Introduction
The UAE has spent the past decade refining the legal architecture that governs how companies are owned, financed, and transferred. Federal Decree-Law No. 32 of 2021 on Commercial Companies set a modern baseline, including the landmark shift to full foreign ownership of most mainland activities. Federal Decree-Law No. 20 of 2025 now builds on that foundation with a set of targeted but consequential amendments. Issued in late 2025 and taking effect on a phased basis, the reforms reshape the toolkit available to founders, investors, and family enterprises operating onshore. For most businesses, 2026 is the practical year in which these changes start to influence how deals are structured and how constitutional documents are drafted.
This Jurisdiction Report explains what changed and why it matters. It covers the headline reforms: the ability of limited liability companies to issue multiple classes of shares, a statutory basis for drag-along and tag-along rights, the treatment of shares on a shareholder's death, clearer rules on in-kind capital contributions, the first recognition of non-profit companies, redomiciliation between jurisdictions, and expanded private placement flexibility for Private Joint Stock Companies. Throughout, we focus on the decisions UAE business owners and investors face in 2026, and where professional advice on corporate structuring, tax compliance, and AML obligations adds the most value.
A Quick Recap: From the 2021 Law to the 2025 Amendments
Federal Decree-Law No. 32 of 2021 replaced the long-standing 2015 companies law and brought UAE corporate rules closer to international norms. Its most visible reform removed the requirement for a UAE national to hold a majority stake in most mainland companies, opening the door to full foreign ownership across a wide range of activities. The 2021 law was deliberately broad, leaving room for later refinement as practice revealed gaps.
Federal Decree-Law No. 20 of 2025 is that refinement. Rather than rewriting the framework, it amends specific articles to solve real problems that emerged after 2021: the difficulty of structuring sophisticated investment rounds onshore, the absence of statutory exit mechanics, uncertainty over succession of shares, and the lack of a formal vehicle for mission-driven organisations. The result is a more transaction-ready company law.
- Continuity of personality: Companies do not need to dissolve and re-form to benefit. Most reforms operate by giving companies new options.
- Phased application: The effective date and transitional treatment vary by provision, with implementation anticipated over roughly 12 to 24 months.
- Dependence on secondary rules: Several reforms, including the detail of share classes and PJSC private placements, depend on implementing Cabinet decisions and Securities and Commodities Authority (SCA) regulations.
Read the law alongside the implementing rules
Many of the most useful provisions in Decree-Law 20 are framework rules that will be operationalised by Cabinet decisions and SCA regulations. Until those secondary instruments are published, the precise categories, thresholds, and procedures may not be fully settled. Treat specific mechanics as expected rather than fixed, and confirm the current position before relying on them in a transaction.
Multiple Share Classes for LLCs
The single most significant change for the private market is that a mainland limited liability company may now issue more than one class of shares. Under the previous regime, LLC shares were broadly uniform, which forced investors and founders to replicate preference structures through contractual side arrangements that were not always robust or easy to enforce.
What the new flexibility allows
Different share classes may carry differentiated rights. Based on the amendments and commentary issued so far, these rights are expected to include variations in the following areas:
- Voting: Classes can carry different voting weights or, in some structures, limited or no voting rights.
- Dividends: Classes can have preferential or differentiated dividend entitlements.
- Redemption: Shares may be made redeemable on defined terms.
- Liquidation priority: Classes can rank differently on a winding up, allowing liquidation preferences familiar from venture and private equity deals.
The classes and the rights attached to each must be set out in the company's constitutional documents (the memorandum and articles of association) and recorded in the commercial register.
