The latest amendments to the UAE Commercial Companies Law, introduced through Federal Decree-Law No. 20 of 2025, mark a further step in the UAE’s efforts to modernise its corporate framework. Issued in October 2025 and currently subject to phased implementation and further regulatory clarification, the changes expand the range of legal structures available and introduce greater flexibility in how companies can be organised and governed.
While these changes bring the UAE closer in line with international corporate practices, their application will depend on further implementing regulations and the approach taken by individual emirate-level authorities. In this article, we discuss the key amendments most relevant to businesses in the UAE:
- Introduction of non-profit companies
- Multiple classes of shares
- In-kind capital
- Drag-along and tag-along rights
From a regulatory and compliance perspective, businesses should note that the practical application of these amendments remains dependent on implementing regulations and guidance issued by competent authorities. As such, companies should avoid relying solely on the legislative amendments without confirming local regulatory requirements and approvals.
1. Introduction of non-profit companies
The UAE now offers a legal entity structure for non-profit companies (NPCs) established for social, charitable, cultural or developmental purposes. Prior to this, if you were looking to set up a non-profit or impact-driven initiative, the available options were typically more limited, particularly on the mainland. While structures exist in jurisdictions such as the Dubai International Financial Centre (DIFC) and the Abu Dhabi Global Market (ADGM), they are not always suitable for every operating model.
The inclusion of NPCs under the UAE Commercial Companies Law therefore extends a corporate-style vehicle to the mainland. An NPC can be incorporated and function as a formal company with directors, members or shareholders. Importantly, profits must be reinvested back into the NPC’s stated objectives, rather than distributed to partners or shareholders.
The establishment and operation of NPCs may also be subject to additional approvals from relevant authorities, depending on the nature of the activities and jurisdiction. Businesses should assess licensing, governance and reporting obligations on a case-by-case basis.
2. Multiple classes of shares
Mainland limited liability companies (LLCs) now have a framework for issuing multiple classes of shares, with differing rights in relation to voting, dividends and liquidation proceeds. Under this framework, the rights attached to each class will need to be clearly set out in the company’s constitutional documents and reflected in the commercial register maintained by the relevant emirate-level authority.
Historically, most mainland LLCs in the UAE have operated with a single class of ordinary shares. While variations in economic and governance rights could be addressed contractually through shareholders’ agreements, these arrangements did not create distinct legal share classes and were not always enforceable against third parties. In some cases, introducing differentiated rights required additional approvals and supporting legal documentation, which limited their practical use.
Businesses considering such structures should monitor regulatory developments closely and seek clarification on local registration requirements. Those adopting multiple share classes should ensure that shareholder rights, voting structures and economic entitlements are clearly documented and consistently reflected across constitutional documents, shareholder agreements and regulatory filings to avoid ambiguity or disputes.
3. In-kind capital
The UAE Commercial Companies Law also introduces standards for valuing in-kind contributions (in-kind capital). These refer to non-cash assets provided to a company as capital, such as equipment, real estate, intellectual property or other valuable rights.
Under the updated provisions, the valuation of these contributions is expected to follow standards and controls issued by the Ministry of Economy and Tourism in coordination with the relevant authorities in the UAE. This applies to most company types, with separate rules for public joint-stock companies.
The aim is to bring greater transparency to the process of contributing non-cash assets. Previously, the absence of clearly defined approaches could lead to differing interpretations of value, particularly for intangible assets.
A more structured framework should help reduce that uncertainty. From what we see, this also provides greater flexibility in how capital can be structured in the UAE. Rather than converting assets into cash, you may contribute them directly to the company, subject to valuation requirements. This can be particularly relevant where intellectual property, technology or real estate forms a core part of your business.
Companies should also ensure that appropriate due diligence is conducted on the origin, ownership and valuation of in-kind contributions, particularly where such assets may present increased financial crime or valuation risks.
4. Drag-along and tag-along rights
Additionally, the amendments include provisions governing relationships between partners and shareholders, particularly through the recognition of drag-along and tag-along rights.
Drag-along rights allow majority shareholders to require minority shareholders to sell their shares as part of a sale to a third party. This can help ensure that transactions proceed without being delayed or blocked by minority interests. Tag-along rights, by contrast, provide protection to minority shareholders by allowing them to participate in such a sale on the same terms and conditions.
While these concepts have long been used in shareholders’ agreements, their recognition within the broader legal framework reflects a shift towards greater clarity in how ownership transitions can be managed. This can support smoother mergers and acquisitions, while also strengthening investor confidence by balancing the interests of majority and minority stakeholders.
As with other aspects of the amendments, the application will depend on how these rights are incorporated into a company’s constitutional documents and implemented in practice. Businesses considering these mechanisms should review existing arrangements to ensure they are aligned with the evolving legal framework.
