UAE Commercial Companies Law 2026, Practical Guide for Llcs, Shareholders and Corporate Services

The commercial companies law UAE framework underwent its most significant overhaul in a decade when Federal Decree‑Law No. 20 of 2025 entered into force, replacing and amending substantial portions of the prior regime that had governed company formation, shareholding and governance since 2015. The new decree introduces statutory recognition of multiple share classes for LLCs, codifies drag‑along and tag‑along rights, creates a formal re‑domiciliation pathway between free zones and the mainland, and broadens capital‑raising mechanisms available to private companies. For directors, general counsel, company secretaries and corporate services teams operating across the UAE, these changes demand immediate review of existing articles of association, shareholder agreements and registry filings, the window for orderly compliance is narrowing through 2026.

Last reviewed: 13 May 2026. This article is general guidance and does not constitute legal advice. Readers should obtain bespoke advice before acting on any matter discussed below.

Executive Summary, What Federal Decree‑Law No. 20 of 2025 Changed and What to Do Now

Federal Decree‑Law No. 20 of 2025 replaces and amends core provisions of the prior commercial companies law UAE regime (Federal Decree‑Law No. 32 of 2021 and its predecessor, Federal Law No. 2 of 2015). The decree represents a deliberate effort by the UAE legislature to modernise the corporate toolkit available to onshore and, in many respects, free‑zone entities, making the jurisdiction more competitive for venture capital, private equity, family‑office structuring and cross‑border holding arrangements.

The headline changes affect virtually every limited liability company (LLC) in the UAE. The law now permits LLCs to issue multiple classes of shares with differing economic and voting rights, provides a statutory framework for compulsory buy‑out mechanisms (drag‑along and tag‑along), introduces formal re‑domiciliation procedures, and updates governance requirements including board composition, related‑party transaction controls and capital maintenance thresholds. Companies that were previously forced to use offshore or free‑zone structures to achieve share‑class flexibility can now accomplish similar outcomes in an onshore LLC.

The practical implication is clear: every existing UAE LLC should audit its articles of association (AOA) and any shareholders’ agreement (SHA) against the new provisions. Industry observers expect that companies which delay this review risk finding their constitutional documents are inconsistent with mandatory statutory provisions, potentially rendering certain clauses unenforceable and exposing directors to personal liability. The recommended action plan, detailed in full below, operates on a 90‑day cycle: audit within 30 days, draft amendments within 60 days, and file with the relevant registry within 90 days.

Legal Basis and Quick Reference, Federal Decree‑Law No. 20 of 2025

The primary statutory text is Federal Decree‑Law No. 20 of 2025, published in the Official Gazette and available on the UAE Legislation Portal. The decree amends and restates provisions of the previous commercial companies law UAE framework and applies to all commercial companies incorporated on the UAE mainland. Free‑zone companies remain governed by their respective free‑zone authority regulations, although several free zones have indicated they will adopt equivalent provisions or recognise re‑domiciliation applications filed under the new law.

Official government guidance on implementation, including the interaction with full foreign ownership rules, is published by the UAE government portal at u.ae. Companies should treat the official decree text and u.ae guidance as the authoritative primary sources for compliance planning.

Key Articles to Read

While the full decree runs to dozens of articles, corporate services teams should prioritise the following provisions when conducting their initial compliance audit:

• Share classes and capital structure. Articles governing the issuance of multiple share classes for LLCs, including provisions on differing voting, dividend and liquidation rights attached to each class.
• Drag‑along and tag‑along rights. Articles providing statutory recognition for compulsory acquisition and co‑sale mechanisms, including valuation methodology and notice requirements.
• Re‑domiciliation. Articles establishing the formal procedure for transferring a company’s registered domicile between a free zone and the mainland (and vice versa), including creditor protection safeguards.
• Foreign ownership. Articles confirming and expanding the full foreign ownership regime for mainland commercial companies, to be read alongside the u.ae guidance and the relevant Cabinet Resolutions on the Positive List.
• Corporate governance updates. Articles addressing board composition, related‑party transactions, conflict‑of‑interest disclosure, and enhanced capital maintenance requirements.
• Transitional provisions. Articles specifying deadlines and grace periods for existing companies to bring their constitutional documents into compliance.