Why this matters for founders and investors
This reform brings the onshore LLC much closer to the structures used in international venture capital, private equity, and joint venture transactions. A startup can now offer preferred shares to a lead investor, with a liquidation preference and enhanced consent rights, while founders retain ordinary shares and operational control. A family business can separate economic participation from management voting, giving the next generation dividends without ceding day-to-day control prematurely.
| Use case | Before Decree-Law 20 | After Decree-Law 20 |
|---|---|---|
| Venture financing | Preferences replicated by contract, weaker enforceability | Preferred share class with liquidation preference in the articles |
| Family succession | Economic and voting rights hard to separate | Distinct classes split dividends from control |
| Strategic investor | Limited room for tailored governance rights | Class-specific voting and consent thresholds |
| Employee incentives | Awkward to grant economic upside only | Non-voting or limited-voting economic class possible |
Document the cap table early
If you plan to raise capital in 2026 or beyond, define your share classes and the rights attached to each before you take in money, not after. Building the structure into the articles from the outset avoids costly amendments mid-round and gives investors confidence that their preferences sit in the constitutional documents rather than a side letter.
Drag-Along and Tag-Along Rights
Exit mechanics are the second major upgrade. The amendments give a statutory basis for drag-along and tag-along rights, which were previously contractual constructs of uncertain standing under UAE law.
How each right works
- Drag-along: A selling majority shareholder can require minority shareholders to sell their shares on the same terms, allowing a buyer to acquire 100 percent of the company in a single transaction. This removes the holdout problem that can derail a sale.
- Tag-along: A minority shareholder can require that, if the majority sells, the minority is allowed to participate in the sale on equal terms. This protects smaller shareholders from being left behind with a new, unknown controlling owner.
Embedding these rights in the constitutional documents (rather than relying solely on a separate shareholders' agreement) strengthens their enforceability and makes the company more attractive to incoming investors who want a clear path to exit.
Pre-emption can still bite in an LLC
For LLCs, the statutory pre-emption regime continues to apply, and it can interact with drag-along and tag-along provisions in ways that affect how they operate in practice. Drafting needs to reconcile the new exit rights with existing pre-emption rules so the two do not conflict. Do not assume a drag-along clause overrides pre-emption automatically; have the interaction reviewed before you rely on it.
Succession of Shares on a Shareholder's Death
A recurring source of disputes in closely held UAE companies has been what happens to a shareholder's stake when they die. The amendments clarify the treatment of shares on a shareholder's death, giving companies and families a clearer framework for succession.
This matters most for family businesses and founder-led companies, where an unplanned death previously risked deadlock, forced sales, or protracted disputes among heirs. Combined with the new ability to create distinct share classes, the succession provisions let owners design an orderly transition:
- Plan for continuity: Constitutional documents can address how shares pass and how the company continues operating during a transition.
- Align with estate planning: Share structures can be coordinated with wills, foundations, and other succession tools available in the UAE.
- Reduce deadlock risk: Clearer default rules and the ability to tailor them reduce the chance of a governance freeze when a shareholder dies.
In-Kind Capital Contributions
The amendments clarify and reinforce the rules around in-kind (non-cash) capital contributions, which are contributions of assets such as property, equipment, intellectual property, or an existing business rather than cash.
In-kind contributions remain subject to regulated valuation standards. The emphasis on proper, independent valuation protects co-shareholders and creditors by ensuring that non-cash assets are not overstated when they are credited toward share capital. For businesses contributing assets into a UAE entity, the practical points are:
- Independent valuation: Expect to support an in-kind contribution with a valuation that meets the applicable standards.
- Documentation: The nature, value, and treatment of the contributed assets should be properly recorded in the constitutional documents and corporate records.
- Cross-border assets: Where assets are contributed from outside the UAE, valuation and title transfer require careful coordination.
Tie valuation to your tax position
A non-cash contribution has consequences beyond company law. The value attributed to contributed assets can affect your UAE corporate tax base and transfer pricing position for related-party arrangements. Coordinate the corporate valuation with your tax analysis so the two are consistent and defensible if reviewed.
Recognition of the Non-Profit Company
For the first time, the Commercial Companies Law formally recognises the non-profit company as a corporate form. Previously, mission-driven organisations in the UAE often had to use structures that were not purpose-built for non-profit activity.
