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Federal Decree Law no 20 of 2025 ("CCL Amendment Law") has recently been promulgated which makes several significant changes to the Federal Decree Law no 32 of 2021 on Commercial Companies (the "CCL").
This short article outlines the practical applications that one such amendment to the CCL may bring to a mainland limited liability company in the UAE (a "Mainland LLC") focusing on the introduction of different share classes to Mainland LLC.
The legal position prior to the CCL Amendment Law was that only one class of shares was permitted to be issued by Mainland LLCs which shares would provide their shareholders with the rights to (please note this is not a comprehensive list): –
- Receive dividends derived from the profits made by Mainland LLC;
- Vote on ordinary and special resolutions including the appointment and removal of managers and or directors; and
- Participate in the shareholders meetings of the Mainland LLC.
By limiting shareholders of Mainland LLCs to only one class of shares, the options for a shareholder in a Mainland LLC to secure investment into their Mainland LLC were limited. These shareholders would in return for the sale of their shares and investment into the Mainland LLC, have to give up voting rights and some form of control. It also disincentivized employee share option schemes being utilized by Mainland LLCs as owners may be reluctant to give up voting rights and possibly control over their Mainland LLC to employees.
The introduction of different share classes to Mainland LLCs brings the Mainland LLCs regime closer into line with the Abu Dhabi Global Market ("ADGM") and Dubai Financial Centre ("DIFC") company law regimes which already allow different share classes within their respective company's laws. This amendment highlights the UAE's continued commitment to modernization, by now affording flexibility and creativity in allowing Mainland LLCs to issue different types of shares. For example, a Mainland LLC could issue two types of shares being: –
- Voting right shares where the holder of this class of shares could enjoy the right to vote in the management and affairs of the Mainland LLC and receive dividends; and
- Dividend shares, whereby the holder would simply have the right to receive dividends if and when these dividends are declared and have no voting rights.
By allowing for this simple structure, the voting shareholders of the Mainland LLC can cause the Mainland LLC to issue dividend bearing shares to potential investors or to longstanding employees without the risk of losing control over their company, allowing further investment into their business or a mechanism to encourage employees to be more productive and to remain with the Mainland LLC.
Amendments to the Memorandum of Association ("MOA") of the existing Mainland LLC and other corporate documents (including the license and share registers) will need to be effected to correctly record and set out and not only authorize different share classes, but will also need to include class rights, issue procedures, variation procedures and class – meeting thresholds. These amendments should be carried out carefully to ensure all terms in the MOA are cross referenced and to avoid contradictions. Furthermore, prior to any issuance of a new class of shares being carried out consideration should be made of current shareholder rights, for example pre-emption rights and how these rights should be approached in light of the issuance of new shares.
Prior to any amendments being made to the MOA, approval from the relevant authority in the specific Emirate will need to be obtained. These authorities should as a first step need to be consulted to gauge how the issuance of different share classes is to be carried out practically as this process may differ from Emirate to Emirate.
Given the recent pronouncement of the CCL Amendment Law further input from the relevant authorities in this regard is yet to be forthcoming and as this is a recent development further guidance is needed and as discussed above, the relevant authority in the Emirate in question should be consulted as a first step.
For additional reading on the CCL Amendment Law please see https://www.bsalaw.com/insight/uae-companies-law-amendments-a-modernization-package-aligning-onshore-practice-with-market-standards/.
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.
