The UAE has once again reinforced its position as a global business hub with the issuance of Federal Decree-Law No. (20) of 2025, introducing targeted yet powerful amendments to Federal Decree-Law No. (32) of 2021 on Commercial Companies. Rather than a wholesale rewrite, the amendments focus on clarity, flexibility, governance continuity, and corporate mobility, addressing long-standing practical issues faced by businesses operating across mainland, free zones, and financial free zones.
At AMA Global Audit Tax Advisory, we have reviewed the amendments in detail. Below, is a structures breakdown of the most impactful changes and what they mean for UAE businesses, investors, and multinational groups.
1. Clear jurisdictional boundaries for Mainland & Free Zone companies
One of the most significant amendments relates to the legal treatment of companies operating inside and outside free zones.
The updated law confirms that the Commercial Companies Law applies to:
- UAE companies incorporated onshore
- Foreign companies operating or managed within the UAE
- Free zone companies when they operate outside their free zone jurisdiction
Free zone companies remain governed by their respective regulations as long as their operations remain inside the zone.
Importantly, all companies incorporated in the UAE — including free zone companies — hold UAE nationality.
Why this matters:
Businesses operating hybrid models (onshore + free zone) now have clearer compliance requirements and better integration pathways across UAE jurisdictions.
2. Introduction of Non-Profit companies in the UAE
For the first time, UAE company law explicitly permits non-profit companies, where:
- Net profits are reinvested into achieving the company’s stated objectives
- No profits are distributed to partners or shareholders
- More detailed rules will be issued by the Cabinet in coordination with relevant authorities
Impact:
This opens a clear legal pathway for foundations, professional bodies, social enterprises, and impact-driven organizations, supporting the UAE’s broader ESG and social development agenda.
3. Enhanced Contractual flexibility: Drag-Along, Tag-Along & Succession Rules
The Amendment allows mainland LLCs and Private Joint Stock companies to incorporate sophisticated shareholder protections directly into their constitutional documents, including:
- Drag-along rights
- Tag-along rights
- Succession and first-refusal mechanisms on death
- Court-assisted valuation when heirs and shareholders disagree
Impact:
This aligns UAE entities with international M&A and private equity standards, significantly reducing transaction risk and shareholder disputes.
4. Introduction of multiple share classes for LLCs
LLCs may now issue different classes of shares, allowing:
- variations in voting rights
- Dividend preferences
- Redemption rights
- Liquidation priority
All such rights must be recorded in the Commercial Register, with further Cabinet regulations to follow.
Why this is a game-changer:
This reform brings venture capital–style structuring into the UAE mainland environment, supporting investors, startups, family businesses, and growth-stage companies.
5. Stricter Standards for In-Kind Capital Contributions
The amendment tightens governance around in-kind capital by requiring:
- In-kind capital contributions must be valued by one or more certified values (at contributor’s cost)
- Valuation must be approved by the competent authority
- Failure to do so may invalidate the valuation
- Cash compensation if assets are over-valued
Impact:
This protects shareholders and reduces the risk of disputes about inflated or inaccurate capital contributions.
6. Public & Private offering opportunities revalidated
The amendment confirms that:
- Only public joint stock companies (PJSCs) may conduct public offerings
- Private joint stock companies may now issue securities through private placement, subject to Securities and Commodities Authority (SCA) approval
Impact:
Private companies gain more structured access to capital markets while maintaining regulatory oversight.
7. New Article (15 bis): Transfer of Commercial Registration within UAE jurisdictions
A landmark addition, Article (15 bis) allows companies to transfer their commercial registration between UAE licensing authorities, including:
- Mainland to free zone
- Free zone to mainland
- Between different free zones
The company retains its:
- Legal personality
- Incorporation date
- Operating history
Transfers require:
- Shareholder approval
- No registry restrictions
- Approval from both licensing authorities
- Publication of the transfer decision
Important:
The law only permits re-domiciliation within UAE jurisdictions. It does not explicitly authorize importing foreign entities through re-domiciliation.
8. Updated Governance Rules for LLC Managers and Boards
To prevent leadership gaps, the law now provides that:
- Manager resignations become effective after 30 days if no decision is taken
- Companies must notify the authority within 30 days when a manager’s appointment expires
- Boards may continue for up to six months post-term expiry
- If a board is not reconstituted, authorities may appoint an interim board for up to a year
Impact:
These rules minimize governance gaps and provide stability for operational decision-making.
Conclusion: A More Agile, Transparent, and Globally Aligned Corporate Framework
Federal Decree-Law No. (20) of 2025 is a precision reform — modern, pragmatic, and aligned with global best practices. It strengthens UAE company law by:
- Introducing internationally recognized governance tools
- Enhancing legal clarity for cross-jurisdiction operations
- Providing expanded structuring flexibility for investors
- Strengthening the foundation for corporate growth and transformation
- Implementing corporate mobility within the UAE
At AMA Global Audit Tax Advisory, our corporate specialists are ready to help you in:
- Updating MOAs and shareholder agreements
- Structuring multi-class equity
- Managing jurisdiction transfers
- Assessing governance and compliance impacts
- Supporting M&A and restructuring transactions
📩 Connect with our advisory team to evaluate how these amendments affect your business structure and future plans.
Monish Mohan is a versatile and accomplished Auditor, VAT Consultant, Finance and Accounts Professional offering over 18 years of experience in UAE VAT, Audit & Assurance, Finance management Advisory & Accounting & bookkeeping.