A non-profit company may pursue social, philanthropic, cultural, or developmental objectives. The defining feature is that any surplus generated from its activities must be reinvested in furtherance of its mission and may not be distributed to members or shareholders. This gives founders of social enterprises, foundations with commercial activity, and community organisations a recognised vehicle inside the mainstream company law framework.
- Clear purpose lock: Surplus is dedicated to the founding objectives, providing assurance to donors, partners, and grant-makers.
- Mainstream framework: The form sits within the Commercial Companies Law rather than a separate, less familiar regime.
- Hybrid activity: Organisations that conduct economic activity to fund a social mission gain a structure suited to that model.
Redomiciliation: Moving Without Re-Incorporating
Among the most practically useful reforms is a statutory mechanism allowing a company to transfer its registration from one competent authority to another while retaining its legal personality. In plain terms, a company can change where it is registered without dissolving and starting again.
This is expected to support several types of move, subject to shareholder approval and the consent of the relevant licensing authorities:
- Between Emirates within the mainland.
- Between the mainland and free zones in either direction.
- Between free zones.
The key advantage is continuity. The company keeps the same legal entity, its history, its contracts, and its operations. Bank accounts, employment relationships, and supplier agreements do not have to be unwound and rebuilt, which has historically been the painful part of relocating a UAE business.
Continuity is subject to authority consent
Redomiciliation preserves legal personality, but it is not automatic. It requires shareholder approval and the agreement of both the originating and receiving licensing authorities, and each authority is expected to set its own procedures. Plan the move as a coordinated process with a realistic timeline rather than a single filing.
Capital Raising: Private Placements for Private Joint Stock Companies
The amendments also expand how companies can raise capital. The established principle remains that public offerings may only be undertaken by Public Joint Stock Companies with SCA approval. What is new is the flexibility allowing Private Joint Stock Companies (PJSCs) to undertake private placements in the UAE, subject to forthcoming SCA rules.
For a growing private business that has outgrown a small shareholder base but is not ready for a public listing, this creates a middle path: raising capital from a defined set of investors under a regulated private placement regime. The detail, including who qualifies as an eligible investor and what disclosure is required, will be set out in the SCA regulations expected to follow.
- For growth companies: A regulated route to raise larger sums without a full public offering.
- For investors: A clearer framework for participating in private rounds of PJSCs.
- For the market: A step toward a deeper private capital ecosystem onshore.
Note: Until the SCA publishes its implementing regulations, the scope and conditions of PJSC private placements should be treated as announced rather than fully operational. Confirm the current rules before structuring a raise.
What This Means for Different Businesses
The reforms land differently depending on the type of business. The table below summarises the most relevant changes by audience.
| Business type | Most relevant reforms | Practical priority for 2026 |
|---|---|---|
| Startups and scale-ups | Multiple share classes, drag/tag rights | Build investor-ready articles before raising |
| Family businesses | Share classes, succession of shares | Separate control from economics, plan succession |
| Private equity and VC investors | Share classes, exit mechanics, PJSC private placements | Structure preferences and exits in constitutional documents |
| Social enterprises | Non-profit company form | Assess whether the new vehicle fits the mission |
| Multi-jurisdiction groups | Redomiciliation | Map opportunities to consolidate or relocate entities |
For founders and growth companies
Founders gain the ability to offer institutional investors the preference and protection terms they expect, inside the company's own articles. The combination of multiple share classes and statutory exit rights makes an onshore UAE LLC a credible alternative to offshore holding structures for many ventures.
For family enterprises
Families can now separate dividend rights from voting control and put clearer succession rules in place. This supports gradual, planned handovers across generations and reduces the risk of disputes or deadlock when a shareholder dies.
For investors
Investors benefit from enforceable exit mechanics and the ability to hold tailored share classes. Drag-along rights ease clean exits, while tag-along rights protect minority positions. The expanded PJSC private placement route adds a new channel for deploying capital.
Practical Steps to Prepare in 2026
The amendments do not require most companies to act immediately, but they reward those who review their position and use the new tools deliberately. A structured approach helps.
