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The UAE has enacted Federal Decree-Law No. 20 of 2025 amending Federal Decree-Law No. 32 of 2021 on the Commercial Companies Law (CCL). The 2025 reforms broaden the CCL's scope, embed market-standard corporate tools, improve governance continuity, and enable seamless mobility of companies across onshore and free zone regimes. For boards, founders, investors and counsel, these are structural changes that affect how UAE companies are structured, financed, governed and reorganised.
Scope, free zone interface and nationality
The amendments clarify how the CCL applies to free zone entities where activities extend beyond zone boundaries. Free zone companies remain primarily subject to their own rules; however, branches or representative offices operating onshore must comply with the CCL and other applicable UAE legislation. The reforms also confirm that free zone companies are recognised as having UAE nationality. This reduces ambiguity for multi-licence groups and simplifies compliance planning across onshore and free zone footprints.
A formal corporate vehicle for non-profits
For the first time, the CCL permits non-profit companies whose net revenues are reinvested in their stated purposes rather than distributed to owners. The detailed framework—covering eligibility, supervision and any exemptions—will be set by Cabinet decision with the competent authorities. This should professionalise governance and funding pathways for social enterprises, philanthropic initiatives and community organisations.
Embedding market-standard exit and succession tools
LLCs and private joint stock companies may now include drag‑along and tag‑along provisions in their constitutional documents, providing a statutory foundation for majority-led exits with minority protections. This enhances enforceability and reduces reliance on standalone shareholders' agreements, though bespoke agreements will still be needed for valuation mechanics, confidentiality and options.
The CCL also introduces a clear mechanism for dealing with shares on a shareholder's death. Companies may grant priority purchase rights to remaining shareholders—or, notably, to the company itself—with pricing agreed with the heirs or determined by the court via independent valuation if agreement is not reached. The acknowledgement that an LLC may acquire shares in this narrow context is significant, although broader buyback mechanics remain subject to future clarification.
Capital structuring: multiple share classes in LLCs
LLCs can issue multiple share classes with tailored voting, economic and redemption rights, dividend priorities and liquidation preferences. This enables venture and private equity-style economics within the UAE's primary operating vehicle. Cabinet decisions will prescribe detailed categories, conditions and governance rules, which will determine how preferred, convertible and other structured instruments operate in practice.
Private placements by private joint stock companies
Private joint stock companies may conduct private placements of their securities within UAE markets, subject to Securities and Commodities Authority conditions. This creates a domestic bridge between private capital and public markets, supports staged fundraising, and disapplies the statutory lock‑in period for such placements, improving execution agility.
Migration and continuation without interruption
A new statutory mechanism permits company migration—across Emirates, between mainland and free zones, and to or from financial free zones—while preserving legal personality, assets, liabilities and corporate history. Continuation requires registry compatibility, absence of prohibitive annotations, and approvals from competent authorities (with additional requirements for joint stock companies). This portability allows companies to optimise licensing, regulatory posture, governance and financing frameworks without liquidation or reincorporation.
Governance continuity and deadlock resolution
The reforms strengthen continuity rules for LLC managers and boards, including time-bound effectiveness of resignations, notification and replacement obligations upon expiry of a manager's term, and limited continuation of boards pending reconstitution. Where a deadlock prevents appointment of a new board, the competent authority may appoint non‑shareholder directors, restoring functionality and reducing compliance and counterparty risk.
Streamlined conversion to a public joint stock company
Conversion to a public joint stock company is simplified. The reforms remove the need for a founders' committee or a new incorporation application, allow existing management to complete conversion steps, and permit registration before appointing a new board, auditor or registrar—provided a general assembly is convened within 30 days to formalise those appointments. This reduces execution risk and timing uncertainty for companies transitioning to public markets.
Practical implications for UAE businesses
Constitutional documents for LLCs and private joint stock companies should be updated to hardwire drag/tag rights, succession mechanics and multi‑class share frameworks. Fundraising plans can incorporate domestic private placements for private joint stock companies. Group structuring should consider the migration regime to align legal seat, licensing, tax posture and operational needs. Governance manuals and board procedures should reflect continuity rules and deadlock contingencies.
Several elements—particularly multi‑class share conditions, non‑profit specifics and the scope of company share purchases in death‑related scenarios—will depend on forthcoming Cabinet and regulator guidance. Companies should build adaptable frameworks into constitutions and shareholder arrangements, with clear pricing, consent and dispute resolution mechanics.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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