The UAE has updated its corporate regulations, introducing increased flexibility for mainland companies. These changes aim to align the mainland regime with industry standards and free zone structures. The corporate environment of the UAE has always been dynamic, offering a range of corporate vehicles in free zones, financial free zones, and the mainland to cater to diverse business needs and activities.
The Federal Decree-Law No. 20 of 2025, which amends the Commercial Companies Law (CCL), took effect on October 15, 2025. This update modernizes the CCL, addressing significant limitations in the previous framework. The recent amendment to the Federal Decree-Law No. 32 of 2021 on Commercial Companies (the CCL) by virtue of Federal Decree-Law No. 20 of 2025 (the CCL Amendment Law), published on October 1, 2025, and coming into legal operation on October 15, 2025, is a strategic move to align the mainland regime with industry norms and enhance its competitiveness.
Multiple Share Classes for Mainland Companies
A notable change is the introduction of multiple share classes for mainland limited liability companies (LLCs). Previously, these companies were restricted to issuing a single share class, which granted shareholders both dividend rights and voting rights. This limitation significantly constrained investment options, as shareholders had to relinquish control by giving up voting rights to attract investors.
It also discouraged the adoption of employee share option schemes (ESOPs), as business owners were reluctant to dilute their control. The new amendment allows mainland companies to issue dividend-bearing shares without voting rights, facilitating investment and improving employee retention. This change bridges the gap between mainland companies and entities in financial free zones like the Dubai International Financial Centre (DIFC), where multiple share classes have long been available.
In practice, voting shareholders can now issue new classes of shares limited to dividends, enabling them to attract investors or reward employees without losing control. However, implementing this requires amending the company’s memorandum of association and consulting relevant authorities to ensure compliance with regulatory procedures.
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Drag-Along Rights and Succession Planning
The amended CCL also introduces drag-along rights for mainland companies. This allows one or more shareholders, subject to the agreed conditions, to require the remaining shareholder(s) to sell their interests or shares to a third party on agreed terms. This mechanism, previously accessible only through shareholder agreements or financial free zone incorporation, enhances flexibility for mainland companies. It is particularly valuable for family businesses and joint ventures, providing a structured approach to ownership transitions.
Additionally, the amendments address succession planning by permitting the memorandum to regulate the treatment of a deceased shareholder’s interest. This includes provisions for rights of first refusal and expert valuation in case of disputes. These changes require careful amendment of the memorandum and consultation with authorities to ensure proper implementation.
Company Redomiciliation
Another significant addition is the ability for companies to transfer their commercial registration between competent authorities, including from free zones to the mainland and vice versa, while retaining their legal personality. This removes the historical need to dissolve a free zone entity and re-incorporate on the mainland (or the reverse), significantly reducing cost and administrative burden for businesses whose needs evolve over time. Historically, companies faced significant expenses and complexities when transitioning between jurisdictions. The new provision streamlines this process, supporting businesses as they evolve.
However, the practical implementation of redomiciliation depends on the requirements and procedures of the relevant authorities. Companies should monitor developments and seek professional advice to handle this process effectively.
These amendments show the UAE’s commitment to maintaining a competitive and internationally aligned corporate framework. By addressing key limitations, the updated CCL offers mainland companies greater flexibility and options for growth and succession planning. Prudent investors should consider obtaining professional advice to maximize the opportunities created by these changes.