In Brief:
- The UAE has taken another major step in modernising its corporate landscape with the issuance of Federal Decree Law No 20 of 2025, which came into effect in October 2025 (“New Companies Law”) introducing several transformative concepts that were not previously available under the earlier version of the UAE Companies law.
- These reforms further align with international corporate governance standards and significantly enhance flexibility for investors, entrepreneurs, private equity stakeholders and family-owned businesses.
- For the first time, the New Companies Law permits bespoke provisions in the constitutional documents of onshore limited liability companies (“UAE LLCs”) and private joint stock companies (“PrJSCs”).
We set out below the most notable changes that will have a direct impact on the structuring, governance and administration of UAE companies.
1. Drag-Along and Tag-Along Rights
Historically, drag-along and tag-along rights, widely used in private equity, venture capital, and joint venture arrangements, were not expressly recognized under the UAE Companies Law. Their enforceability often depended on complex contractual workarounds or shareholders agreements drafted under foreign laws. Under the New Companies Law, these rights may now be directly entrenched in the LLC’s memorandum of association or the PrJSC’s articles of association, giving them statutory support and making them more enforceable. This offers shareholders:
- greater transactional certainty;
- smoother exit processes; and
- enhanced minority protection.
2. Mechanisms Governing Shares of Deceased Shareholders
One of the most meaningful effects of the New Companies Law is its impact on succession planning, particularly for family-owned businesses, an essential pillar of the UAE’s corporate landscape. Historically, UAE LLCs and PrJSCs faced limitations when attempting to manage succession events contractually, especially on the death of a shareholder. Many arrangements required complex parallel structures (such as offshore entities, family constitutions, foundations, or nominee agreements) given that the Companies Law did not offer mechanisms to control post-death transfers of shares.
The New Companies Law now expressly permits UAE LLCs and PJSCs to include in their memorandum or articles:
- contractual mechanisms governing how shares or interests of a deceased shareholder are to be treated;
- rights of first refusal in favour of remaining shareholders or the company itself; and
- agreed valuation or pricing mechanisms to be applied on the death of a shareholder.
This represents a fundamental shift. Previously, shares of a deceased shareholder fell into the estate by default and were subject to inheritance procedures, often introducing heirs who may have no operational involvement or strategic interest as shareholders. Businesses can now prevent unintended share transfers by incorporating mandatory buyout or transfer provisions directly into the constitutional documents. This strengthens continuity and reduces the risk of disputes or operational disruption.
By allowing constitutional documents to contain bespoke succession related provisions, the New Companies Law gives family groups the ability to centralise decision-making, preserve control within active family branches, avoid dilution of ownership through forced heirship, and maintain strategic alignment across generations which significantly enhances long-term governance stability, especially for multigenerational enterprises.
3. Corporate Migration (Continuation) Into and Out of Mainland UAE
One of the most groundbreaking changes introduced by the New Companies Law is the ability for companies to migrate (continue):
- from UAE free zones into mainland UAE; and
- from mainland UAE into UAE free zones.
This enables full corporate continuity, allowing companies to retain legal personality, assets and liabilities, contracts and licences, and banking arrangements.
The ability to migrate companies enhances structuring flexibility and supports cross-border reorganisations, redomiciliation strategies, private equity exit planning, international tax and regulatory structuring, and consolidation of operations into the UAE.
Prior to the New Companies Law, such migration was not legally possible for mainland entities, forcing businesses to incorporate newly and carry out complex transfers of business and assets.
4. Introduction of Share Classes for UAE LLCs
The New Companies Law now permits UAE LLCs to issue different classes of shares, including shares with differing voting rights, dividend rights, and other economic or governance rights.
This reform represents a major shift in the flexibility historically allowed to LLCs, which were traditionally limited to a single class of ownership. The availability of share classes will enable enhanced investment structuring, issuance of preferred or non-voting shares, employee incentive arrangements, clean division of economic vs. control rights, and more sophisticated joint venture and private equity structures.
This change is expected to dramatically increase the attractiveness of the UAE onshore market for investors and is especially relevant for startups, growth companies, and family businesses seeking to professionalise governance.
Conclusion
The New Companies Law marks a significant milestone in the UAE’s legal and economic development. The introduction of drag-along and tag-along rights within constitutional documents, succession mechanisms relating to deceased shareholders, company migration into and out of mainland UAE, and multiple share classes for LLCs, brings the UAE’s corporate framework closer to international standards and provides businesses with unprecedented structuring flexibility.
These reforms are expected to strengthen investor confidence, facilitate corporate reorganisations, enhance governance, and support the UAE’s long-term vision of becoming a global hub for business, investment and innovation.
If you would like assistance interpreting how the New Companies Law may impact your existing structure or wish to explore restructuring opportunities, our team would be pleased to support you. For more information, please contact Marwan Ashraf Abdel Hamid (m.abdelhamid@hadefpartners.com), Partner or Sundus Khan (s.khan@hadefpartners.com), Senior Associate.