In late 2025, the UAE issued Federal Decree-Law No. 20 of 2025, introducing targeted amendments to Federal Decree-Law No. 32 of 2021. These changes modernise the corporate regime and strengthen governance standards.
17 December, 2025
UAE Commercial Companies Law: Key Legal Updates and What Businesses Must Know
The UAE’s corporate regulatory framework has taken another significant step forward with recent amendments to the Commercial Companies Law. First introduced as Federal Decree-Law No. 32 of 2021 on Commercial Companies, this law has formed the legal backbone for the formation, operation, governance, and restructuring of companies in the UAE’s mainland.
In late 2025, the UAE issued Federal Decree-Law No. 20 of 2025, introducing targeted amendments to Federal Decree-Law No. 32 of 2021. These changes modernise the corporate regime, strengthen governance standards, align onshore practice more closely with international norms, and enhance operational flexibility for businesses.
Legal Basis and Scope
Federal Decree-Law No. 32 of 2021 on Commercial Companies remains the principal statute regulating commercial entities in the UAE, including limited liability companies (LLCs), private and public joint stock companies (PJSCs), and other corporate forms. It governs company incorporation, shareholding structures, directors’ duties, shareholder rights, mergers, reorganisations, liquidation procedures, and compliance obligations.
Federal Decree-Law No. 20 of 2025, issued on 1 October 2025, amends key provisions of the 2021 law and introduces several important reforms effective from 1 January 2026, with many requiring compliance by 30 June 2026.
What Has Changed: Key Amendments
1. Recognition of Free Zone Companies and Scope Clarity
The amendments clarify that companies established in free zones and financial free zones, including their branches and representative offices operating outside their respective zones, are subject to the Commercial Companies Law when they carry out activities in the mainland. Free zone companies conducting mainland operations must comply with the federal law alongside their zone regulations.
The law also confirms that companies incorporated anywhere in the UAE including free zones are recognised as UAE national companies for statutory purposes, reducing ambiguity in cross-jurisdiction corporate planning.
2. Non-Profit Companies
For the first time, the UAE corporate regime formally recognises the concept of non-profit companies under the Commercial Companies Law. These entities are structured to reinvest all net profits into achieving stated objectives instead of distributing dividends to shareholders. Detailed regulations on their formation and governance are expected via subsequent Cabinet and authority decisions.
3. Shareholder Rights and Capital Structuring
The amendments explicitly allow:
Drag-along and Tag-along rights to be included in the constitutional documents of LLCs and private joint stock companies, aligning onshore entities with global practices in shareholder protection and exit mechanisms.
Companies to issue multiple classes of shares with distinct rights related to voting, dividends, redemption priority, liquidation preferences, and other privileges.
Enhanced flexibility for capital structuring that supports sophisticated financing and growth strategies.
4. Re-Domiciliation and Corporate Mobility
A notable innovation is the introduction of a statutory framework for re-domiciliation (migration). This allows companies to transfer their legal domicile between different UAE jurisdictions including from free zones to mainland licencing authorities, while retaining their corporate identity, shareholding, licensing, and contractual continuity.
5. Governance and Continuity
The updated law strengthens managerial continuity provisions:
If a manager resigns and no action is taken, the resignation becomes effective after 30 days unless otherwise agreed.
Competent authorities must be notified of a manager’s term expiry within 30 days.
Boards may continue functioning for up to six months after term expiration, and in the absence of new appointments, authorities may appoint interim boards to maintain governance continuity.
Penalties and Compliance
While the core penalties for non-compliance remain aligned with the original Commercial Companies Law, the updated regulatory environment emphasises stricter enforcement of constitutional and governance standards. Directors and officers must ensure formal compliance with:
constitutional document updates;
shareholder and governance mechanisms approved by authorities;
newly introduced structuring rights and obligations.
Failure to update constitutional documents in time or to comply with the amended provisions may expose companies to administrative fines, regulatory scrutiny, or operational limitations by registries and licensing authorities.
