The new amendments to the UAE Commercial Companies Law marks a pivotal milestone that underscores the UAE’s commitment to enhancing the flexibility and sustainability of companies and supporting their ability to keep pace with future trends, said Abdulla bin Touq Al Marri, Minister of Economy and Tourism.

At a media briefing held to review the Federal Decree-Law No. 20 of 2025 amending certain provisions of Federal Decree-Law No. 32 of 2021 concerning Commercial Companies, issued by the UAE, he said: “The law introduces unprecedented legislative measures at both the national and regional levels, reinforcing the competitiveness of the UAE’s business environment and its attractiveness to investments. 

“It provides a comprehensive and clear legal framework that supports our companies’ growth and long-term sustainability, facilitates access to financing and investment opportunities, and strengthens their ability to continue operations and expand geographically across free zones and financial free zones. In addition, the amendments offer greater flexibility in ownership structures and sale and exit processes, while enhancing corporate governance and safeguarding shareholders’ rights within a leading and innovative national economic ecosystem aligned with global best standards and practices.”

The minister said the amendments grant multiple quotas and share classes in limited liability companies (LLCs) and public and private joint stock companies as a legal right, compared to the previous system where this right was limited to public joint stock companies through a Cabinet decision. 

“The UAE is among the first countries in the Middle East to allow multiple quotas classes for LLCs, while many countries restrict this to joint stock companies, particularly public joint stock companies. It enhances flexibility in ownership structures and better regulates the relationship among shareholders.”

He added: “The law also enhances the ease of doing business and ensures smoother entry to the markets by allowing the transfer of a company’s registration in the commercial register between emirates, free zones and financial free zones, while maintaining the company’s original legal personality as well as its contracts and obligations, without the need for re-establishment or liquidation. Additionally, it permits the conversion of companies between different legal forms, including cooperatives.”

Multiple quotas and share classes

In detail, the new amendments introduce the option for limited liability companies (LLCs) to establish multiple classes of quotas, placing the UAE among the leading countries in the region to enact such legislation, in recognition of the central role of LLCs in business and investment. The amendments also allow joint stock companies (JSCs) to issue multiple classes of shares, subject to specific regulatory conditions and procedures.

The classification of partners' shares or stocks into different categories follows various patterns, which will subsequently be determined by a Cabinet decision in alignment with international legislation governing such categories. Examples include: dividend shares, which grant their holders a higher percentage of profits or special privileges; shares with priority in capital recovery upon exit or liquidation, considered preferential rights; preferred shares, which grant additional privileges in profits or liquidation and special voting rights; shares with varying nominal values, which can be issued at different values without prejudice to partners' rights; and restricted shares, which are subject to restrictions on disposal or transfer of ownership, including the partners' approval of material decisions. The company may also propose other categories approved by the competent authority, provided that it adheres to the law and fully discloses information to investors, specifying all details in the articles of incorporation.

Integration between local legislations and free zones laws

The minister highlighted that the new amendments will significantly enhance alignment and integration between local legislation and the laws of free zones and financial free zones related to establishing, operating and transferring companies between different regimes, as well as strengthen the integration among licensing authorities in the UAE. This will reduce compliance and business operating costs for companies, ensure business continuity, and support their access to markets, financing and investments efficiently and effectively, thereby reinforcing investor and business community confidence in the reputation of the national economy. The total number of company registrations and licences in the UAE is expected to increase by 10 to 15 per cent within the first year of implementing the new amendments.

Valuation of quotas and in-kind capital

The new amendments introduce standards and requirements for valuing in-kind quotas (in-kind capital) through a decision issued by the Ministry of Economy and Tourism, in coordination with the relevant authority, across all company forms, except public JSCs, where this matter falls under the regulation of the Securities and Commodities Authority (SCA). 