Action plan
- Review constitutional documents: Assess your memorandum and articles of association and any shareholders' agreement against the new options. Identify where contractual workarounds can be moved into the articles.
- Decide whether to restructure share capital: If you plan to raise capital or reorganise ownership, design the share classes and rights you need rather than defaulting to a single class.
- Update exit and succession provisions: Embed drag-along, tag-along, and share-succession rules where they support your goals, and reconcile them with the pre-emption regime.
- Evaluate redomiciliation: If your group has entities in suboptimal jurisdictions, assess whether a registration transfer would simplify the structure.
- Align tax and compliance: Check how any restructuring affects your UAE corporate tax position, transfer pricing, and AML obligations before you implement it.
Compliance checklist
- Constitutional documents reviewed against Decree-Law 20 options.
- Share classes and attached rights clearly defined and recorded.
- Exit and succession mechanics reconciled with pre-emption rules.
- In-kind contributions supported by compliant, independent valuations.
- Corporate tax and transfer pricing impact of any restructuring assessed.
- AML and beneficial ownership records updated to reflect new structures.
Common pitfalls to avoid
- Pitfall one: Treating framework provisions as fully operational before the Cabinet and SCA implementing rules are published.
- Pitfall two: Adding a drag-along clause without reconciling it against the LLC pre-emption regime, leaving it hard to enforce.
- Pitfall three: Restructuring share capital or contributing assets without checking the corporate tax and transfer pricing consequences.
- Pitfall four: Assuming redomiciliation is a single filing rather than a multi-authority process requiring consents and a realistic timeline.
Company law changes have tax and AML consequences
Reorganising share capital, contributing assets in kind, changing ownership through an exit, or relocating an entity can all affect your UAE corporate tax base, transfer pricing arrangements, and beneficial ownership and AML records. Treat any structural change as a combined legal, tax, and compliance exercise, not a standalone filing. AURNE coordinates these workstreams so the corporate, tax, and AML positions stay consistent.
Forward-Looking View
Decree-Law 20 signals a deliberate direction: the UAE wants its onshore company law to be the natural home for sophisticated private capital, family wealth structuring, and mission-driven enterprise, not just a licensing regime. As the implementing Cabinet decisions and SCA regulations arrive over the coming 12 to 24 months, expect the practical detail to fill in, particularly around the permitted share classes and the contours of PJSC private placements.
For most businesses, the right posture in 2026 is preparation rather than panic. The reforms create options, and the value lies in using them intentionally. Companies that review their constitutional documents now, and design structures that fit their growth, succession, or exit plans, will be ready to act when an investment, a sale, or a relocation arises.
Key Takeaway
Federal Decree-Law No. 20 of 2025 turns the UAE onshore company into a far more flexible vehicle for investment, succession, and exit. The businesses that benefit most in 2026 will be those that proactively redesign their constitutional documents, while coordinating the corporate, tax, and AML consequences of every change.
Conclusion
The 2025 amendments to the UAE Commercial Companies Law are not a cosmetic update. By allowing multiple share classes, giving statutory force to drag-along and tag-along rights, clarifying succession and in-kind contributions, recognising non-profit companies, and enabling redomiciliation, Decree-Law 20 closes the main gaps that pushed sophisticated structuring offshore. The onshore LLC and the PJSC are now genuinely competitive vehicles for venture, private equity, and family capital.
The themes connect: each reform widens the set of choices available to owners and investors, and each choice carries consequences across company law, corporate tax, and AML compliance. The companies that capture the upside will be the ones that plan their cap table, their governance, and their exit before they need to, and that keep their constitutional documents aligned with the implementing rules as they are published through 2026 and beyond.
Professional guidance adds the most value precisely where these disciplines intersect: designing a share structure that an investor will accept, drafting exit and succession provisions that hold up, and ensuring that every structural decision is sound from a tax and compliance standpoint. AURNE works with founders, investors, and family enterprises to translate the new law into structures that are practical, defensible, and built for what comes next. To explore how the reforms apply to your business, see our company formation and corporate advisory services, or get in touch to discuss your structure.