Practical Implications for Businesses
The 2025 amendments provide UAE businesses with:
Greater corporate structuring flexibility, allowing tailored share classes and investor rights;
Better alignment with global corporate practices, reducing transactional friction;
Enhanced capital raising options, especially for private entities under national financial market frameworks;
Simplified cross-jurisdiction operations, thanks to clearer free zone/mainland integration and re-domiciliation pathways.
For entities operating across multiple UAE jurisdictions, these reforms help streamline governance and expand strategic options for growth, investment, and operational mobility.
What Businesses Must Do
Companies should:
Review and amend their memorandum and articles of association to incorporate new shareholder rights and capital mechanisms;
Update governance practices to align with continuity provisions;
Assess whether re-domiciliation or corporate restructuring could support future growth plans;
Engage with legal advisors to ensure compliance before the end of the transition period (30 June 2026).
Conclusion
The UAE’s updated Commercial Companies Law under Federal Decree-Law No. 20 of 2025 represents one of the most significant modernisations of corporate regulation since the introduction of Federal Decree-Law No. 32 of 2021. By integrating enhanced shareholder tools, flexible capital structures, new entity types, and mobility options, the amendments strengthen the UAE’s competitive position as a global business hub.
For businesses operating in the UAE, understanding and implementing these changes — and updating constitutional documents accordingly — will be essential to remain compliant and take full advantage of the enhanced corporate toolkit now available.
UAE Commercial Companies Law: Key Legal Updates and What Businesses Must Know
The UAE’s corporate regulatory framework has taken another significant step forward with recent amendments to the Commercial Companies Law. First introduced as Federal Decree-Law No. 32 of 2021 on Commercial Companies, this law has formed the legal backbone for the formation, operation, governance, and restructuring of companies in the UAE’s mainland.
In late 2025, the UAE issued Federal Decree-Law No. 20 of 2025, introducing targeted amendments to Federal Decree-Law No. 32 of 2021. These changes modernise the corporate regime, strengthen governance standards, align onshore practice more closely with international norms, and enhance operational flexibility for businesses.
Legal Basis and Scope
Federal Decree-Law No. 32 of 2021 on Commercial Companies remains the principal statute regulating commercial entities in the UAE, including limited liability companies (LLCs), private and public joint stock companies (PJSCs), and other corporate forms. It governs company incorporation, shareholding structures, directors’ duties, shareholder rights, mergers, reorganisations, liquidation procedures, and compliance obligations.
Federal Decree-Law No. 20 of 2025, issued on 1 October 2025, amends key provisions of the 2021 law and introduces several important reforms effective from 1 January 2026, with many requiring compliance by 30 June 2026.
What Has Changed: Key Amendments
1. Recognition of Free Zone Companies and Scope Clarity
The amendments clarify that companies established in free zones and financial free zones, including their branches and representative offices operating outside their respective zones, are subject to the Commercial Companies Law when they carry out activities in the mainland. Free zone companies conducting mainland operations must comply with the federal law alongside their zone regulations.
The law also confirms that companies incorporated anywhere in the UAE including free zones are recognised as UAE national companies for statutory purposes, reducing ambiguity in cross-jurisdiction corporate planning.
2. Non-Profit Companies
For the first time, the UAE corporate regime formally recognises the concept of non-profit companies under the Commercial Companies Law. These entities are structured to reinvest all net profits into achieving stated objectives instead of distributing dividends to shareholders. Detailed regulations on their formation and governance are expected via subsequent Cabinet and authority decisions.
3. Shareholder Rights and Capital Structuring
The amendments explicitly allow:
Drag-along and Tag-along rights to be included in the constitutional documents of LLCs and private joint stock companies, aligning onshore entities with global practices in shareholder protection and exit mechanisms.
Companies to issue multiple classes of shares with distinct rights related to voting, dividends, redemption priority, liquidation preferences, and other privileges.
Enhanced flexibility for capital structuring that supports sophisticated financing and growth strategies.
4. Re-Domiciliation and Corporate Mobility
A notable innovation is the introduction of a statutory framework for re-domiciliation (migration). This allows companies to transfer their legal domicile between different UAE jurisdictions including from free zones to mainland licencing authorities, while retaining their corporate identity, shareholding, licensing, and contractual continuity.
