INSITE - UAE- December 2025
- sukhwinder21
- Dec 24, 2025
- 3 min read
UAE ENACTS FEDERAL DECREE-LAW NO. 20 OF 2025: KEY AMENDMENTS TO THE COMPANIES LAW
Summary: The United Arab Emirates has issued Federal Decree-Law No. 20 of 2025, introducing targeted yet significant amendments to Federal Decree-Law No. 32 of 2021 (the “Companies Law”). These reforms reflect the UAE’s ongoing commitment to modernising its corporate legal framework, aligning with international best practices, and enhancing the regulatory environment for commercial entities. The amendments further reinforce the UAE’s position as a global financial and commercial hub by strengthening governance standards, improving investor protections, and enabling more flexible corporate structuring.
In Detail: The UAE has issued Federal Decree-Law No. 20 of 2025, amending key provisions of Federal Decree-Law No. 32 of 2021 on Commercial Companies (the “Amendment”) reflecting the UAE’s ongoing modernization agenda, introducing common law concepts into the country’s traditionally civil law framework, streamlining operations, enhancing corporate flexibility through advanced shareholder arrangements and governance tools, and better integrating onshore, free zone, and financial free zone ecosystems.
Below is a summary of the headline changes and their practical implications.
Scope and Free Zone Interface
The Amendment clarifies the treatment of Free Zone companies:
The Commercial Companies Law now explicitly applies to foreign companies with a UAE presence, as well as to branches or representative offices of Free Zone companies when they operate outside their respective zone.
Free Zone companies remain governed by their own laws unless those laws permit mainland operations. In that case, branches or representative offices must comply with the Commercial Companies Law and other applicable UAE legislation.
Free Zone companies are now formally recognized as carrying UAE nationality.
This alignment reduces ambiguity for multi-jurisdictional structures, eases cross-border planning, and facilitates smoother integration between onshore and Free Zone entities.
Introduction of Non-Profit Companies
The Amendment introduces the possibility of establishing non-profit companies, whose net profits are reinvested to achieve their objectives without distribution to owners.
Governance and operational requirements for these companies will be defined in Cabinet-issued regulations.
This formalizes the legal structure for organizations operating for public or social benefit.
Bridging Civil Law and Common Law Practices
Mainland LLC shareholders may now:
Include drag-along and tag-along rights in their Memorandum of Association (MOA).
Include provisions for shares of deceased shareholders, allowing remaining owners to purchase shares at an agreed price, with court valuation available if needed.
These changes align UAE company constitutions with common law M&A and succession practices, reducing transactional friction and providing clear exit and continuity pathways.
Capital Structure Flexibility in Mainland LLCs
Mainland LLCs can now create different share classes (e.g., Class A and Class B) with varying:
Voting rights
Redemption rights
Dividend and liquidation priorities
Other privileges or restrictions
All classifications must be recorded in the commercial register, with the Cabinet defining permissible share categories and rights. This allows venture-style capital structures within the commonly used LLC framework.
In-Kind Capital Contributions
Shareholders in LLCs may contribute capital in-kind. Contributions must be valued by one or more valuers; otherwise, they are void.
Public Offering
Only public joint stock companies may conduct public offerings, requiring SCA approval.
Private joint stock companies may now offer securities via private placement, expanding access to capital markets for growth-stage companies.
Re-Domiciliation of Companies (Article 15)
The Amendment introduces re-domiciliation, allowing companies to transfer their legal registration between UAE authorities while retaining legal personality.
Transfers can occur from outside the UAE to inside, between Free Zones, or between mainland and Free Zones.
Requires special resolution or absolute majority approval, and authority and regulator consents.
Cabinet-issued regulations will provide further guidance.
This enables operational flexibility, strategic realignment, and access to applicable tax or trade benefits, depending on the new jurisdiction.
Governance Continuity and Board/Manager Transitions
Resignations are effective after 30 days if unacted upon.
Authorities must be notified of manager expirations within 30 days, and successors appointed promptly.
Boards may continue to operate up to six months post-term, after which interim appointments may be made for up to one year.
These provisions ensure orderly management continuity and governance stability.
Practical Takeaways
Flexibility and clarity for corporates and investors, particularly for M&A, succession, and shareholder rights.
Multi-class shares enable sophisticated capital structures for venture, growth equity, and family enterprises.
Re-domiciliation supports cross-jurisdictional structuring within the UAE.
Overall, the Amendment modernizes the UAE corporate framework, blending civil and common law features to enhance operational agility, legal predictability, and investor protection.
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