The enforceability of such rights will depend on how they are structured, documented and recognised under applicable laws and regulations, and may require careful legal drafting to ensure effectiveness
Next steps
These reforms represent a continued evolution of the UAE corporate framework. Businesses should consider reviewing their existing structures, governance arrangements and constitutional documents in light of these developments, while ensuring alignment with applicable regulatory requirements.
As implementation continues, there will likely be further guidance at the emirate level. If you would like to understand how these changes apply to your company or need support with maintaining compliance, please get in touch with us. Any structural or governance changes should be assessed in conjunction with legal and regulatory advice to adhere to applicable laws and licensing requirements.
Frequently asked questions
What is the UAE Commercial Companies Law?
The UAE Commercial Companies Law is the primary legislation governing how companies are established and operated in the mainland. It outlines the requirements for different business structures, including limited liability companies and joint stock companies, and covers areas such as share capital, management, reporting and shareholder relationships. It is also updated over time to reflect changes in the business environment.
Do these amendments apply to UAE Free Zone companies?
Generally, these amendments do not automatically extend to companies incorporated in UAE free zones. Free zone entities are governed by their own regulations, which can differ from the mainland framework set out under the UAE Commercial Companies Law. If you’re operating in a free zone, it is worth verifying the specific rules of your authority. The extent of alignment, if any, will depend on the relevant free zone authority and whether corresponding regulations are adopted locally.
What is the impact on foreign branches already in the UAE?
For foreign branches already operating in the UAE, the impact is generally limited. A branch is not a separate legal entity but an extension of its foreign parent, so many of the amendments, particularly those relating to share capital and shareholder rights, do not apply in the same way. If you would like to review your position, our Dubai team can assist.
Are there new rules for non-profit organisations?
The amendments introduce a formal structure for non-profit companies (NPCs) within the UAE’s corporate landscape. These entities are intended for social, charitable, cultural or developmental purposes and are required to reinvest any surplus into their objectives. If you’re considering this route, our team can help you evaluate whether it aligns with your plans.
Is an NPC different from a non-profit organisation (NPO)?
Yes, there is a distinction, though both are designed to support non-profit objectives. A NPO is typically established as an association, foundation or similar entity and is often governed by a separate regulatory framework, with activities commonly supported by donations, grants or sponsorships. An NPC, on the other hand, is incorporated as a company under corporate law. If you’re deciding between these structures, our team can guide you through the differences.
Who is the NPC structure most relevant for?
From what we see, the NPC structure is most relevant to social entrepreneurs running impact projects. With the introduction of NPCs in the UAE, there is expected to be an increase in philanthropy and support initiatives for the education, sustainability and community development sectors. If you’re exploring whether this structure fits your plans, we can support you in evaluating your options.
Can an LLC have different types of shares?
The amendments introduce the possibility for mainland limited liability companies (LLCs) to adopt more flexible capital structures, including different classes of shares with varying rights attached. These may relate to voting, dividend entitlements or liquidation proceeds. In practice, however, the extent to which this can be implemented will depend on how the rules are applied by the relevant emirate-level authority and the supporting regulations in place.
Where must information about different share classes be recorded?
Where a company adopts multiple share classes, the rights attached to each class should be clearly documented in the company’s constitutional documents, such as its Memorandum of Association (MoA), and reflected in the commercial register maintained by the relevant emirate-level authority. Under the UAE Commercial Companies Law, this ensures that the allocation of voting, dividend and liquidation rights is formally recognised and visible from a regulatory perspective.
Are "drag-along" and "tag-along" rights legally enforceable?
Drag-along and tag-along provisions are commonly used in shareholder arrangements in the UAE, and the amendments acknowledge these mechanisms within the broader legal framework. Their enforceability, however, depends largely on how they are drafted and where they are reflected. If you’re looking to formalise these provisions or assess their enforceability, our team can support you.
What protection do tag-along rights offer minority shareholders?
Tag-along rights are intended to protect minority shareholders in the event majority shareholders decide to sell their stake in a company. These rights allow minority shareholders to participate in the sale and exit on the same terms and conditions as the majority.
Why are drag-along and tag-along rights significant for investors?
Drag-along and tag-along rights play a significant role in balancing the interests of majority and minority investors. Drag-along rights enable majority shareholders to complete a sale without being blocked by minority stakeholders, which can be critical in facilitating mergers and acquisitions. Tag-along rights, on the other hand, ensure that minority shareholders are treated fairly and can participate in the same exit opportunities.
What are the penalties for non-compliance with UAE Commercial Companies Law?
Failure to comply with the UAE Commercial Companies Law can lead to a range of consequences, depending on the nature of the breach. These may include fines or administrative measures such as licence suspension or restrictions on business activities.
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