Commercial Companies Law After Four Years: What Businesses Need to Know

The UAE’s 2025 amendments to the Commercial Companies Law introduce greater contractual freedom, modern governance tools, and more flexible capital structures aligned with international standards. These reforms enhance investor confidence, streamline corporate restructuring, and strengthen the country’s position as a competitive global business hub.

On October 1, 2025, the United Arab Emirates introduced Federal Decree-Law No. (20) of 2025 (hereinafter, the “2025 law”), amending the country’s Commercial Companies Law first enacted under Federal Decree-Law No. (32) of 2021. The amendments mark the most significant update to the UAE’s corporate regulatory framework in your years and form part of a broader modernization agenda aimed at enhancing flexibility, investor confidence, and alignment with international corporate governance standards.

Notably, the changes introduce several concepts commonly found in common law jurisdictions, including enhanced shareholder arrangements, broader capital structuring tools, and governance mechanism that allow greater freedom of contract. They also seek to strengthen integration across onshore entities, free zone companies, and financial zones, addressing long standing structural fragmentation within the UAE’s corporate ecosystem.

For businesses operating in (or entering) the UAE, the amendments carry implications for shareholder agreements, corporate restructuring, capital raising, and board governance. Understanding how these changes apply in practice will be essential for compliance planning and strategic decisions making.

Background: Evolution of the UAE Commercial Companies Law

The UAE Commercial Companies Law governs the incorporation, management, restructuring, and dissolution of companies established onshore in the UAE. Historically rooted in civil law principles, the framework placed relatively strict limits on shareholder freedom, board delegation, and capital arrangements. While these features offered regulatory certainty, they often limited flexibility for multinational businesses accustomed to common law systems.

The introduction of the 2021 Commercial Companies Law marked a major shift, including the liberalization of foreign ownership rules and updates to corporate governance requirements. However, certain constraints remained, particularly around shareholder rights, capital instruments, and corporate reorganizations.

The 2025 amendments build on earlier reforms by targeting these remaining gaps. Rather than a wholesale rewrite, the changes refine existing provisions and introduce additional optional tools that companies may adopt depending on their structure and objectives.

Key theme: Increased contractual and governance flexibility

One of the most significant aspects of the amendments is the explicit recognition of enhanced shareholder autonomy. The updated law allows shareholders greater freedom to structure their relationships through contractual arrangements, aligning onshore companies more closely with practices in financial free zones such as the Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).

In particular, the reforms clarify that shareholders may regulate matters such as voting rights, transfer restrictions, drag-along and tag-along rights, and exit mechanisms through shareholder agreements, provided these arrangements do not conflict with mandatory provisions of the law or public policy.

This approach reflects a move away from rigid statutory prescriptions toward a more permissive framework that respects negotiated outcomes between parties. For foreign investors and private equity sponsors, this change enhances deal certainty and reduces the need for complex offshore holding structures.

Capital structuring and financial instruments

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The amendments also introduce new tools for capital structuring, addressing longstanding limitations in the UAE’s corporate framework. While traditional equity and debt structures remain available, companies now have greater flexibility to design bespoke financing arrangements.

Key areas of development include:

• Recognition of different classes of shares, subject to disclose and constitutional documentation;
• Enhanced flexibility around share capital increases and reductions;
• Greater alignment with international approaches to convertible instruments and preference rights.

Although not all details are set out exhaustively in the law itself, the direction of reform clearly supports more sophisticated financing models. This is particularly relevant for startups, scale-ups, and joint ventures that rely on staged investments or investor specific rights.

For businesses planning future fundraising rounds, the amendments provide an opportunity to reassess existing capital structures and determine whether alignment with common law style instruments could reduce friction or valuation complexity.

Corporate reorganization and transformation options

Another area addressed by the amendments is corporate transformation, including mergers, demergers, and conversions between legal forms. While such transactions were previously permitted, the regulatory process often lacked clarity and flexibility.

The amended framework strengthens the legal basis for corporate restructurings by:

• Clarifying procedures for mergers and divisions;
• Recognizing broader forms of corporate continuation and conversions between legal; and
• Supporting intra-group reorganizations without triggering unnecessary dissolution or re-incorporation steps.

These changes are particularly significant for multinational groups seeking to rationalize their Middle East operations or integrate UAE entities more closely into regional or global structures. Greater procedural clarity also reduces regulatory risk and transaction timelines.

Board authority and management delegation

Governance reforms under the amendments further underscore the UAE’s shift toward international corporate practices. The law expands the ability of boards to delegate management authority, subject to appropriate oversight and constitutional limits.

This change allows companies to adopt governance models better suited to their size and operational complexity. For example, subsidiaries of multinational groups can more effectively align local governance with group wide policies, while founder led companies can formalize executive authority without diluting shareholder oversight.

At the same time, directors continue to be subject to statutory duties of care, loyalty, and compliance. The amendments do not reduce accountability but rather place greater emphasis on internal governance arrangements rather than prescriptive statutory controls.

Alignment across onshore, free zone, and financial free zone regimes

A recurring challenge for businesses in the UAE has been the fragmented nature of corporate regulation across onshore jurisdictions, free zones, and financial free zones. Each regime operates under its own legal framework, often resulting in inconsistent governance standards and structural constraints.

The 2025 Amendments move toward greater functional alignment. While the regimes remain legally distinct, onshore companies can now access tools that were previously available mainly in common law jurisdictions such as the DIFC and ADGM.

This convergence reduces the incentive to establish complex multi layered structures purely for legal flexibility. For many businesses, an onshore company may now achieve governance and financing objectives that previously required a free zone or offshore holding entity.

Compliance considerations for existing companies

The amendments do not automatically override existing constitutional documents or shareholder agreements. Companies incorporated before the amendments come into effect should assess whether updates are needed to fully benefit from the new framework.

Key areas for review include:

• Memorandum and articles of association alignment with shareholder agreements;
• Board delegation provisions and internal governance rules;
• Capital structure flexibility and investor rights; and
• Transaction planning for future reorganizations or exits.

While compliance deadlines are likely to be clarified through implementing regulations, early review allows companies to proactively align documentation and avoid future disputes or regulatory inconsistencies.

Implications for foreign investors and new entrants

For foreign investors evaluating the UAE, the amendments reinforce the country’s position as a regional business hub with an increasingly familiar legal environment. The introduction of common law inspired concepts improves predictability for international investors while preserving the efficiency of the UAE’s regulatory system.

The changes also support investment structures that prioritize ease of entry and exit, minority protection, and sophisticated financing arrangements. This is particularly relevant in sectors such as technology, professional services, logistics, and regional headquarters operations.

Outlook

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The 2025 amendments to the UAE Commercial Companies Law reflect a clear policy direction. Rather than imposing uniform solutions, the law provides companies with a broader toolkit and greater discretion to determine how they operate, finance, and govern themselves.

While implementing regulations and judicial interpretation will shape how these changes function in practice, the trajectory is evident. The UAE continues to evolve toward a corporate environment that balances regulatory oversight with contractual freedom and international compatibility

For businesses already operating in the UAE, the amendments present an opportunity to modernize governance and capital structures. For new entrants, they further lower structural barriers and enhance the UAE’s appeal as a jurisdiction that accommodates both local and global business practices.

Also read: Bounced Cheques in the UAE: What Every Business Needs to Know in 2026

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