Originally published by Sarah Zuhri Ouchikh in Ahead of Regulation on LinkedIn. Republished in full at the author’s request. The analysis and source qualifications below reflect the original publication date.
Imagine an investor offering to acquire 20 per cent of your company. You consider the valuation, calculate the dilution and decide whether retaining the other 80 per cent is acceptable. Then the proposed terms introduce a preferential return, consent rights over future financing and conditions governing a sale. The percentage has not changed, but the arrangement you are negotiating has become considerably more complex.
That distinction is the starting point for understanding the UAE’s recent company-law reforms. Ownership, economic participation and control need not tell the same story. The challenge is to ensure that the parties understand the differences before those differences determine the outcome of an investment, a disagreement or an exit.
Federal Decree-Law No. 20 of 2025, amending Federal Decree-Law No. 32 of 2021 on Commercial Companies, expands the arrangements available under the federal corporate framework. At the Ministry of Economy & Tourism briefing on 7 January 2026, Abdulla Bin Touq connected the amendments with access to financing, ownership flexibility, shareholder protection and continuity when companies transfer their registration. Those are the government’s stated objectives. Whether they translate into an advantage for an individual business depends on its circumstances and implementation.
For founders, the immediate issue is the bargain they are making with an investor. For family businesses, it may be the relationship between succession and business continuity. For larger groups, it may be whether an established structure still performs a necessary function. Across those situations, the same principle applies: additional legal flexibility is useful only when the business can understand, document and administer the arrangement it chooses.
The distinction matters throughout this article: a statutory permission is not an automatic amendment to a company's constitution. Nor does permission establish that every proposed mechanism is immediately registrable in every jurisdiction. The central argument here is that the reform increases the importance of deliberate corporate design. It creates scope to simplify certain structures, but also introduces more rights that must be understood, reconciled and administered. For a small company, that may mean a better agreement between two shareholders. For a large group, it may change the relationship between its capital structure, governance arrangements and eventual exit.
1. A wider legal toolkit, not a single UAE corporate regime
The amendments operate within the federal Commercial Companies Law, referred to here as the CCL. They do not merge mainland, DIFC and ADGM into a single corporate regime. Amended Articles 3 and 5 address, among other matters, the mainland presence of free zone companies. Gibson Dunn’s analysis by Andrew Steele and Hazim Alfreahat distinguishes the revised statutory framework from the implementing measures needed to make certain mechanisms operational. That distinction remains essential when assessing a proposed transaction.
A statutory permission does not rewrite an existing memorandum. Nor does an agreement between shareholders establish that every provision they negotiate can immediately be registered in the form they prefer. A transaction must pass through several stages: the relevant mechanism must be legally available, the parties must approve it, the documents must express it correctly and any required registration or regulatory process must be completed. These are related tasks, but they are not substitutes for one another.
The practical response is to test implementation before the commercial bargain becomes difficult to change. A term sheet should not promise a structure that the transaction team has not checked against the relevant legal form and authority requirements. Equally, a registry’s acceptance of documents should not be treated as evidence that every interaction between those documents has been considered. Registration and commercial coherence answer different questions.
For an SME, that review may concern a single investor entering an operating company. For a multinational, it may involve several entities, financing arrangements and regulatory regimes. Neither should begin with the assumption that the most elaborate structure is necessarily the most protective. The relevant objective is a structure that performs the required functions without introducing avoidable cost or uncertainty.
2. Ownership can no longer be understood from a percentage alone
Amended Article 76(4) expressly provides for different classes of ownership interests in LLCs, including differences in voting rights, profit entitlements, redemption and liquidation preferences, subject to the applicable framework. Al Tamimi & Company , highlights the requirement to record the classification in the commercial register and the role of Cabinet measures in determining categories, conditions and associated rights. The practical availability of a particular design must therefore be checked rather than inferred from the enabling provision alone.