Key Changes in the Commercial Companies Law UAE, How the Decree Differs from the Prior Regime

The UAE companies law amendments introduced by Federal Decree‑Law No. 20 of 2025 touch nearly every area of corporate life. The following comparison table summarises the most significant changes, measured against the prior regime, and identifies the practical implication for each.

Legislative Timeline

Impact on LLCs and Shareholders, Formation, Share Capital and Exit Rights

The LLC remains the most widely used corporate vehicle in the UAE, and the practical impact of the commercial companies law UAE amendments is felt most acutely here. The decree transforms the LLC from a relatively rigid, single‑class structure into a flexible vehicle capable of accommodating sophisticated shareholding arrangements previously available only through offshore or free‑zone structures.

For existing LLCs, the key question is whether your current AOA and SHA remain fit for purpose. Under the new law, constitutional documents that reference only a single class of shares, or that contain drag‑along or tag‑along provisions drafted without reference to the new statutory requirements, may need to be amended. Companies that have relied on contractual SHA provisions alone, without corresponding AOA amendments, face a heightened risk that courts will apply the statutory default rules rather than the contractually agreed terms.

The statutory recognition of LLC exit rights is particularly significant. Minority shareholders now have a clearer legal basis for challenging unfair prejudice, and the compulsory buy‑out provisions give majority holders a codified mechanism for acquiring minority stakes. The likely practical effect will be a reduction in deadlock disputes and more predictable exit outcomes, but only if the AOA is drafted to work with, rather than against, the statutory framework.

Multiple Share Classes, Drafting Checklist and Sample Clause

The new law permits an LLC’s AOA to create multiple share classes. Each class may carry different rights as to voting, dividends, return of capital on liquidation, and conversion. When implementing multiple share classes, corporate teams should follow this checklist:

• Define each class clearly in the AOA. Specify the rights, preferences and restrictions attaching to each class, do not rely on a SHA alone.
• Align voting thresholds. Check that reserved‑matter and special‑resolution thresholds in the AOA reflect the intended voting power of each class.
• Address conversion and anti‑dilution. If any class is convertible, specify the conversion ratio, trigger events and any anti‑dilution protections.
• File amended AOA with the relevant registry. The share class structure must be reflected in the filed constitutional document, registry amendments are mandatory, not optional.

Sample clause (for adaptation only): “The Company’s share capital shall be divided into Class A Shares and Class B Shares. Class A Shares shall carry one vote per share and shall rank pari passu for dividends. Class B Shares shall carry no voting rights but shall be entitled to a preferred cumulative dividend of [X]% per annum, payable in priority to any dividend on Class A Shares.”

Drag‑Along and Tag‑Along, Sample Language and Enforcement Considerations

Federal Decree‑Law No. 20 of 2025 provides a statutory basis for drag‑along and tag‑along rights in LLCs, meaning that these mechanisms are no longer solely dependent on contractual SHA clauses. The decree prescribes minimum notice periods to minority shareholders, mandates an independent valuation where the parties cannot agree on price, and sets out the process for compulsory transfer. Industry observers expect that courts will interpret these provisions strictly, which means that existing SHA drag/tag clauses drafted before the decree must be reviewed for consistency.

Sample drag‑along clause (for adaptation only): “If Shareholders holding [75]% or more of the issued shares (the ‘Drag Shareholders’) accept a bona fide offer from a third party to acquire all issued shares, the Drag Shareholders may require all remaining Shareholders to transfer their shares to the third party on the same terms, subject to the notice and valuation requirements of Federal Decree‑Law No. 20 of 2025.”

Sample tag‑along clause (for adaptation only): “If any Shareholder proposes to transfer shares representing [50]% or more of the issued shares to a third party, each remaining Shareholder shall have the right to require the transferring Shareholder to procure that the third party acquires the remaining Shareholder’s shares on the same terms and at the same price per share.”

Companies that fail to update their AOA and SHA to reflect these statutory requirements risk having their existing contractual provisions set aside in favour of the statutory defaults, which may produce a materially different outcome from the commercial deal originally negotiated.

