The United Arab Emirates promulgated Federal Decree-Law No. 20 of 2025 to amend key provisions of Federal Decree-Law No. 32 of 2021 on commercial companies. President His Highness Sheikh Mohamed bin Zayed Al Nahyan issued the decree on October 1, 2025, and it entered into force on October 15, 2025. The revisions expand corporate flexibility, strengthen governance tools and clarify jurisdictional boundaries to support a modern business environment.
Companies may now transfer their domicile within the UAE between emirates, the mainland, free zones and financial free zones. This redomiciliation occurs with full continuity of the company’s legal personality, rights, obligations, contracts and licenses. The process avoids the need for dissolution, re-incorporation or complex asset transfers. Businesses can therefore optimize their regulatory and commercial setups with greater ease under the updated framework.
Limited liability companies can for the first time issue multiple classes of shares with differing economic, voting and other rights. These classes may vary in entitlements to dividends, liquidation preferences and redemption features. Contributions in kind toward capital are also permitted, subject to valuation according to standards issued by the Ministry of Economy in coordination with local authorities. The changes enable more sophisticated investment and ownership structures that align onshore rules with international norms.
The amendments establish a statutory basis for drag-along and tag-along rights that shareholders of limited liability companies and private joint stock companies may include in their constitutional documents. Clearer processes now exist for share succession upon events such as death, allowing surviving shareholders or the company to acquire shares based on agreed terms or expert valuation. Licensing authorities gain the power to appoint independent non-shareholder directors for up to one year to resolve deadlocks. These mechanisms reduce uncertainty and facilitate smoother transactions for private businesses and family-owned enterprises.
A comprehensive framework for non-profit companies has been introduced, requiring all revenues to be reinvested in line with stated objectives while prohibiting distributions to shareholders. The Cabinet will issue implementing regulations on governance, licensing and permissible activities for such entities. This structure provides a dedicated vehicle for social, cultural and charitable initiatives within the commercial companies legislation for the first time.
The decree extends the scope of the Commercial Companies Law to foreign entities maintaining a presence in the UAE and to free zone companies that conduct activities on the mainland. Branches and representative offices of free zone entities operating outside their zones must comply with the law in addition to free zone regulations. The clarification promotes consistency across jurisdictions while preserving specialized rules in centers such as the Abu Dhabi Global Market and Dubai International Financial Centre.
Sources:
— https://www.linkedin.com/feed/update/urn:li:activity:7405803730098696193/
— https://www.clearygottlieb.com/news-and-insights/publication-listing/uae-companies-law-update-2025
— https://www.reedsmith.com/articles/uae-commercial-companies-law-key-changes-and-what-they-mean-for-business/
— https://www.gtlaw.com/en/insights/2026/2/uae-commercial-companies-law-amendments-practical-corporate-structuring-and-manda-considerations
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