Return to the investor acquiring 20 per cent. As a purely illustrative economic arrangement, assume the investor contributes AED 2 million and receives a validly established right to recover that amount before the ordinary shareholders participate, without sharing again in the remaining proceeds. If a later exit produces AED 5 million available for distribution to equity holders, that priority could allocate AED 2 million to the investor and AED 3 million to the other shareholders. The investor’s nominal 20 per cent would then account for 40 per cent of the available equity proceeds.
That example is not a claim that any proposed preference is automatically available or registrable. It demonstrates why the economic bargain cannot be understood from the ownership percentage. The result would change with different participation rights, conversion provisions, distribution priorities or definitions of the event activating the preference. The founder and investor need to understand those consequences, rather than assume that an agreed percentage resolves them.
Legal drafting and financial modelling should therefore proceed together. A proposed structure should be tested against a disappointing exit, an ordinary exit, a successful exit and a further funding round. The purpose is not to predict the company’s future. It is to establish how the documents allocate outcomes the parties can reasonably describe. A financial model should not assume rights the documents fail to create, and the documents should not produce an allocation the parties have never examined.
For an SME, one carefully defined protection may be sufficient. A larger investment may justify more differentiated rights. In either case, the complexity should correspond to a commercial need. A company that requires one investor consent right does not necessarily need several classes, cumulative preferences and a complicated redemption mechanism.
3. Exit rights must survive the journey from agreement to completion
Amended Article 14(4) permits LLCs and private joint stock companies to incorporate drag-along and tag-along arrangements into their constitutional documents. A drag can require specified holders to participate in a qualifying sale; a tag allows a protected holder to join one. Cleary Gottlieb’s analysis draws attention to their interaction with the LLC pre-emption regime and the continuing role of detailed shareholders’ agreements. Recognising the mechanism is not the same as resolving every condition of its exercise.
The drafting should be tested against the transaction the parties might actually complete. Suppose a majority shareholder negotiates cash at completion, deferred consideration and an opportunity to reinvest in the buyer. A minority’s entitlement to participate on the same terms then requires more than identifying a price per share. The documents need to address allocation of deferred amounts, participation in reinvestment, the warranties each seller gives and the liabilities each assumes.
Different share classes make that exercise more demanding. The sale provisions must work with the economic priorities attached to the interests being sold. Otherwise, one clause may promise equivalent treatment while another creates a priority that changes the distribution. The problem may remain invisible while the shareholders agree in principle and emerge only when the purchaser’s lawyers ask for a completion mechanism.
The same reasoning applies to notices, deadlines, execution arrangements and non-cooperation. A buyer wants to know that the sellers can deliver the interests they have agreed to sell. A minority shareholder wants protection that survives an inconvenient transaction. A founder needs to understand the circumstances in which the agreed threshold can require a sale. Each perspective should be reflected before a binding exit commitment is made.
My conclusion is that an exit provision should be assessed by following it from trigger to completion. Its value lies in the sequence it makes possible, not the sophistication of its label. A shorter clause with a clear and workable process may serve the parties better than a longer provision whose interaction with the rest of the documents has never been tested.
4. For family businesses and SMEs, continuity may matter more than fundraising
The same amended Article 14(4) permits constitutional arrangements concerning shares on a shareholder's death. An analysis from Squire Patton Boggs , whose listed contacts include Omar Momany, PhD and Leila Drissi , describes priority purchase mechanisms in favour of surviving shareholders or the company, with the price agreed with the heirs or determined through court-appointed experts where agreement fails. It also identifies unresolved questions about the treatment of shares purchased by an LLC itself. That specific succession mechanism should not be treated as a general, unrestricted corporate buyback power.
For a family business, the drafting problem extends beyond identifying who may purchase. Ownership succession, management succession and financing the acquisition from the heirs are separate issues. In an illustrative two-owner company, the surviving shareholder may have a purchase right but insufficient liquidity to exercise it. A company-funded acquisition may consume funds required for operations. A disputed valuation may leave the ownership question unresolved while the business still needs decisions.