Capital Raising, Share Classes and Investor Onboarding in 2026

Capital raising UAE 2026 has been materially simplified by the new law’s recognition of multiple share classes and convertible instruments for LLCs. Previously, founders seeking to raise venture capital or private equity had to structure their companies in a free zone or use offshore holding vehicles to achieve the share‑class flexibility investors required. The commercial companies law UAE amendments now permit onshore LLCs to issue preference shares, non‑voting shares and convertible instruments directly, opening a significant new channel for fundraising.

Practical Steps for Seed and VC Rounds

Companies planning a fundraising round should follow this document checklist:

• Amend AOA to authorise the new share class. The AOA must define the rights attaching to each class before shares can be issued. File the amended AOA with the registry before closing.
• Prepare a subscription agreement. This should reference the relevant class of shares, the subscription price, any conversion mechanics and the applicable provisions of Federal Decree‑Law No. 20 of 2025.
• Update the SHA (if any). Align investor protection provisions, including anti‑dilution, pre‑emptive rights and information rights, with the new statutory framework.
• Obtain board approval. The board must resolve to allot the new shares and, where required, confirm that pre‑emptive rights have been waived or complied with.
• Regulatory and tax clearance. Confirm the share issuance does not trigger securities‑law requirements (particularly for larger raises) and notify the Federal Tax Authority if the capital structure change affects the company’s corporate tax profile.

Special Purpose Share Classes, Non‑Voting, Preference and Tax Considerations

The ability to issue non‑voting shares allows founders to raise capital without diluting control. Preference shares can carry a fixed or cumulative dividend entitlement, liquidation preference, or both. Early indications suggest that the tax treatment of preference dividends will follow general corporate tax principles (subject to any specific guidance from the Federal Tax Authority), but companies should obtain confirmatory tax advice before structuring a preference share issuance. Registry fees for amending the AOA to reflect new share classes vary by emirate and licensing authority.

Re‑Domiciliation UAE, Transfers and Cross‑Jurisdiction Moves

One of the most anticipated features of the UAE companies law amendments is the formal statutory pathway for re‑domiciliation. Under the prior regime, transferring a company between a free zone and the mainland (or between free zones) typically required the company to be wound up in one jurisdiction and re‑incorporated in another, a costly, time‑consuming process that disrupted contracts, licences and employment relationships.

Federal Decree‑Law No. 20 of 2025 introduces a continuity‑of‑entity mechanism: a company can transfer its registered domicile without dissolution, preserving its legal personality, contracts, assets and liabilities. The procedure involves the following key steps:

• Board and shareholder approval. A special resolution of shareholders is typically required, together with a board resolution confirming solvency.
• Application to the receiving registry. The company must apply for registration in the destination jurisdiction (mainland or free zone) and demonstrate compliance with the new jurisdiction’s requirements.
• Creditor protection notice. The law requires a notice period during which creditors may object to the transfer. The company must satisfy or secure outstanding obligations.
• De‑registration from the originating registry. Once accepted by the receiving registry, the company applies for de‑registration from the originating jurisdiction.
• Employee transfer. Employment contracts continue automatically, the company remains the same legal entity, but companies should issue confirmatory communications to employees and update labour records.
• Licensing authority coordination. The company must obtain a new trade licence from the receiving licensing authority and surrender its existing licence.

Industry observers expect the typical re‑domiciliation timeline to run between 60 and 120 days, depending on the complexity of the company’s structure and the responsiveness of the relevant registries. Companies considering re‑domiciliation should begin the process by engaging both the originating and receiving authorities in parallel to identify any jurisdiction‑specific requirements.

Company Compliance Checklist UAE, A Step‑by‑Step Guide for Corporate Services Teams

The following company compliance checklist UAE is designed for company secretaries and corporate services providers managing onshore and free‑zone entities. It translates the legal requirements of Federal Decree‑Law No. 20 of 2025 into a concrete, sequenced action plan.

Companies should treat this compliance checklist as a living document, updated as further implementing regulations or ministerial decisions are issued throughout 2026.

Sample Clause Bank, Drafting for Share Classes, Exits and Valuation

The following sample clauses are provided as starting points for drafting. They must be adapted to the specific circumstances of each company and reviewed against the full text of Federal Decree‑Law No. 20 of 2025 before use. None of these clauses should be adopted without independent legal advice.

