United Arab Emirates: The New United Arab Emirates Commercial Companies Law

Last Updated: 14 July 2017
Article by Douglas G. Smith and Mark J. Gilligan

The United Arab Emirates (UAE) has a new Commercial Companies Law (Federal Law No. 2 of 2015), enacted on 1 April 2015, which came into force on 1 July 2015. The law completely replaces the Commercial Companies Law which had been in place since 1984 (Federal Law No. 4 of 1984).

While the new law was highly anticipated and expected by many market practitioners to usher in a complete overhaul of prevailing corporate governance and structuring regimes in the UAE, the change has been less dramatic than expected. However, there are a number of significant changes which market participants and potential market entrants should be aware of. The law does pave the way for a more flexible regime allowing for the authorities to pass supplemental regulations to provide for additional flexibility in the future, including in relation to the operation of free zone entities in the UAE and also the introduction of multiple share classes for UAE limited liability companies.

Here are a number of the key changes:

  1. "Excluded Companies Register" and Exempted Companies: The new law specifically excludes a number of companies from its application. These include companies formed by Resolution of the Federal Cabinet or companies owned wholly by the UAE Federal Government or the Government of any of the seven Emirates and any companies owned by such companies, provided that, in each case, a specific provision excluding the company from the application of the new law is included in its Articles of Association. The Article also makes mention of an "excluded companies registry" to be maintained by the Ministry of Economy, ESCA or local authorities in each Emirate, with whom exempted companies are required to register and periodically renew their registration (likely annually). We understand that no excluded registry has been established to date, however our discussions with Federal Authorities working closely on the implementation of the new law indicate that all procedural aspects of the implantation process will likely be available within one month of the new law becoming effective.
  2. Changes in Rights of Preemption: The old law contained preemption rights pursuant to which, if a shareholder in a limited liability company wished to sell his shares, he needed to first offer them for sale to the existing shareholders at an agreed price and, failing agreement, at a price determined by valuation. The new law maintains this provision with a few refinements. The new law essentially repeats the rule but provides that in the event of disagreement over the preemption purchase price the price will be determined by one or more experts with proper technical and financial experience in valuation (under the old law the price was to be determined by the auditors of the company, arguably favoring the remaining shareholders). Further, the new law provides that where more than one remaining shareholder takes up the offer, they are to purchase pro-rata to their existing shareholdings in the company (the old law was silent on what occurred in this contingency). Finally, the new law provides that the preemption right remains open to the remaining shareholders for a period of 30 days from the date on which the Manager of the company is notified of the price. The old law also specified a 30-day period but failed to indicate when it commenced, leading to some disputes.

    In our view, these revised preemption provisions still fail to provide sufficient statutory clarity to shareholders as to how they will operate in practice. While the consensus is that parties cannot contract out of the law, they can enter into detailed shareholders agreements which augment the provisions of the law, and may address issues such as notice and time requirements and other terms relating to the preemption right designed to supplement the statutory rights and to offer certainty to the parties. This remains best practice, however care needs to be taken in the drafting of such agreements to ensure that no inadvertent contradiction arises between the new law and the terms of any supplemental shareholders agreement as any contradictory provision will be deemed void.
  3. Decrease in "Public Float" for Public Joint Stock Companies: Previously the founders of companies which wished to list on the Dubai Financial Market (DFM) or Abu Dhabi Stock Exchange (ASX) were required to give up not less than 55% of their shares to the public on any listing, i.e. to become minority shareholders. The new law reduces the minimum required public float to 30%, presumably with a view to encouraging listings.
  4. Restrictions on Financial Assistance: The law formerly contained no specific prohibitions on the provision of financial assistance, and this was seen by many as a significant failing, as compared to international norms in corporate governance standards. This deficiency has been corrected under the new law which provides that neither a company nor its subsidiaries shall provide financial assistance to any person to enable them to purchase shares, bonds or sukuk issued by the company. This includes financial assistance by way of loan, gift, providing assets of the company as collateral security or providing a guarantee of the obligations of the prospective purchaser.
  5. Types of Companies: The new law reduces the number of commercial entities which can be formed in the UAE from seven to five, namely: limited partnership company, partnership company, limited liability company, private joint stock company and public joint stock company. The limited liability company remains the most attractive option for foreign parties seeking to engage in joint venture arrangements in the UAE, however the preexisting restrictions on foreign ownership continue under the new law. Not less than 51% of the shares of a limited liability company must be owned by one or more UAE nationals or by a company wholly owned by UAE nationals. Our discussions with Federal Regulators indicate that a new foreign investment law is in the final stages of preparation and may address what many deem to be the hottest commercial topic of recent years, a relaxation of foreign ownership restrictions for foreign investors. If and when such changes are introduced they are likely to focus primarily on specific industry sectors identified as being key growth areas for foreign investment.
  6. Number of Managers: The old law provided that the management of a company would be undertaken by one or more managers, not to exceed five. The new law has done away with that limit, now providing that management shall be undertaken by one or more managers, as stipulated in the company's Articles of Association.
  7. Pledge over Shares: The new law recognizes and considerably simplifies the process of pledging shares to a third party. While it remains to be seen how this provision will be interpreted and implemented in practice, and how it will interplay with the taking of possessory pledges as provided for under the UAE Civil Code. However this advancement will likely pave the way for a clear procedure to ensure the enforceability of share pledges. The inability to register and perfect share pledges of UAE companies has long been identified as a significant deficiency under the old law and this change is a welcome advancement.
  8. New Classes of Shares: The new law specifically provides that a company shall not issue more than one class of shares. It also provides that the Federal Cabinet may, on a proposal from the Emirates Securities and Commodities Authority (ESCA), issue a resolution determining other classes of shares and their characteristics. No such resolution has been issued to date and it remains to be seen how, and to which types of companies this provision will apply. Ideally, a much higher level of detail would have been provided on this issue as the current regime remains extremely restrictive when compared to international norms.
  9. Share Capital for Joint Stock Companies: The minimum capital for a public joint stock company has been raised from AED10 million to AED30 million and that for private joint stock companies raised from AED2 million to AED5 million.
  10. "Takeovers": The new law provides ESCA with the authority to issue regulations, rules, conditions and procedures for a "takeover." ESCA has neither published any such rules nor publically circulated them in draft form for review however it is possible that such regulations might include rules regarding the requirement for a mandatory offer in the context of a takeover. We are in regular contact with representatives of ESCA and anticipate further updates in this regard.
  11. Single Shareholder Companies: Touted as one of the principal changes to the law, the new law allows a limited liability company to be formed and held by a single person or corporate shareholder. This similarly applies in the case of private joint stock companies although in that instance the sole shareholder must be a "corporate person." As noted above, the new law affirms the principle that not less than 51% of the shares of a company formed under the law must be UAE owned. Accordingly, where a company is formed by a sole shareholder, that shareholder would need, of course, to be a UAE national or a company wholly owned by UAE nationals. As of the time of writing, the Departments of Economic Development of Dubai and Abu Dhabi were rushing to accommodate this amendment in practice.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.