The United Arab Emirates (UAE) has introduced a new package of reforms to its corporate legislative framework through Federal Decree-Law No. 20 of 2025 (Amendment) amending certain provisions of Federal Decree-Law No. 32 of 2021 on Commercial Companies (CCL). The amendments focus on practical improvements across the corporate lifecycle and bringing certain areas of corporate governance and process in line with international practices.

In this article, we highlight the key amendments and provide our initial observations on their anticipated implementation and impact in the UAE market.

We will continue to monitor these developments closely and eagerly await the implementing mechanisms and procedural requirements on which we will provide an update and be in a position to help clients navigate these changes on their UAE operations.

Scope of Commercial Companies Law application

The Amendment clarifies the relationship between the CCL and free zone corporate regimes. The CCL now expressly applies to foreign companies with a UAE presence, including branches or representative offices of free zone entities conducting activities in mainland UAE.

The Amendment also explicitly provides that companies established in the UAE - including those incorporated in free zones and financial free zones - are deemed to have UAE nationality for corporate purposes.

As with many provisions in the Amendment, registries and competent authorities are expected to issue procedural guidance to implement these clarifications. In practice, businesses should anticipate a transition period, as free zone and mainland authorities reconcile processes.

Introduction of non-profit companies

For the first time, the CCL recognises non-profit companies as entities required to reinvest their net profits in achieving their stated objectives without distributing profits to owners or shareholders. This formal category fills a long-standing legislative gap and provides a clearer statutory framework for organisations operating for social, educational, cultural or community-oriented purposes.

The Cabinet is expected to issue further regulations governing non-profit companies – until these regulations are published, it remains unclear how licensing authorities will distinguish between non-profit companies and existing foundations or associations.

Codification of drag-along, tag-along and succession rights

A major step toward aligning onshore and international practices is the Amendment's express authorisation for Limited Liability Companies (LLCs) to incorporate drag-along, tag-along, and succession-related mechanisms directly within their constitutional documents, rather than relying on such rights only in shareholders' agreements.

Shareholders are now able to adopt protections that reduce disputes during exits, protect minority interests and address transfer of shares processes, including upon the death of a shareholder. These mechanisms will now benefit from a clear statutory footing.

The change effectively brings onshore LLCs closer to the flexibility traditionally seen in common law frameworks, providing owner-managed businesses, private equity portfolio companies and family enterprises with clearer tools to manage exits and generational transfers.

Share classes for LLCs: a new era of capital structuring

The most anticipated reform among investors is the introduction of multiple share classes for LLCs. The Amendment permits LLCs to issue shares with different rights, including as to voting, dividend priority, redemption privileges and liquidation preferences. This reform aligns mainland LLCs practice with international capital structuring standards and enables LLCs to adopt venture-style arrangements.

Implementation (including share classes, associated rights, privileges and regulatory control) will depend on future Cabinet decisions and updates to commercial register systems.

Valuation of in-kind contributions

The Amendment requires that in-kind capital contributions be valued by one or more valuers approved by the UAE Ministry of Economy and Tourism (MOET), in coordination with the competent authority. This change strengthens capital integrity and reduces the risk of inflated or disputed valuations, issues that have historically caused complications in corporate reorganisations and shareholder disputes.

The CCL expressly states that contributions made without proper valuation are void, emphasizing the significance of compliance.

The MOET is expected to issue detailed standards and assessor approval criteria. Until these are published, it remains unclear how valuation professionals will be accredited, how specialised assets (such as intellectual property or intangible rights) will be treated.

Re-domiciliation: corporate mobility without liquidation

A major addition to the CCL enables companies to transfer their registration (re-domiciliation) from one competent licensing authority to another while maintaining their legal personality, corporate history, contracts, licences and shareholding structure. Such transfers require a special resolution of the general assembly or, for LLCs, approval by an absolute majority of the shareholders.

The scope of permitted transfers includes from mainland to free zones (and vice-versa) and from mainland to free zones and movements involving financial free zones (DIFC and ADGM). Transfers will be subject to several statutory conditions, including relevant approvals and publications.

Notably, the Amendment does not address transfers from outside the UAE into the mainland. It will be interesting to see whether future regulations or Cabinet-issued controls expand the re-domiciliation framework to allow such movements.

Capital markets: private placements for private joint stock companies

The Amendment maintains the established principle that public offerings may only be undertaken by public joint stock companies (PJSCs) with Securities and Commodities Authority (SCA) approval. However, it introduces a notable flexibility by permitting private joint stock companies to undertake private placements in the UAE, subject to SCA regulations.

This reform supports more nuanced capital-raising strategies – particularly for mature family businesses, pre-listing companies and growth-stage enterprises seeking institutional investment – without transitioning to PJSC status prematurely. We await SCA guidance on the specific requirements, disclosure standards and eligibility criteria that will govern such private placements.

Governance continuity and managerial transitions

To reduce governance gaps, the Amendment clarifies rules governing resignations, appointments, expiry of terms and continuity of boards and managers.

Resignations are deemed effective after 30 days if the general assembly does not act, unless otherwise provided in the company's memorandum of association or the manager's appointment contract. Companies must notify the competent authority within 30 days of the expiration of a manager's term without renewal and appoint a replacement during that period. If the term of the board of managers expires and the board has not been reconstituted, the board may continue to run the company's business for up to six months. Upon expiry of this period, the general assembly must form a new board; failing which, the competent authority may, in coordination with relevant sectoral entities, appoint a manager or board of managers for up to one year, during which a general assembly shall be convened to elect the new board.

These measures are designed to preserve accountability and ensure the uninterrupted functioning of corporate entities.

If you are interested in discussing the new CCL amendments, please contact Tim Casben, Simon Elliott or Joy Kadi.