Is the UAE Rewriting the Rules of Company Ownership?

Running a business in the UAE has always meant adapting quickly to change. New rules, new opportunities, new ways of structuring companies. With the latest amendments to the UAE’s Commercial Companies Law, that pace of change is continuing—this time with a clear focus on flexibility, continuity, and long-term growth.

At a recent media briefing, the Ministry of Economy and Tourism outlined key updates introduced under Federal Decree-Law No. 20 of 2025, which amends the Commercial Companies Law issued in 2021. The changes affect how companies are formed, owned, funded, managed, and even how they move across emirates and free zones.

For SMEs, startups, investors, and growing family businesses, these updates are less about legal theory and more about removing friction from everyday business decisions.

A law shaped around how businesses actually operate

Speaking at the briefing, Minister of Economy and Tourism H.E. Abdulla bin Touq Al Marri said the amendments are part of a longer-term effort to create a business environment that works for companies of all sizes—not just large corporates or listed entities.

The idea is simple: laws should help companies grow, not slow them down. Whether that’s raising capital, restructuring ownership, expanding to another emirate, or converting into a joint stock company, the updated law aims to make these transitions smoother and more predictable.

Multiple share classes: no longer just for big companies

One of the most practical changes is the introduction of multiple quota and share classes for Limited Liability Companies and private joint stock companies.

Until now, this level of flexibility was largely limited to public joint stock companies. Under the new amendments, LLCs can issue different classes of quotas with varying rights—such as profit preference, voting rights, or exit priority.

For founders and SMEs, this matters. It allows businesses to bring in investors without giving up control, structure family ownership more clearly, and negotiate funding on terms that fit their long-term plans.

Moving your company without starting over

Another major change addresses a long-standing pain point: company relocation.

Under the new law, businesses can transfer their commercial registration between emirates, or between the mainland, free zones, and financial free zones—without liquidation or re-incorporation. The company keeps its legal identity, contracts, obligations, and commercial history.

For growing businesses, this means expansion no longer has to feel like a reset button. A company can move where it makes sense operationally, without losing years of progress.

Easier conversions and fewer administrative roadblocks

The amendments also simplify the process of converting one company form into another. Businesses can now change their legal structure—say, from an LLC to a joint stock company—while retaining their legal personality.

In cases where companies convert to joint stock companies, existing executive management can oversee the transition without the need to form new founders’ committees, unless shareholders decide otherwise. This removes delays and uncertainty during restructuring.

Shorter lock-in periods for private joint stock companies

Private joint stock companies now benefit from a reduced lock-up period, down from two years to one year. In some cases, this period can be further reduced or waived.

This gives founders and investors more flexibility when it comes to exits, private placements, or listings, making private joint stock companies a more practical option for fast-growing businesses seeking structured investment.

A new option: non-profit commercial companies

The law also introduces a new legal form: the non-profit commercial company.

These entities operate commercially but reinvest profits into their stated objectives rather than distributing them to shareholders. This structure supports areas like education platforms, health technology, research and development, and social impact ventures.

A Cabinet decision will outline the detailed rules, but the intent is clear—to give purpose-driven businesses a recognised legal framework within the commercial ecosystem.

Stronger rules around ownership changes and exits

The amendments formally regulate drag-along and tag-along rights, forced sales, and the transfer of shares in cases such as death of a shareholder.

For SMEs with multiple partners or investors, this adds clarity to situations that often lead to disputes. The law now clearly allows shareholders to agree in advance on how exits and transfers will work, reducing uncertainty later.

Keeping businesses running during management gaps

Administrative gaps can stall a company. The new amendments give LLCs more flexibility if a General Manager or Board of Managers position becomes vacant.

Existing management can continue operations for up to six months, and if needed, specialised management firms can step in temporarily. This helps ensure continuity while shareholders sort out long-term appointments.

What this means for SMEs

In practical terms, the updated law benefits:

• Startups raising private funding

• SMEs planning to expand across emirates

• Family businesses restructuring ownership

• Companies converting to joint stock structures

• Investors looking for clearer rights and exit mechanisms

According to the Ministry, the UAE saw around 250,000 new companies established in 2025 alone, and total registered companies now exceed 1.4 million. The government expects company registrations to grow further as these amendments take effect.

A quieter shift with long-term impact

The changes to the Commercial Companies Law may not grab headlines every day, but for businesses operating in the UAE, they quietly reshape how growth, funding, and expansion can happen.

For SMEs especially, the message is straightforward: fewer forced restarts, more structural flexibility, and clearer rules for the future.