The UAE (United Arab Emirates) has enforced a new Federal Decree Law no. 20 of 2025. It introduces targeted amendments to the Federal Decree Law No. 32 of 2021, referred to as the ‘UAE Commercial Companies Law’.
With these reforms in the latest government-issued amendments, the UAE intends to show its continued commitment towards modernizing the corporate legislative frameworks and ensuring they align with international practices. The law firms in UAE have been advised to help businesses adhere to these new amendments and reap the associated benefits.
UAE aims at reinforcing its status as the global financial & commercial centre by making notable improvements to its governance standards. Thus, it will enhance investor protections and facilitate a more seamless corporate structuring.
This article will be a summary of all the key changes that this new Federal Decree Law no 20 of 2025 proposes, and their practical implications.
Before reaching out to your lawyers in Dubai, take note of these key changes proposed and implemented in the UAE’s corporate legislative framework under the new Federal Decree Law no. 20 of 2025:
This new Decree law introduces the concept of a non-profit company, for the first time in UAE corporate legislation. Due to this, the country now marks an expansion of the type of corporate forms permissible to operate under the Commercial Companies Law.
Under Article 8(3), an organization can be registered for non-profit operations, conditioned that the net profits derived from the business activities are reinvested mandatorily for the internal objectives based on which the company was incorporated in the first place.
Following that, there should also be no distribution of profits made to shareholders, partners, or stakeholders within or outside the company. The idea of this amendment is to introduce new legislative tools within the country for social, mission-driven, and philanthropic initiatives.
Decree No. 20 of 2025 also enhances new exit mechanisms for organizations. There will be a dedicated statutory basis for tag-along & drag-along rights. These mechanisms are already being used actively in the international shareholder agreements, but were unregulated under the UAE law.
In adherence to Article 14(4), codifying the drag-along and tag-along mechanisms, the business partners can agree that one or more shareholders of the company may compel others to sell off their shares to a third party after the said conditions are satisfied. This is referred to as drag-along!
Following that, the partners may also agree that a shareholder of the company can join the sale transaction, even if it is initiated by another shareholder. They can take an exit on the same terms & conditions that are offered to the third party the shares are being sold to. This is referred to as tag-along!
Due to this recognition of rights, there can now be legal certainty in the transactional contexts, extending support for the protection of minority shareholders. This way, there will be smoother mergers, investments, and acquisitions.
This new law will enable tailoring of the company’s capital structures and authorize the UAE organizations to clearly classify their shares into diverse categories. Due to this new development, companies can now structure their capital by enabling variations in voting rights, redemption rights, nominal value, priority upon liquidation, distribution of profits, etc.
With this amendment in place for the Commercial Companies Law, all companies are required to record all such classifications and the associated rights & restrictions in the commercial register. This will be to ensure complete transparency and strong enforceability. Not just that, but this new flexibility helps UAE corporate practices to align with international standards.
With Article 15 in practice under the new Federal Decree Law, a statutory framework is established for the re-domiciliation of companies operating within the UAE. This law will permit the entities to transfer their company registration from one legit authority to another, without losing out on their legal personality.
The transfers can be implemented upon a special resolution by the general assembly or an approval by a majority of the business partners. Due to this amendment, companies can now facilitate corporate mobility and realign their regulatory flexibility with strategic practices or operational needs. Moreover, the overall administrative burden also reduces as the company’s legal identity, obligations, and rights stay unaffected during the transfer process.
Amendment | Implications |
Introduction to Free Zone Companies |
|
Succession of Shares |
|
In-Kind Contributions |
|
LLC Governance Continuity |
|
PJSC Conversion |
|
The new Federal Decree Law No. 20 of 2025 in the UAE is a sign that the government is making substantial advancements for the country’s corporate legal framework. With these new amendments in practice, the UAE aims to attract more investors and strengthen the country’s global corporate governance efficiency.
RH and HALE, being the best law firm in UAE, encourages you to seek the help of our corporate lawyers for assessing the impact of these amendments and acting accordingly. Whether you are setting up a new business in the UAE or are optimizing your business structure with respect to the new Federal Decree Law, let our experts pave the path for you!