Federal Decree Law No. 20 of 2025: Comprehensive Amendments to the UAE Commercial Companies Law

The United Arab Emirates has enacted Federal Decree Law No. 20 of 2025, introducing targeted yet substantial amendments to Federal Decree Law No. 32 of 2021 (the “Companies Law”). These reforms demonstrate the UAE’s continued commitment to modernising its corporate legislative framework, aligning with international best practices, and enhancing the regulatory environment governing commercial entities operating within the State. The amendments further reinforce the UAE’s standing as a global financial and commercial centre by improving governance standards, enhancing investor protections, and facilitating more flexible corporate structuring.

1. Introduction of Non-Profit Companies (Article 8(3))

The decree introduces, for the first time in UAE corporate legislation, the concept of the non-profit company, marking a significant expansion of the permissible corporate forms under the Companies Law.

Under Article 8(3), a company may be established for non-profit purposes, provided that:

• Net profits derived from its activities are mandatorily reinvested to further the objectives for which the company was incorporated; and
• No distribution of profits may be made to partners or shareholders.

The establishment, governance, and operational conditions of such companies will be subject to a Cabinet resolution, which is expected to outline the detailed regulatory framework and compliance obligations. This amendment introduces an entity form commonly recognised in other jurisdictions and expands the legislative tools available for philanthropic, social, and mission-driven initiatives.

2. Codification of Drag-Along and Tag-Along Rights (Article 14(4))

The decree introduces an explicit statutory basis for drag-along and tag-along rights – mechanisms widely used in international shareholder agreements but previously unregulated under UAE law.

Pursuant to Article 14(4):

• Shareholders or partners may agree that one or more shareholders may compel the remaining shareholders to sell their shares to a third party once predetermined conditions are satisfied (drag-along).
• Shareholders or partners may further agree that any shareholder may join a sale transaction initiated by another shareholder and exit on the same terms and conditions as those offered to the selling party (tag-along).

The express recognition of these rights enhances legal certainty in transactional contexts, supports minority shareholder protection, and facilitates smoother mergers, acquisitions, and investment exits.

3. Authorisation of Share Classes (Article 76(4))

A notable structural reform has been implemented through the addition of Article 76(4), which authorises UAE companies to classify their shares into different categories. This development introduces significant flexibility in capital structuring by allowing variations in:

• Voting rights
• Nominal value
• Redemption rights
• Priority in the distribution of profits
• Priority upon liquidation
• Other privileges, rights, or restrictions as determined by the Articles of Association

The amendment expressly requires that all such classifications, including associated rights and restrictions, be recorded in the commercial register to ensure transparency and enforceability.

This flexibility aligns UAE corporate practice with international standards, enabling more sophisticated equity arrangements suitable for venture capital, private equity, and joint-venture structures

4. Re-Domiciliation of Companies Within the UAE (Article 15)

The introduction of Article 15 establishes a statutory framework for the re-domiciliation of companies within the UAE, permitting entities to transfer their registration from one competent authority to another without interruption of their legal personality.

The transfer may be implemented upon:

• A special resolution of the general assembly; or
• Approval by an absolute majority of partners, depending on the company’s structure.

This amendment facilitates corporate mobility, allowing companies to realign their regulatory oversight with operational needs or strategic considerations. It also reduces administrative burdens by ensuring continuity of the company’s legal identity, rights, and obligations throughout the transfer process.

Conclusion

Federal Decree Law No. 20 of 2025 constitutes a substantial advancement in the UAE’s corporate legal framework. By introducing non-profit corporate structures, codifying key shareholder protections, permitting multi-class share structures, and enabling intra-State re-domiciliation, the amendments strengthen the UAE’s attractiveness to investors and elevate its alignment with global corporate governance standards.

Further implementing regulations – particularly those expected from the UAE Cabinet regarding non-profit entities – will provide additional clarity for practitioners and investors. Companies operating in the UAE are advised to review their existing Articles of Association, shareholder agreements, and governance structures to assess whether amendments may be required or beneficial in light of these reforms.