UAE Commercial Companies Law Enters a New Era: What the 2025 Amendment Really Means

The UAE has quietly but decisively reshaped its corporate landscape with Federal Decree-Law No. 20 of 2025, an update to the well-known Commercial Companies Law that has governed business life since 2022. Four years of practical experience showed where the law worked well and where the market needed more flexibility. The result is a refreshed corporate framework that feels far more aligned with how modern businesses actually operate — from start-ups seeking investment to multinationals managing complex group structures.

One of the most noticeable shifts is the clearer relationship between mainland and free-zone companies. For years, businesses moved back and forth between these jurisdictions, often dealing with grey areas in how the laws overlapped. The new amendment removes much of that uncertainty. Free-zone companies now enjoy a more fully recognised legal standing for certain mainland interactions, and the law explicitly covers onshore branches and activities of foreign or free-zone entities. In practice, corporate groups that work across different zones will find it easier to structure themselves without constantly questioning which rules apply where.

Another significant step forward is the introduction of share classes for LLCs. This is a change that many investors and founders have been waiting for. The classic “one share = one vote” model simply didn’t offer enough nuance for companies dealing with venture capital, family control arrangements or institutional investors. Under the new rules, LLCs can finally issue different types of shares — some with enhanced voting rights, others designed for preferential dividends or specific investment structures. It brings the mainland LLC model closer to international standards and gives founders and investors the tools they need to negotiate balanced, sophisticated agreements.

Closely connected to this is the formal recognition of drag-along and tag-along rights within a company’s constitutional documents. These rights already existed in practice through side agreements, especially in deals influenced by common-law jurisdictions like DIFC or international investors. But their absence from the federal mainland framework made enforcement less predictable. Now, they’re on firm legal ground. Majority shareholders benefit from a clearer mechanism to execute exits, and minority investors gain reassurance that they won’t be left behind in a transaction. It’s a small change with a major impact on deal certainty.

One of the most forward-looking elements of the amendment is the introduction of re-domiciliation. Until now, companies wanting to move from mainland to a free zone (or vice versa) had to dissolve one entity and create another. This caused disruption, administrative complexity, and often a complete reset of corporate history. The new law removes that barrier. Companies can now migrate their legal home within the UAE while keeping their identity, obligations and corporate relationships intact. This development alone will likely influence long-term group structuring strategies, especially for international investors consolidating their presence in the UAE.

The amendment also opens the door to something the UAE has long needed: a non-profit company structure under the federal corporate system. While the UAE hosts hundreds of community, cultural and charitable initiatives, most operated under workarounds rather than a clear corporate form. With the introduction of non-profit companies, organisations aiming at social impact finally have a transparent and legally recognised vehicle for their activities. This will be welcomed by educational, cultural, philanthropic and CSR-focused groups looking for a formal legal identity.

Governance is another area where the law has become more practical. Management transitions, resignations, temporary board gaps — these are normal parts of corporate life, yet the previous rules didn’t always provide smooth solutions. The new provisions offer continuity mechanisms that prevent companies from falling into operational limbo when leadership changes. These updates might not make headlines, but they will significantly reduce the internal friction businesses often face in day-to-day administration.

Private joint stock companies also receive a notable upgrade: the ability to raise capital through private placements. This closes a long-standing gap between the ambitions of fast-growing companies and the limitations of the previous law. Institutional investors, private equity funds and strategic partners now have a clearer pathway to invest without forcing companies into a full public offering. For many businesses preparing for expansion, this shift will be a game-changer.

Taken together, these reforms mark a deliberate move toward a more open, flexible and investor-friendly corporate environment. They strengthen corporate governance, give shareholders clearer tools to manage risk, and make it easier for businesses to adapt to growth, restructuring or strategic changes.

For companies already operating in the UAE, now is the right moment to review their MOA, shareholder agreements and long-term structuring plans. For new investors, the market has just become even more attractive and familiar. And for those balancing operations between free zones and the mainland, the landscape is considerably clearer.

The 2025 Amendment signals that the UAE is not only keeping pace with global corporate standards — it is setting the stage for the next chapter of business growth in the region.