Conversion of legal forms to Joint Stock Companies in the absence of a Board of Directors and Registrar Secretariat

The Decree allows any company to convert from one legal form to another while retaining its legal personality, in accordance with the regulations issued by the Ministry of Economy and Tourism or the Securities and Commodities Authority (SCA), in coordination with the competent authority. However, the amendments address practical challenges previously faced when converting them into a Joint Stock Company. The amendments allow existing executive management to oversee the transition procedures without requiring a new incorporation application or a founders' committee, unless the General Assembly decides otherwise in its conversion resolution.

Reducing lock-up period for private joint stock companies

The amendments reduce the lock-up period regarding the disposal of shares in Private Joint Stock Companies from two years to one year, with the possibility of further reducing or waiving this period via a ministerial decision. Furthermore, Private Joint Stock Companies are exempt from the lock-up period during private placement or listing in financial markets. This allows companies greater flexibility, enhances their ability to attract investment and financing, and creates new financial opportunities and instruments within the country’s markets.

Expansion of the law’s scope and bridging relations with comparative legislation in financial free zones and free zones

The provisions of the Decree apply to companies established in the UAE, foreign companies operating within the country or having their headquarters, branches, or representative offices therein. It also applies to branches or representative offices of companies established in Free Zones and Financial Free Zones when operating outside those zones and within the mainland. The law defines the forms of companies as: Joint Liability Company, Simple Commandite Company, Limited Liability Company (LLC), Public Joint Stock Company (PJSC), and Private Joint Stock Company.

The decree specifies five legal forms of companies: General partnership; Limited partnership; Limited liability company; Public shareholding company; Private shareholding company. The law also introduces a new legal form, “Non-profit commercial company,’ which is a company whose net profits resulting from its economic activity are reinvested in achieving the goals for which it was established, without distributing these profits to partners or shareholders. A Cabinet decision will be issued specifying the forms under which it can be registered and will regulate the terms and conditions specific to the non-profit commercial company, which may include special provisions that are different from the standard provisions specified for the same form of companies in order to achieve the goals of non-profit commercial companies.

Non-profit commercial company

The move supports the establishment of social impact projects in the country, digital education and health platforms, innovation, Research and Development (R&D) projects, and other economic clusters, which reinvest surpluses to achieve their goals without distributing profits, within a special regulatory framework determined by the Cabinet.

The law also stipulates that the Cabinet shall issue a decision specifying the purposes of these companies and regulating their provisions and forms, based on a proposal from His Excellency the Minister of Economy and Tourism, and in coordination with the Securities and Commodities Authority and the competent authority, while granting the Cabinet the power to exempt these companies from some of the provisions of this law when necessary.

Transfer of commercial registration enhances business flexibility and national economic integration

The new amendments provide broad flexibility for companies to transfer their commercial registration. This allows them to move their registration and licensing scope from one emirate to another, or between Free Zones and the mainland, without requiring liquidation or re-incorporation. This process ensures the preservation of the legal entity, operational continuity, and commercial history, along with all associated rights and obligations.

Transfer of free zone and financial free zone companies to operate in mainland

The amendments allow companies in Free Zones and Financial Free Zones to conduct their activities within the mainland through branches or representative offices. This raises the efficiency of existing investments and supports their optimal utilization to serve the growth of the national economy.

Continuity of corporate legal personality

The transfer of commercial registration entails the continuation of the company's legal personality without the need for liquidation or re-incorporation, as was the previous approach and practice. This enables the company to move between various emirates, and from Free Zones and Financial Free Zones to the mainland and vice versa, according to clear controls, continuing its existence from the first day of its registration in the Commercial Register; whereas previously, a company changing its headquarters was treated as a new entity. 

The transfer of company registration in the Commercial Register with the competent authorities takes place after fulfilling a number of conditions, including the compatibility of registration systems, the absence of any legal impediments preventing the transfer, and obtaining the necessary approvals from the concerned authorities, followed by the publication of the transfer decision and the regularization of the company's status where applicable.

Reinforcing the UAE identity of companies

The amendments confirm that existing companies and those which to be established in the country, including in Free Zones and Financial Free Zones, continue to hold the UAE nationality. This reinforces the country's economic identity and reputation, supports national brands, and improves companies' access to global opportunities and markets through the country's extensive international partnerships and established economic standing.