5. Governance and Continuity
The updated law strengthens managerial continuity provisions:
If a manager resigns and no action is taken, the resignation becomes effective after 30 days unless otherwise agreed.
Competent authorities must be notified of a manager’s term expiry within 30 days.
Boards may continue functioning for up to six months after term expiration, and in the absence of new appointments, authorities may appoint interim boards to maintain governance continuity.
Penalties and Compliance
While the core penalties for non-compliance remain aligned with the original Commercial Companies Law, the updated regulatory environment emphasises stricter enforcement of constitutional and governance standards. Directors and officers must ensure formal compliance with:
constitutional document updates;
shareholder and governance mechanisms approved by authorities;
newly introduced structuring rights and obligations.
Failure to update constitutional documents in time or to comply with the amended provisions may expose companies to administrative fines, regulatory scrutiny, or operational limitations by registries and licensing authorities.
Practical Implications for Businesses
The 2025 amendments provide UAE businesses with:
Greater corporate structuring flexibility, allowing tailored share classes and investor rights;
Better alignment with global corporate practices, reducing transactional friction;
Enhanced capital raising options, especially for private entities under national financial market frameworks;
Simplified cross-jurisdiction operations, thanks to clearer free zone/mainland integration and re-domiciliation pathways.
For entities operating across multiple UAE jurisdictions, these reforms help streamline governance and expand strategic options for growth, investment, and operational mobility.
What Businesses Must Do
Companies should:
Review and amend their memorandum and articles of association to incorporate new shareholder rights and capital mechanisms;
Update governance practices to align with continuity provisions;
Assess whether re-domiciliation or corporate restructuring could support future growth plans;
Engage with legal advisors to ensure compliance before the end of the transition period (30 June 2026).
Conclusion
The UAE’s updated Commercial Companies Law under Federal Decree-Law No. 20 of 2025 represents one of the most significant modernisations of corporate regulation since the introduction of Federal Decree-Law No. 32 of 2021. By integrating enhanced shareholder tools, flexible capital structures, new entity types, and mobility options, the amendments strengthen the UAE’s competitive position as a global business hub.
For businesses operating in the UAE, understanding and implementing these changes — and updating constitutional documents accordingly — will be essential to remain compliant and take full advantage of the enhanced corporate toolkit now available.
UAE Commercial Companies Law: Key Legal Updates and What Businesses Must Know
The UAE’s corporate regulatory framework has taken another significant step forward with recent amendments to the Commercial Companies Law. First introduced as Federal Decree-Law No. 32 of 2021 on Commercial Companies, this law has formed the legal backbone for the formation, operation, governance, and restructuring of companies in the UAE’s mainland.
In late 2025, the UAE issued Federal Decree-Law No. 20 of 2025, introducing targeted amendments to Federal Decree-Law No. 32 of 2021. These changes modernise the corporate regime, strengthen governance standards, align onshore practice more closely with international norms, and enhance operational flexibility for businesses.
Legal Basis and Scope
Federal Decree-Law No. 32 of 2021 on Commercial Companies remains the principal statute regulating commercial entities in the UAE, including limited liability companies (LLCs), private and public joint stock companies (PJSCs), and other corporate forms. It governs company incorporation, shareholding structures, directors’ duties, shareholder rights, mergers, reorganisations, liquidation procedures, and compliance obligations.
Federal Decree-Law No. 20 of 2025, issued on 1 October 2025, amends key provisions of the 2021 law and introduces several important reforms effective from 1 January 2026, with many requiring compliance by 30 June 2026.
What Has Changed: Key Amendments
1. Recognition of Free Zone Companies and Scope Clarity
The amendments clarify that companies established in free zones and financial free zones, including their branches and representative offices operating outside their respective zones, are subject to the Commercial Companies Law when they carry out activities in the mainland. Free zone companies conducting mainland operations must comply with the federal law alongside their zone regulations.
The law also confirms that companies incorporated anywhere in the UAE including free zones are recognised as UAE national companies for statutory purposes, reducing ambiguity in cross-jurisdiction corporate planning.
2. Non-Profit Companies
For the first time, the UAE corporate regime formally recognises the concept of non-profit companies under the Commercial Companies Law. These entities are structured to reinvest all net profits into achieving stated objectives instead of distributing dividends to shareholders. Detailed regulations on their formation and governance are expected via subsequent Cabinet and authority decisions.