A useful succession arrangement should therefore examine the period between death and the eventual settlement. Payment terms, valuation assumptions, interim decision-making and management authority deserve attention alongside the purchase right. The company needs to continue operating during that period. Preserving a stable ownership structure does not, by itself, identify the person who can manage staff, deal with customers or make necessary financial decisions.
This is not an alternative to respecting inheritance entitlements. It is an exercise in coordinating those entitlements with the continuing business, subject to the applicable law. The constitutional documents, management arrangements and separate estate planning should be considered together. One clause should not be expected to settle every consequence of losing an owner who was also the principal decision-maker.
The amendment to Article 85(4) provides a further, limited continuity mechanism concerning the appointment of replacement LLC management from outside the shareholder body in the specified circumstances. It should not be presented as a general statutory cure for every 50:50 disagreement. A dispute about a budget or a shareholder’s departure still requires an appropriate response under the company’s particular arrangements.
5. Raising capital now requires attention to what is contributed, not only who contributes it
Amended Article 32 develops the private-placement route for private joint stock companies, subject to the relevant regulatory conditions. It is not permission for any LLC to offer securities to the public. Amended Article 275 also removes certain incorporation-related steps when a company converts into a joint stock company. The form of financing and the process of conversion must nevertheless be assessed on their own terms.
Non-cash contributions require particular care. Greenberg Traurig’s analysis of Ministerial Decision No. 117 of 2026 describes valuation and valuer requirements, including an ordinary six-month period from valuation to submission and a three-month limit on the age of valuation data, subject to competent-authority variations. A material change affecting value can require an update within the ordinary period. These are requirements for an existing form of contribution, not the invention of non-cash capital itself.
For a founder contributing software, equipment or intellectual property, the commercial valuation is therefore only one part of the transaction. The parties must establish what will be transferred, who owns it and which rights or restrictions affect it. A business cannot rely on the value of an asset it will not obtain in the form the investment agreement assumes. A valuation and an examination of title perform different tasks.
For an acquisition involving contributed assets or seller reinvestment, those tasks belong in the timetable. The documents should also address responsibility for an updated valuation and the consequences if the update changes the agreed economics. Leaving that exercise until the rest of the transaction is ready can force the parties to renegotiate assumptions they believed had already been settled.
6. Continuation preserves the company, not freedom from its existing obligations
New Article 15 bis establishes a framework for transferring a company’s registration while preserving its legal personality. The Ministry’s explanation addresses transfers between emirates and between mainland and free zone regimes, including financial free zones, subject to the applicable conditions. The distinction from liquidation and reincorporation is the survival of the legal person, with its existing rights and obligations.
That continuity can be commercially useful, but it does not answer every question raised by the move. A financing agreement may contain conditions concerning changes of jurisdiction. A regulated activity may require approval from an authority separate from the company registrar. Banking arrangements, security, employment matters and tax registrations should each be examined. The migration exercise should identify which relationships continue unchanged and which require further action.
International transfers require additional caution. Published practitioner accounts differ on the breadth of the migration provisions: Al Tamimi’s briefing describes inward transfers from outside the UAE, while Afridi & Angell’s analysis expressly notes that the amendment is silent on foreign companies continuing into mainland UAE. An inbound route should therefore not be treated as established without confirming the applicable provisions and the requirements of both jurisdictions.
For a substantial group, the assessment should begin with the purpose of each existing entity. A holding company may serve financing, investor participation, asset segregation or another function that remains relevant after the reform. Removing it merely to shorten an organisation chart may solve the wrong problem. Equally, a layer retained only because it was once necessary deserves reconsideration.
For an SME, the proportional approach may be more modest. A move should address an identifiable operating need or produce a demonstrable benefit after its costs and consequences have been assessed. The fact that the company can preserve its identity is a reason to examine the option carefully, not a reason to assume that moving is desirable.