Regulation of shareholder relations, forced sales

The amendments include provisions regarding forced sales and "Drag Along" and "Tag Along" rights. A majority shareholder can require minority partners to sell their stakes upon deciding to sell, while granting the minority the right to join the sale deal under the same terms. This protects the rights of all shareholders and ensures smooth ownership transfer. This applies to companies, whether limited liability or joint stock, subject to obtaining the necessary legal approvals.

The new amendments allow Limited Liability Companies and Private Joint Stock Companies to include provisions in their Memoranda of Association or Articles of Association to regulate the relationship between partners and shareholders. This includes allowing prior agreement to obligate certain partners or shareholders to sell their stakes or shares to a third party upon the fulfillment of specific conditions, or enabling one of them to join an existing sale deal under the same terms agreed upon with the buyer.

Additionally, the amendments regulate the mechanism for the disposal of shares or stakes belonging to a deceased partner or shareholder. Existing partners or shareholders, or the company itself, are granted priority to purchase these shares at a value agreed upon with the heirs. In the absence of an agreement, the competent court determines the value of the stake or share through experts specialised in technical and financial aspects.

Private placement for private joint stock companies and listing 

The new amendments also permit Private Joint Stock Companies to list their securities for private placement in one of the country's financial markets, in accordance with controls and conditions issued by a decision from the SCA, in coordination with the Ministry and concerned entities. Private placement refers to inviting specific pre-determined categories or individuals, whether natural or legal persons, to subscribe to securities.

Key beneficiaries of the amendments to the companies law

The primary beneficiaries of the amendments to the Commercial Companies Law include companies established within the country wishing to convert to public or private joint stock companies; companies operating in Free Zones and Financial Free Zones when conducting activity within the country; startups and entrepreneurs seeking private funding without a public offering; companies wishing to transfer registration or expand geographically within the country without re-incorporation; and investors and venture capital funds utilizing share categories and structured voting rights.

Addressing of administrative vacancies

The new amendments offer significant flexibility for Limited Liability Companies to address cases of vacancy in the position of General Manager or Board of Managers. A General Manager or Board of Managers may be appointed for one year from among the partners or others, including firms specialising in company management, in coordination with the competent authority and entities concerned with the activity, if any. This is done according to the following controls:

• Expiration of term without reappointment of a General Manager or formation of a Board of Managers: The General Manager or Board of Managers continues to manage the company and conduct its business for a period not exceeding six months from the date of expiry.

• Post-interim period: The General Assembly must appoint a General Manager or form a Board of Managers immediately upon the expiry of the six-month period; otherwise, the competent authority may appoint a manager or the Board in coordination with the entities concerned with the activity.

• Election of Board members: The General Assembly must elect members of the Board of Managers within one year at most.

In this manner, the law allows companies operating in the management field to assume the temporary management of Limited Liability Companies, ensuring the continuity of their business and the stability of their administrative structure without interruption.

Economic and social impact of the new amendments 

The new amendments contribute to enhancing the investment environment in the country by providing modern and diverse financing tools, such as private placement for Private Joint Stock Companies, issuing multiple categories of stakes or shares, and valuing in-kind shares according to approved standards, in coordination with the Ministry of Economy and Tourism, or with the SCA for Public Joint Stock Companies. These tools allow for rapid and effective project financing while preserving the founders' control over their companies, thereby enhancing the companies' ability to grow, expand, and maintain their strategic vision.

The amendments establish a clearer and more flexible corporate governance framework by regulating mechanisms for the removal and resignation of managers and ensuring the temporary continuation of the Board of Managers to avoid administrative vacuums. This ensures the stability of the administrative structure and business continuity, reducing risks associated with transitions or sudden changes in management.

Furthermore, the amendments grant every company established in the country UAE nationality, which enhances its international recognition, strengthens its reputation in global contracts and partnerships, empowers the national brand, and contributes to increasing the confidence of both local and foreign investors. This integrated legal framework helps open new growth channels, reducing the time required to enter the market and increasing company survival rates. – TradeArabia News Service