Summary
On 1 October 2025, the UAE issued Federal Decree-Law No. (20) of 2025 (Amendment Law), introducing targeted amendments to Federal Decree-Law No. (32) of 2021 on Commercial Companies (CCL).
Key points:
- Scope extended to foreign companies with UAE presence and clarifies free zone company operations outside designated zones
- Re-domiciliation framework established, allowing companies to migrate between Emirates or from mainland to free zones while preserving legal identity
- Drag-along and tag-along rights now permitted in limited liability companies (LLCs) and private joint stock companies (private JSCs)
- LLCs may issue different classes of shares with varying rights and privileges
What Is Federal Decree-Law No. (20) Of 2025?
Federal Decree-Law No. (20) of 2025 (Amendment Law) introduces targeted modifications to Federal Decree-Law No. (32) of 2021 on Commercial Companies (CCL). Rather than replacing the CCL, the Amendment Law refines provisions for onshore and free zone entities. As these reforms continue reshaping the business landscape, many companies are seeking guidance from a corporate law firm in UAE to ensure compliance with the updated framework.
How Does the Scope of Application Change?
The Amendment Law extends the CCL to foreign companies with a UAE presence, including branches, representative offices, or management centers of free zone companies conducting activities outside their designated zones.
Free zone companies remain governed by their zone legislation unless it conflicts with the CCL. If free zone rules permit activities outside the zone, such as through a branch or representative office, those activities must comply with the CCL and other UAE laws applicable to mainland entities.
This reduces ambiguity for multi-jurisdiction structures and eases cross-border operational planning. Businesses can now operate under unified rules when integrating onshore and free zone activities. Free zone companies now carry UAE nationality, ensuring national treatment in contracts and dispute resolution.
What Is Re-Domiciliation and How Does It Work?
Re-domiciliation stands out as a core feature of the Amendment Law. It allows companies to migrate between Emirates, from mainland to free zones or vice versa, between free zones, or even into the UAE from abroad.
This preserves the company’s legal personality, rights, obligations, assets, and liabilities. It also preserves the company’s full history and track record from formation. Operations continue under the same shareholding, management, and activity level.
The process requires the following:
- Approval by a special resolution or absolute majority vote of shareholders.
- Compatibility between registries.
- Absence of prohibitive annotations.
- Consents from licensing authorities and the Ministry of Economy (or SCA for joint stock companies).
The decision must be published. Cabinet rules, developed in collaboration with competent authorities, will govern the process, including transfers involving financial free zones.
Previously, such moves required liquidation and reincorporation. This disrupted operations and erased corporate history. Now, this framework supports tax planning, operational alignment, regulatory arbitrage, and correcting legacy jurisdiction choices without those costs. For instance, companies can access free zone tax exemptions or mainland GCC customs benefits.
How Do Shareholder Rights and Exit Mechanisms Change?
AThe CCL now incorporates common law principles, including drag-along and tag-along rights, into its civil law framework.
For LLCs and private JSCs:
- Drag-along rights: Compel minority shareholders to join a sale initiated by majority holders under predefined conditions
- Tag-along rights: Allow minorities to participate in such sales on equivalent terms
- Rights must be included in the memorandum of association (MOA) or articles of association (AOA)
For mainland LLCs with deceased shareholders:
- Priority purchase options for surviving shareholders or the company itself
- Price negotiated with heirs
- If no agreement is reached, a court appoints independent financial and technical experts for valuation
These provisions provide statutory backing for merger and acquisition tools, reduce disputes, and facilitate smoother transactions. Many of these updates align with transaction practices typically handled by mergers and acquisitions (M&A) lawyers in UAE.
What Capital Structure Options Are Now Available?
The Amendment Law expands options for capital formation. LLCs can now issue shares in different classes, each with distinct attributes. These may vary in value, voting rights, dividend entitlements, redeemability, liquidation preferences, or other privileges and restrictions, provided they are detailed in the MOA or AOA and recorded in the commercial register.
This enables venture-style economics on the mainland:
- Preferred shares with downside protection
- Liquidation preferences
- Enhanced voting structures
The Cabinet will issue decisions prescribing permissible categories and conditions.
Shareholders in LLCs and JSCs may contribute assets rather than cash as in-kind contributions. These must be valued by accredited valuers at the contributor’s expense. The competent authority may challenge valuations and appoint alternatives if necessary.
What Governance Changes Apply?
Governance provisions prioritize operational stability and address leadership gaps.
Resignations of managers or board members take effect after 30 days if no replacement is appointed, unless otherwise stipulated. Companies must notify authorities within 30 days of term expirations and secure successors promptly.
In deadlock scenarios for LLCs where a board term ends without a new appointment, the competent authority may appoint non-shareholder directors after six months. Key continuity measures include:
- Boards may continue managing for up to six months post-term.
- Authorities can install interim managers or boards for up to one year until a general assembly resolves the matter.
These safeguards prevent operational paralysis during transitions.
How Does This Affect Public and Private Offerings?
Public offerings (PJSCs only):
- Require Securities and Commodities Authority (SCA) approval for any subscription invitations within the UAE
- Founder participation limits set by SCA decisions informed by Cabinet resolutions
Private JSCs:
- May now conduct private placements of securities on UAE financial markets
- Defined as offers to a limited, specified group of persons
- No previous statutory lock-in periods
- Subject to SCA-prescribed conditions and procedures
These updates enable onshore entities to access domestic markets more efficiently for growth-stage financing.
What Are Non-Profit Companies?
The revised CCL formally recognizes non-profit companies as a distinct corporate form. Entities may now incorporate as non-profits, where all revenues must be directed exclusively toward the company’s stated objectives, with no distribution of profits to partners or shareholders.
This addresses a longstanding gap in the UAE’s corporate toolkit, previously limited to profit-oriented structures. Non-profit companies can now pursue social enterprises or philanthropic initiatives. A forthcoming Cabinet decision will outline purposes, regulatory oversight, and exemptions for non-profits.
Key Takeaways
Federal Decree-Law No. (20) of 2025 introduces comprehensive reforms that enhance the UAE’s corporate governance framework:
- Multiple share classes in LLCs enable venture-style capital structures
- Drag-along and tag-along rights provide statutory merger and acquisition tools
- Re-domiciliation preserves corporate identity while allowing jurisdictional migration
- Non-profit companies address the need for social enterprises and philanthropic initiatives
Businesses should review their MOAs and AOAs to leverage new options such as share classes, exit mechanisms, and migration opportunities.
Authors: Shantanu Mukherjee, Alan Baiju
