax considerations. Conversion of Legal Form The amendments also allow companies to convert from one legal form to another without losing legal identity. This enables businesses to evolve as they grow, e.g. transitioning from an LLC to a PrJSC, while preserving contractual relationships and corporate history. Non-Commercial Company Article 8(2) lit b. introduces the concept of the non-profit commercial company, allowing entities to pursue economic activities while reinvesting profits exclusively in furthering their stated objectives. While the framework will be further clarified by Cabinet regulations, this new vehicle provides a formal structure for impact-driven and socially oriented business models within the UAE. Removal and Resignation of Directors Article 85 regulates the resignation, removal, and replacement of directors in limited liability companies and establishes mechanisms to ensure continuity of management where appointments cannot be made in due time. The material strengthening of management continuity was already introduced with the 2021 Companies Law, which first set out clear rules on removal, resignation, interim management, and regulatory intervention in cases of shareholder deadlock. The 2025 amendments do not alter the substance of this framework but mainly replace the term manager with director. Article 85 continues to serve as a key continuity mechanism by allowing the competent authority to appoint interim directors, including people who are not shareholders in the LLC, where shareholders fail to make timely appointments. Lock-up period for PrJSC The amendments also introduce targeted changes affecting joint-stock companies and corporate governance. For private joint-stock companies, the amendments reduce the lock-up period for share transfers from two years to one year. In practical terms, this means that ownership of shares may not be transferred until the balance sheet and profit and loss account for at least one financial year, have been published, calculated from the date of the company’s registration in the commercial register. Taken together, the Federal Decree-Law No. 20 of 2025 significantly enhances the attractiveness of the UAE as a jurisdiction for investment and corporate structuring. Founders and investors can now implement more sophisticated capital and governance structures directly in the MoA of the company, reducing structural complexity and transaction costs. At the same time, the full impact of the reforms will depend on active implementation. Existing companies should review their constitutional documents and shareholder agreements to assess whether newly available tools should be embedded, while advisers must closely monitor forthcoming Cabinet and regulatory decisions, particularly in relation to share classes and valuation standards for in-kind contributions.