7. Share-class design can alter the tax analysis and the governance burden
One of the less obvious consequences lies outside company law. Under the corporate tax grouping conditions in Article 40 of Federal Decree-Law No. 47 of 2022, the relevant 95 per cent tests extend beyond share capital to voting rights and entitlements to profits and net assets. The Federal Tax Authority explains in its Tax Groups Guide, CTGTGR1, section 4.5, that different share classes can affect whether these conditions are satisfied. This is a separate legal test; a capital percentage does not answer every limb.
Assume a parent holds 96 per cent of its subsidiary’s capital but, under the rights validly attached to that capital, is entitled to only 90 per cent of its profits. The capital threshold alone would not establish eligibility. The point is not that preference rights invariably prevent grouping. It is that their economic consequences must be tested against each applicable condition rather than assessed solely by reference to the ownership chart.
The FTA’s guidance also illustrates why the inquiry may need to continue after the structure is established: different profit levels can affect whether the relevant entitlement condition is satisfied where preferences apply. A review performed when the documents are signed should not be mistaken for a conclusion that remains correct regardless of subsequent circumstances.
Governance requires a similar separation of questions. A management decision, a shareholder approval and a contractual investor consent do not necessarily perform the same function. In a hypothetical financing, management may consider new capital necessary while an existing consent right also needs attention. The transaction team should identify the issue before execution, rather than discover it when someone recalls a provision in a document that was not included in the working file.
For a large group, this may justify systematic tracking of rights across subsidiaries. For an owner-managed company, a concise and accurate schedule of key approvals may be sufficient. What matters is that the information is reliable and used when decisions are made. A company should not administer an elaborate capital structure as though its only relevant fact were the percentage held by each shareholder.
8. Stronger enforcement must be understood through actual decisions, not slogans
The corporate reforms and arbitration developments are distinct, but their commercial relationship is important. Clifford Chance Middle East , in Open for Investment: UAE Company Law Reforms & Pro-Enforcement Developments, examines them together in the context of investor protection and structuring. Its analysis also recognises that established offshore arrangements may remain appropriate and that careful drafting remains necessary. Additional corporate tools do not eliminate the need to consider how a dispute would be resolved.
In introducing SADER Annotated Codes: Arbitration in the UAE, Essam Al Tamimi described a judiciary increasingly recognising arbitration as “a complementary and vital mechanism for justice.” That is his assessment of the developing relationship between courts and arbitration. For transaction planning, it highlights a practical point: the arbitration agreement should be considered alongside the judicial assistance that may be needed to protect the parties’ position and pursue enforcement.
One specific development is Dubai Court of Cassation Case No. 657 of 2025, decided on 3 July 2025. K&L Gates ’ account explains that the court upheld the tribunal’s authority to grant the interim anti-suit injunction at issue and dismissed the annulment application for lack of jurisdiction. The analysis concerns Article 21 of Federal Law No. 6 of 2018 on Arbitration and the treatment of interim measures. It is not a general proposition that any arbitral injunction can displace any court proceeding.
Institutional cooperation provides another example. ADGM Courts’ official register records its reciprocal-enforcement memorandum with DUBAI COURTS , signed on 14 January 2025. Habib Al Mulla and Partners explains the documentation and procedural steps relevant to that arrangement. Facilitating execution does not merge the jurisdictions or guarantee recovery. Those distinctions matter when a transaction depends on a particular enforcement assumption.
The drafting implication is to consider the governing law, arbitral seat, administering institution and likely asset locations together. They serve different purposes. The dispute provisions across the shareholders’ agreement, constitutional documents and associated contracts should also be examined for compatibility. The intended remedy may require a registration step, participation by another person or action that an award against one contracting party will not itself accomplish.
For an SME, cost belongs in that analysis. A procedure suitable for a major acquisition may be disproportionate to a smaller shareholder dispute. For an institutional investor, the identity of the obligor, available security and location of assets may be central. The common objective is a remedy that is legally appropriate and commercially usable, rather than a clause selected because it sounds sophisticated.