3. Shareholder Rights and Capital Structuring
The amendments explicitly allow:
Drag-along and Tag-along rights to be included in the constitutional documents of LLCs and private joint stock companies, aligning onshore entities with global practices in shareholder protection and exit mechanisms.
Companies to issue multiple classes of shares with distinct rights related to voting, dividends, redemption priority, liquidation preferences, and other privileges.
Enhanced flexibility for capital structuring that supports sophisticated financing and growth strategies.
4. Re-Domiciliation and Corporate Mobility
A notable innovation is the introduction of a statutory framework for re-domiciliation (migration). This allows companies to transfer their legal domicile between different UAE jurisdictions including from free zones to mainland licencing authorities, while retaining their corporate identity, shareholding, licensing, and contractual continuity.
5. Governance and Continuity
The updated law strengthens managerial continuity provisions:
If a manager resigns and no action is taken, the resignation becomes effective after 30 days unless otherwise agreed.
Competent authorities must be notified of a manager’s term expiry within 30 days.
Boards may continue functioning for up to six months after term expiration, and in the absence of new appointments, authorities may appoint interim boards to maintain governance continuity.
Penalties and Compliance
While the core penalties for non-compliance remain aligned with the original Commercial Companies Law, the updated regulatory environment emphasises stricter enforcement of constitutional and governance standards. Directors and officers must ensure formal compliance with:
constitutional document updates;
shareholder and governance mechanisms approved by authorities;
newly introduced structuring rights and obligations.
Failure to update constitutional documents in time or to comply with the amended provisions may expose companies to administrative fines, regulatory scrutiny, or operational limitations by registries and licensing authorities.
Practical Implications for Businesses
The 2025 amendments provide UAE businesses with:
Greater corporate structuring flexibility, allowing tailored share classes and investor rights;
Better alignment with global corporate practices, reducing transactional friction;
Enhanced capital raising options, especially for private entities under national financial market frameworks;
Simplified cross-jurisdiction operations, thanks to clearer free zone/mainland integration and re-domiciliation pathways.
For entities operating across multiple UAE jurisdictions, these reforms help streamline governance and expand strategic options for growth, investment, and operational mobility.
What Businesses Must Do
Companies should:
Review and amend their memorandum and articles of association to incorporate new shareholder rights and capital mechanisms;
Update governance practices to align with continuity provisions;
Assess whether re-domiciliation or corporate restructuring could support future growth plans;
Engage with legal advisors to ensure compliance before the end of the transition period (30 June 2026).
Conclusion
The UAE’s updated Commercial Companies Law under Federal Decree-Law No. 20 of 2025 represents one of the most significant modernisations of corporate regulation since the introduction of Federal Decree-Law No. 32 of 2021. By integrating enhanced shareholder tools, flexible capital structures, new entity types, and mobility options, the amendments strengthen the UAE’s competitive position as a global business hub.
For businesses operating in the UAE, understanding and implementing these changes — and updating constitutional documents accordingly — will be essential to remain compliant and take full advantage of the enhanced corporate toolkit now available.
UAE Commercial Companies Law: Key Legal Updates and What Businesses Must Know
The UAE’s corporate regulatory framework has taken another significant step forward with recent amendments to the Commercial Companies Law. First introduced as Federal Decree-Law No. 32 of 2021 on Commercial Companies, this law has formed the legal backbone for the formation, operation, governance, and restructuring of companies in the UAE’s mainland.
In late 2025, the UAE issued Federal Decree-Law No. 20 of 2025, introducing targeted amendments to Federal Decree-Law No. 32 of 2021. These changes modernise the corporate regime, strengthen governance standards, align onshore practice more closely with international norms, and enhance operational flexibility for businesses.
Legal Basis and Scope
Federal Decree-Law No. 32 of 2021 on Commercial Companies remains the principal statute regulating commercial entities in the UAE, including limited liability companies (LLCs), private and public joint stock companies (PJSCs), and other corporate forms. It governs company incorporation, shareholding structures, directors’ duties, shareholder rights, mergers, reorganisations, liquidation procedures, and compliance obligations.
