Legal Analysis of Federal Decree-Law No. 20 of 2025 Amending Federal Decree-Law No. 32 of 2021
1. Introduction
The issuance of Federal Decree-Law No. 20 of 2025 (the Amending Law), which amends Federal Decree-Law No. 32 of 2021 on Commercial Companies (the Commercial Companies Law or CCL), represents a material and strategic development in the UAE’s onshore corporate legislative framework.
The Amending Law introduces substantive reforms across capital structuring, shareholder rights, corporate governance, financing mechanisms, and corporate mobility, reflecting a broader policy shift toward enhanced flexibility, stronger investor protection, and closer alignment with internationally recognised corporate law standards. Subject to transitional provisions and the issuance of implementing regulations, the amendments are expected to come into force in 2026.
Collectively, these reforms underscore the UAE’s continued commitment to modernising its corporate legal regime and reinforcing its position as a preferred jurisdiction for regional and cross-border investment.
2. Legislative Objectives and Policy Rationale
The Amending Law is driven by a clear policy rationale aimed at modernising the corporate law framework in a manner that accommodates diverse investment models, supports innovation, and balances commercial flexibility with adequate safeguards for stakeholders.
The principal legislative objectives include:
(a) introducing greater flexibility in share capital and ownership structures;
(b) strengthening statutory protections for minority shareholders;
(c) modernising corporate governance and management continuity mechanisms;
(d) facilitating corporate restructuring and re-domiciliation without loss of legal personality;
(e) establishing a statutory framework for non-profit corporate entities;
(f) expanding financing and capital-raising options for private joint stock companies; and
(g) enhancing the UAE’s competitiveness as a global investment jurisdiction.
These objectives underpin the substantive reforms outlined below.
3. Statutory Recognition of the Non-Profit Company
The Amending Law introduces non-profit companies as a distinct statutory corporate form under the CCL.
While permitted to engage in income-generating activities, a non-profit company is expressly prohibited from distributing profits or surpluses to shareholders or members. All net profits must be reinvested exclusively toward achieving the company’s stated objectives. This structure establishes a clear statutory basis for social enterprises, foundations, and mission-driven organisations, particularly in sectors such as education, healthcare, sustainability, culture, and social development.
Non-profit companies will be subject to specific governance, supervision, and compliance requirements, which are expected to be further detailed through Cabinet resolutions and implementing regulations.
4. Multiple Classes of Shares and Advanced Capital Structuring
The Amendments significantly enhance flexibility in capital structuring by permitting companies to issue multiple classes of shares, each carrying distinct rights and obligations. These rights may relate to, inter alia:
- voting rights;
- dividend and profit distribution entitlements;
- liquidation and redemption preferences;
- conversion and anti-dilution rights; and
- other financial or governance-related rights.
All share classes and associated rights must be expressly set out in the company’s Memorandum of Association (MOA) and duly registered with the competent authority. This reform aligns UAE corporate law with international investment practices and provides statutory support for sophisticated structures commonly utilised in venture capital, private equity, and structured financing transactions.
5. Statutory Recognition of Drag-Along and Tag-Along Rights
The Amending Law confers explicit statutory recognition on drag-along and tag-along rights, which were previously governed primarily by contractual arrangements.
- Drag-along rights enable majority shareholders, subject to prescribed conditions, to compel minority shareholders to participate in a sale on equivalent terms.
- Tag-along rights entitle minority shareholders to participate in a sale initiated by majority shareholders on the same commercial terms.
The codification of these mechanisms enhances enforceability, reduces transactional uncertainty, and aligns UAE corporate law with established international M&A standards.
6. Corporate Governance and Management Continuity
The amendments strengthen corporate governance provisions relating to:
- resignation, absence, death, or incapacity of directors or managers;
- continuity of management authority; and
- interim or transitional governance arrangements.
These provisions are designed to mitigate risks associated with governance gaps, regulatory non-compliance, and operational disruption, thereby enhancing business continuity and legal certainty.
7. Corporate Mobility and Re-Domiciliation
A key structural reform introduced by the Amending Law is the facilitation of corporate mobility.
Companies may transfer their registration:
- between Emirates;
- between mainland and free zone jurisdictions; and
- between regulatory authorities,
without dissolution or loss of legal personality.
Upon migration, the company’s contracts, rights, obligations, and corporate history remain unaffected. This framework enables regulatory optimisation, group restructuring, and strategic relocation without the need for liquidation or re-incorporation, while safeguarding the rights of shareholders and creditors.
8. Scope of Application and UAE Nationality
This amendment clarifies the scope of application of the CCL, confirming that it applies to:
- companies incorporated in the UAE;
- foreign companies operating in the UAE through branches or representative offices; and
- free zone companies conducting activities onshore, subject to applicable regulations.
Entities established in the UAE, including free zone companies, are expressly recognised as having UAE nationality for the purposes of the CCL.
9. Capital Raising by Private Joint Stock Companies
Private joint stock companies are permitted to raise capital through private subscriptions, including offerings on national financial markets, without being required to convert into public joint stock companies.
Such offerings remain subject to applicable securities legislation and regulatory approvals, thereby expanding financing options while maintaining investor protection and regulatory oversight.
10. Valuation of In-Kind Capital Contributions
To safeguard capital integrity, the Amending Law mandates the valuation of in-kind capital contributions, including real estate, intellectual property, and equipment, by accredited or approved valuers in accordance with prescribed standards.
These measures are intended to prevent over-valuation, enhance transparency, protect creditors and minority shareholders, and ensure fairness in capital formation.
11. Incorporation of Shareholder Arrangements into Constitutional Documents
The Amending Law permits broader incorporation into a company’s MOA of provisions addressing:
- share transfers upon death or incapacity;
- pre-emption and transfer restrictions;
- exit mechanisms and structured buy-outs; and
- succession and continuity arrangements.
Embedding such provisions into constitutional documents enhances enforceability against third parties and reduces reliance on separate, unregistered shareholder agreements.
12. Minority Shareholder Protection and Contractual Certainty
Across multiple provisions, the Amending Law reinforces minority shareholder protections, including enhanced disclosure requirements, enforceability of shareholder rights, and safeguards during restructuring, migration, and exit events. These reforms contribute to improved contractual certainty and a reduction in shareholder disputes.
13. Transitional Considerations and Compliance
In anticipation of the amendments becoming effective, companies should consider:
- reviewing and updating their MOA
- reassessing capital structures and shareholder arrangements;
- aligning governance frameworks with the amended provisions;
- evaluating restructuring or re-domiciliation opportunities; and
- closely monitoring the issuance of implementing regulations and Cabinet decisions.
Early compliance planning will be critical to mitigating risk and maximising the benefits introduced by the Amending Law.
14. Conclusion
The 2025 amendments to the UAE Commercial Companies Law represent a substantive evolution toward a more flexible, transparent, and investor-aligned corporate regime. By codifying internationally recognised corporate mechanisms while preserving regulatory oversight, the UAE further consolidates its position as a forward-looking and competitive jurisdiction for investment, corporate structuring, and cross-border business operations.
Our team can guide you through the implications of the 2025 Commercial Companies Law amendments, including corporate structuring, governance updates, and shareholder arrangements. For further information, please contact Suneer Kumar at suneer@alsuwaidi.ae, Vida Grace Serrano, at vida@alsuwaidi.ae or Mamdouh Tawfik at m.tawfik@alsuwaidi.ae