9. The transaction determines which opportunity matters
For a small or family-owned company, the most valuable work may be to clarify the relationship between existing owners. The company should be able to identify who can make important decisions, how a shareholder can leave, how a sale would proceed and how operations continue after death or incapacity. A limited revision directed at those issues may achieve more than a wholesale restructuring. The test is whether it resolves a real problem without creating disproportionate administration.
For a company seeking investment, the analysis should extend beyond the current round. Rights negotiated with the first outside investor may affect the next financing or exit. A consent provision can be commercially reasonable when granted and still require careful handling later. The parties should consider how rights change, terminate or continue as the ownership structure evolves. That exercise is easier while the commercial terms remain open than when the company needs additional capital urgently.
For private equity investors and larger corporate groups, the reforms provide a reason to revisit where rights should sit and which structural layers remain necessary. The assessment should include financing, regulatory requirements, the intended exit and the coherence of the documents across the group. Familiarity is relevant, but it should be a considered factor rather than an unexamined default.
My reading of these developments is that more attention will need to move from the act of incorporating a company to the continuing administration of the bargain within it. The point is not that incorporation has become unimportant. It is that a company with differentiated rights cannot be understood from a licence, a shareholder list and a renewal date alone. Its records must also explain which rights apply, which events activate them and which decisions have already been taken.
That is a practical conclusion, not a prediction that legal judgment will become automatic. A right may be ambiguous, disputed or subject to qualifications that require advice. Reliable records do not resolve every interpretive question. They make it possible to identify the question before a transaction proceeds on the wrong assumption.
10. Where this leaves AIMAN
As the founder of Aiman Legal , this is the part of the discussion that interests me most. A company can retain every relevant document and still fail to recognise that a proposed transaction requires attention under one of them. The missing step is often the connection between the document and the event: a transfer, financing or change of registration that makes an existing provision relevant.
AIMAN is being developed as a proactive legal intelligence layer for businesses in the UAE. In this context, our direction is to connect the relevant source, the company’s circumstances, the potential obligation, the action requiring attention and the supporting evidence. That could mean bringing a possible transfer restriction or an inconsistency in the documents to counsel’s attention. These are development objectives, not a claim that software can conclusively determine enforceability or replace professional judgment.
The standard must be more demanding than identifying words in a contract. A system should distinguish a proposed amendment from an executed one, an executed document from a registered change and a possible issue from a verified conclusion. It should preserve the source of an alert and make uncertainty visible. Otherwise, it may make a misunderstood provision easier to act on rather than easier to understand.
The investor’s 20 per cent is where this article began. The percentage matters, but the real bargain lies in what it entitles the investor to receive, decide or require. The company’s documents should express that bargain, its financial model should reflect it and its administration should recognise when it requires action. That is the practical work behind a company’s ability to do more.
For those involved in founder-investor negotiations, which part of the bargain tends to require the most explanation: economic preferences, consent rights or exit provisions?
AIMAN | Proactive Legal Intelligence. Built in the UAE.
General information and analysis, not advice on a particular transaction. Examples are illustrative. Application depends on the relevant legislation, implementing measures and competent-authority requirements. References distinguish official explanations from practitioner commentary; the discussion should not be treated as a consolidated statement of every implementing measure. The author is the founder of AIMAN.
Publication note: the official consolidated CCL and the Ministry’s amendment downloads could not be retrieved during this review. Amendment-specific propositions are therefore supported by the official explanations and practitioner analyses cited above, rather than represented as independently verified against a consolidated statutory text. The differing published interpretations of international continuation are expressly identified in section 6.
Sources and publication notes
The references below are linked to the sources cited in the article. They distinguish the underlying legislation from official explanations and legal commentary.
[1] Official ministry briefing reported by Emirates News Agency, 7 January 2026.
[10] Investment and enforcement briefing, 22 September 2026, pp. 1 to 4.
Sources
UAE Ministry of Economy and Tourism · UAE
1 October 2025 · 5 October 2026
Federal Decree-Law No. 20 of 2025 amends Federal Decree-Law No. 32 of 2021 on Commercial Companies.