Federal Decree-Law No. 20 of 2025, issued on 1 October 2025, amends key provisions of the 2021 law and introduces several important reforms effective from 1 January 2026, with many requiring compliance by 30 June 2026.
What Has Changed: Key Amendments
1. Recognition of Free Zone Companies and Scope Clarity
The amendments clarify that companies established in free zones and financial free zones, including their branches and representative offices operating outside their respective zones, are subject to the Commercial Companies Law when they carry out activities in the mainland. Free zone companies conducting mainland operations must comply with the federal law alongside their zone regulations.
The law also confirms that companies incorporated anywhere in the UAE including free zones are recognised as UAE national companies for statutory purposes, reducing ambiguity in cross-jurisdiction corporate planning.
2. Non-Profit Companies
For the first time, the UAE corporate regime formally recognises the concept of non-profit companies under the Commercial Companies Law. These entities are structured to reinvest all net profits into achieving stated objectives instead of distributing dividends to shareholders. Detailed regulations on their formation and governance are expected via subsequent Cabinet and authority decisions.
3. Shareholder Rights and Capital Structuring
The amendments explicitly allow:
Drag-along and Tag-along rights to be included in the constitutional documents of LLCs and private joint stock companies, aligning onshore entities with global practices in shareholder protection and exit mechanisms.
Companies to issue multiple classes of shares with distinct rights related to voting, dividends, redemption priority, liquidation preferences, and other privileges.
Enhanced flexibility for capital structuring that supports sophisticated financing and growth strategies.
4. Re-Domiciliation and Corporate Mobility
A notable innovation is the introduction of a statutory framework for re-domiciliation (migration). This allows companies to transfer their legal domicile between different UAE jurisdictions including from free zones to mainland licencing authorities, while retaining their corporate identity, shareholding, licensing, and contractual continuity.
5. Governance and Continuity
The updated law strengthens managerial continuity provisions:
If a manager resigns and no action is taken, the resignation becomes effective after 30 days unless otherwise agreed.
Competent authorities must be notified of a manager’s term expiry within 30 days.
Boards may continue functioning for up to six months after term expiration, and in the absence of new appointments, authorities may appoint interim boards to maintain governance continuity.
Penalties and Compliance
While the core penalties for non-compliance remain aligned with the original Commercial Companies Law, the updated regulatory environment emphasises stricter enforcement of constitutional and governance standards. Directors and officers must ensure formal compliance with:
constitutional document updates;
shareholder and governance mechanisms approved by authorities;
newly introduced structuring rights and obligations.
Failure to update constitutional documents in time or to comply with the amended provisions may expose companies to administrative fines, regulatory scrutiny, or operational limitations by registries and licensing authorities.
Practical Implications for Businesses
The 2025 amendments provide UAE businesses with:
Greater corporate structuring flexibility, allowing tailored share classes and investor rights;
Better alignment with global corporate practices, reducing transactional friction;
Enhanced capital raising options, especially for private entities under national financial market frameworks;
Simplified cross-jurisdiction operations, thanks to clearer free zone/mainland integration and re-domiciliation pathways.
For entities operating across multiple UAE jurisdictions, these reforms help streamline governance and expand strategic options for growth, investment, and operational mobility.
What Businesses Must Do
Companies should:
Review and amend their memorandum and articles of association to incorporate new shareholder rights and capital mechanisms;
Update governance practices to align with continuity provisions;
Assess whether re-domiciliation or corporate restructuring could support future growth plans;
Engage with legal advisors to ensure compliance before the end of the transition period (30 June 2026).
Conclusion
The UAE’s updated Commercial Companies Law under Federal Decree-Law No. 20 of 2025 represents one of the most significant modernisations of corporate regulation since the introduction of Federal Decree-Law No. 32 of 2021. By integrating enhanced shareholder tools, flexible capital structures, new entity types, and mobility options, the amendments strengthen the UAE’s competitive position as a global business hub.
For businesses operating in the UAE, understanding and implementing these changes — and updating constitutional documents accordingly — will be essential to remain compliant and take full advantage of the enhanced corporate toolkit now available.
