UAE Updates Commercial Companies Law After Four Years: What Businesses Need To Know

The UAE has issued Federal Decree-Law No. (20) of 2025 amending key provisions of Federal Decree-Law No. (32) of 2021 Concerning Commercial Companies (the "Amendment"). The changes reflect an ongoing modernization agenda that introduces common law concepts and principles into the UAE's traditionally civil law-based framework, streamlining company operations, enhancing corporate flexibility through shareholder arrangements and governance tools aligned with common law practices, and better integrating onshore, free zone, and financial free zone ecosystems. They also introduce new tools for shareholder arrangements, capital structuring, and corporate transformations. Below we unpack the headline changes and their practical implications for businesses operating in the UAE.

Scope and Free Zone Interface

The Amendment clarify the treatment of companies operating from Free Zones. The Amendment specified that the Commercial Companies Law now expressly applies to foreign companies with a UAE presence and to branches or representative offices of free zone companies, when they carry on activities in the UAE outside their respective free zone. Free zone companies remain governed by their own laws, unless if those laws permit activities outside the zone (i.e. in the mainland); in that case, branches or representative offices must comply with the Commercial Companies Law and any other applicable UAE legislation that apply to mainland companies. The Amendment introduces a new provision confirming that Free Zone companies are formally recognized as carrying the UAE nationality.

This alignment reduces ambiguity for multi-jurisdiction structures, eases cross-border operational planning, facilitates integration between onshore companies and free zone entities by allowing businesses to operate under a single set of rules, rather than navigating separate regulations for mainland and free zone.

Introduction of Non-Profit Companies

Significantly, the Amendment introduces the possibility to establish non-profit companies whose net profits are reinvested to achieve their purposes without distribution to the owners. Such non-profit companies will also be subject to further rules and regulations that will be issued by the Cabinet in collaboration with competent authorities. This further formalizes the legal structure of organizations that operate for public or social benefit rather than for profit.

Bridging Civil Law Structure with Common Law Practices

The Amendment authorize shareholders in mainland limited liability companies (LLCs) to include drag-along and tag-along mechanisms in their Memorandum of Associations (MOA). They also permit bespoke provisions governing the shares of deceased shareholders, including priority rights for remaining owners of the company to purchase the deceased persons' shares at a price agreed with the heirs, with court valuation available in case of dispute.

These changes formalize market-standard M&A and succession mechanisms familiar from common law jurisdictions within UAE company constitutions, similar to those applied in Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) free zones, reducing transactional friction and providing clearer pathways for exit and continuity, while bridging civil law formality with common law contractual flexibility.

Capital Structure Flexibility in Mainland LLCs

Mainland LLCs may now categorize shareholders shares into different classes (e.g. Class A Shares and Class B Shares) with different rights relating to their value, voting, redemption, dividend priority, liquidation preferences, or other privileges and restrictions, and such categorization will need to be recorded in the commercial register. The Cabinet will also prescribe the categories and classes of shares, the conditions attached to each class, their rights and privileges, and the rules governing them.

This represents a step-change for private capital structuring in the UAE, enabling venture-style economics (e.g., preferred shares, enhanced voting) within the mainland LLC which is commonly used for operational businesses.

In-kind Capital Contributions

The Amendment emphasizes on allowing shareholders in LLCs to contribute their share capital as in-kind contributions. These in-kind contributions must be valued by one or more valuers; otherwise, they are considered void.

Public Offering

The Amendment maintains that only public joint stock companies may conduct public offerings, with SCA approval required for any subscription invitation published in the UAE.

The Amendment now explicitly permits private joint stock companies to offer securities via private placement on UAE markets under SCA conditions.

These changes broaden access to capital markets for private companies and allow more calibrated founder participation rules, supporting pre-listing and growth-stage capital strategies.

The Concept of Re-Domiciliation

The Amendment introduced the new Article 15 bis, which enables companies to re-domicile their legal presence. Re-Domiciliation is a legal process that allows a company to transfer its domicile or seat of incorporation while maintaining the same legal entity. This process allows the company to retain its full history and track record from the date of formation and continue its business operations under the same shareholding, management, and activity level.

Companies can now transfer their commercial register and licensing from one competent licensing authority to another, including transfers from countries outside the UAE to inside the UAE, between UAE free zones, and between mainland and free zone authorities.

Re-domiciliation can be approved by a special resolution or the absolute majority of shareholders, subject to system capability, absence of register blocks preventing the transfer, and approvals from the competent licensing authorities and regulators and finally publication of the Re-Domicile decision. The Re-domiciliation will be subject to further rules and regulations that will be issued by the Cabinet in collaboration with competent authorities

This regulatory "portability" is a key operational enabler, allowing businesses to transfer their registration in a way that aligns with strategic, commercial, licensing, or regulatory objectives without losing the company's legal personality or historical record. It will also allow companies to benefit from renting offices or warehouses located in a free zone or on the mainland, depending on where they Re-Domicile based on their commercial requirements, as well as taking advantage of tax exemptions available to free zone entities when re-domiciling to a free zone, or, conversely, accessing GCC customs or trade treaty benefits that apply specifically to mainland companies when Re-Domiciling to the mainland.

Governance continuity and board/manager transitions

The Amendment emphasized on resignation, removal, and continuity provisions for Mainland LLC managers and boards. Resignations are deemed effective after 30 days if not acted upon (unless otherwise provided), companies must notify authority upon expiration of a manager's appointment within 30 days and appoint a successor, and boards may continue to manage for up to six months post-term pending reconstitution, after which the authority may appoint an interim manager or board for up to one year until a general assembly elects a new board. These rules reduce governance gaps and provide orderly continuity in management.

Practical Takeaway

For corporates and investors, the Amendment deliver tangible flexibility and clarity. The ability to embed drag along and tag along provisions and succession mechanisms directly in the MOAs of mainland LLCs reduces transaction complexity, disputes and aligns UAE practice with global markets, and, especially, common law principles. Allowing different categories and share classes brings sophisticated capital rights into the mainstream operating vehicle used across the UAE, benefitting venture, growth equity, and family enterprises seeking tailored governance and economics.

The concept of Re-Domiciliation is particularly valuable for regional groups looking to move their operations into the UAE, or to move their structures between the UAE's mainland and free zone jurisdictions.

In aggregate, the Amendment modernize the UAE corporate framework by integrating common law concepts into the civil law foundation, making it more adaptable for cross-border businesses, institutional investors, and founders accustomed to common law environments, while maintaining the UAE's unique legal identity and remaining responsive to evolving market structures in the region. This unification enhances operational agility and legal predictability, enabling companies to implement advanced corporate mechanisms that strengthen investor protections and streamline corporate transformations.