• Share class definition. “The share capital of the Company shall be divided into [number] Class A Ordinary Shares and [number] Class B Preference Shares. Class B Preference Shares shall carry a cumulative preferred dividend of [X]% per annum, payable in priority to any dividend declared on Class A Ordinary Shares, and shall rank in priority to Class A Ordinary Shares on a return of capital. Class B Preference Shares shall carry no voting rights except on resolutions to vary the rights of that class.”
• Exit valuation (independent expert). “Where the Shareholders are unable to agree on the fair market value of the Shares within [30] days of a Transfer Notice, the fair market value shall be determined by an independent valuer appointed by agreement of the parties or, failing agreement, by the President of the [relevant professional body]. The valuation shall be conducted on a willing buyer / willing seller basis, assuming the Company is a going concern, and shall be binding on all parties in the absence of manifest error.”
• Pre‑emptive rights waiver. “Each Shareholder hereby irrevocably waives any pre‑emptive or first‑refusal right it may have under the Articles or applicable law in respect of the allotment and issuance of [specify class] Shares to [Investor Name] pursuant to the Subscription Agreement dated [date], provided that this waiver shall not extend to any subsequent issuance of Shares.”
• Tag‑along right. “If a Shareholder (the ‘Selling Shareholder’) proposes to transfer Shares representing [50]% or more of the issued Shares, each other Shareholder (each a ‘Tag Shareholder’) shall be entitled, by written notice given within [20] Business Days of receipt of the Transfer Notice, to require the Selling Shareholder to procure that the proposed transferee acquires the Tag Shareholder’s Shares on terms no less favourable than those offered to the Selling Shareholder.”
• Drag‑along right. “If Shareholders holding in aggregate not less than [75]% of the issued Shares (the ‘Dragging Shareholders’) wish to accept an offer from a bona fide third party to acquire all of the issued Shares, the Dragging Shareholders may, by written notice to all other Shareholders, require each such Shareholder to transfer its Shares to the proposed transferee on the same terms and conditions, subject to the minimum notice and valuation requirements prescribed by Federal Decree‑Law No. 20 of 2025.”

Practical Risk Assessment and Next Steps Under the Commercial Companies Law UAE

Not all compliance actions carry equal urgency. The following risk‑based prioritisation helps corporate teams allocate resources effectively over the next 90 days.

• High risk (act within 30 days). AOA/SHA provisions that directly conflict with mandatory statutory requirements, for example, drag‑along or tag‑along clauses that omit the decree’s prescribed notice or valuation procedures, or capital distribution provisions that fail to incorporate the new solvency test. Non‑compliance here may render clauses unenforceable and expose directors to personal liability.
• Medium risk (act within 60 days). Share class structures that are currently single‑class but where investors or shareholders have requested or are negotiating multiple classes. Delays here stall fundraising rounds and may force parties into sub‑optimal interim arrangements.
• Lower risk (act within 90 days). Governance updates (independent director appointments, audit committee formation) for companies that fall below the thresholds triggering mandatory requirements. These should still be addressed proactively, as the thresholds may be revised downward by subsequent implementing regulations.

The recommended 90‑day action plan is: (1) complete the AOA/SHA audit and gap analysis in the first 30 days; (2) draft, negotiate and approve all amendments in days 30–60; and (3) file with registries, update records and communicate externally in days 60–90. Companies that follow this timeline will be well positioned for compliance when any regulatory enforcement activity commences later in 2026.

Sources

1. UAE Legislation Portal, Federal Decree‑Law No. 20 of 2025 (official text)
2. u.ae, Government guidance on full foreign ownership / doing business
3. Norton Rose Fulbright, Key amendments to the UAE Commercial Companies Law and their practical impact
4. Cleary Gottlieb, UAE Companies Law Update 2025
5. UNCTAD Investment Policy Monitor, Amending Commercial Companies Law
6. Federal Tax Authority (UAE)
7. Clifford Chance, UAE Commercial Companies Law: What have we learned
8. Hunton, New UAE Commercial Companies Law comes into effect
9. International Trade Administration (US), UAE Companies Law overview