Federal Decree-Law No. 20 of 2025 introduces significant amendments to the UAE’s Commercial Companies Law (Federal Decree-Law No. 32 of 2021), marking a major step in modernizing the nation’s corporate legal framework. These reforms align domestic regulations more closely with international—particularly common law—standards, enhancing flexibility, governance, and cross-border operational clarity.
Below is a structured overview of the core changes and their practical impact for companies operating in or entering the UAE market.
1. Clarified Jurisdictional Scope and Free Zone Integration
The amendments provide long-awaited clarity on the application of federal law to free zone entities conducting activities in the mainland. While free zone companies remain governed by their respective zone regulations within their geographic boundaries, any branch or representative office operating outside the free zone must comply with the Commercial Companies Law and other applicable federal legislation.
Additionally, free zone companies are now formally recognized as holding UAE nationality. This reduces legal ambiguity for multi-jurisdictional structures and simplifies operational planning for businesses operating across both mainland and free zone environments.
2. Introduction of a Non-Profit Company Structure
For the first time, UAE company law formally provides for the establishment of non-profit companies. These entities must reinvest all net profits toward their stated objectives, with distributions to owners expressly prohibited. Detailed implementing regulations are expected from the Cabinet. This creates a dedicated legal vehicle for philanthropic, social, and cultural organizations, formalizing their operational framework within the UAE.
3. Adoption of Common-Law Corporate Mechanisms
The reforms integrate familiar common-law tools directly into the statutory framework for Limited Liability Companies (LLCs) and Private Joint Stock Companies (PJSCs):
• Drag-Along & Tag-Along Rights: These may now be embedded directly in a company’s Memorandum of Association, enhancing enforceability in M&A and exit scenarios.
• Shareholder Succession Planning: Companies can pre-define mechanisms for handling a deceased shareholder’s stake, including purchase priority for remaining shareholders at an agreed or court-determined valuation.
These changes reduce reliance on complex side agreements, lower transactional friction, and provide clearer pathways for ownership transition.
4. Enhanced Capital Structure Flexibility for LLCs
Mainland LLCs are now permitted to issue multiple classes of shares (e.g., common, preferred) with differentiated rights concerning voting, dividends, liquidation preferences, and redemption. This is a transformative development for venture capital, private equity, and family businesses, enabling sophisticated capital and governance structures within the UAE’s most common corporate vehicle.
5. Formalized Re-Domiciliation (Corporate Migration) Framework
A landmark introduction is the statutory process for re-domiciliation. Companies can now transfer their legal seat into, within, or between UAE jurisdictions (including from overseas, between free zones, and between mainland and free zones) while maintaining their legal identity, corporate history, and contracts.
This “regulatory portability” is a strategic enabler, allowing businesses to optimize their structure for licensing, taxation, or commercial reasons without the need for liquidation and re-incorporation.
6. Streamlined Fundraising and Governance
• Private Placements: Private Joint Stock Companies may now offer securities via private placement in UAE financial markets, subject to Securities and Commodities Authority (SCA) rules, creating a new domestic fundraising avenue.
• Governance Continuity: Clearer rules govern managerial resignations, board succession, and interim management, reducing operational deadlocks. For instance, boards can continue to function for up to six months post-term expiry, after which authorities may appoint an interim board to ensure continuity.
• In-Kind Contributions: The amendments reinforce the validity of in-kind capital contributions, provided they are assessed by accredited valuers to ensure transparency and fairness.
Practical Takeaways for Businesses and Investors
The 2025 amendments collectively signal the UAE’s commitment to a dynamic, predictable, and internationally competitive corporate ecosystem. Key benefits include:
• Reduced Transactional Complexity: Standard M&A and succession tools are now codified, aligning UAE practice with global markets.
• Sophisticated Capital Structuring: The ability to create share classes within LLCs meets the needs of modern institutional investors and growth companies.
• Operational Agility: The re-domiciliation regime and clarified free zone interface offer unprecedented flexibility for corporate restructuring and regional expansion.
• Enhanced Governance and Certainty: New continuity provisions and formalized mechanisms strengthen investor protections and reduce legal uncertainty.
• Raising capital with more flexible instruments.
• Optimizing companies’ legal relocation via re-domiciliation.
These reforms position the UAE to better accommodate cross-border investment, complex corporate life cycles, and innovative business models, solidifying its status as a leading global business hub. They are further designed to attract and retain regional and international investment by offering a more predictable, agile, and business-friendly legal environment.
Companies operating in the UAE should review their existing governance documents and corporate structures to leverage these new provisions.