Introduction: Why Share Classes Matter in the ADGM
The Abu Dhabi Global Market (ADGM) is one of the UAE’s most sophisticated corporate jurisdictions. Established under Abu Dhabi Law No. 4 of 2013, ADGM is distinctive in that it directly applies English common law, rather than a civil law code. This foundational choice has a significant impact on how corporate and shareholder rights are structured, interpreted, and enforced, offering a level of contractual flexibility and legal predictability that is familiar to international investors and transactional practitioners.
The ADGM Companies Regulations 2020 (the Companies Regulations), which allow companies to create customised equity and governance structures. In particular, the Regulations permit the issuance of multiple classes of shares with different economic, voting, and exit rights, enabling companies to structure shareholding arrangements in line with their commercial needs. For founders, investors, and junior lawyers, understanding how these share classes operate is essential for structuring investments, allocating control, and planning exits in the ADGM.
By contrast, UAE mainland company law historically adopted a far more rigid approach to shareholding rights. Under the former Commercial Companies Law, companies were required to maintain uniform share rights, and the issuance of different classes of shares was expressly prohibited. As a result, instruments commonly used in international transactions such as preference shares, non-voting shares, and other multi-class equity structures were largely unavailable in the mainland regime, significantly constraining flexibility in investment structuring and corporate governance.
This position has shifted in recent years. Federal Decree-Law No. 32 of 2021- Regarding Commercial Companies, as further clarified and expanded by Federal Decree-Law No. 20 of 2025, introduced a fundamental reform by expressly permitting the classification of shares. Under Article 76(4), mainland companies may now issue different classes of shares distinguished by voting rights, redemption rights, priority in profit distribution and liquidation, and other privileges or restrictions. These reforms mark a significant move toward convergence with the flexible, investor-friendly share capital regimes long available in financial free zones such as the ADGM.
Nevertheless, despite this convergence at the level of substantive company law, important differences remain in terms of legal foundations, regulatory implementation, and practical enforcement. Against this background, this article examines the different classes of shares that may be issued under the ADGM Companies Regulations 2020—including ordinary, preference, redeemable, convertible, and other bespoke classes—and contrasts the ADGM framework with the evolving position under UAE onshore company law.
Power to Create Share Classes
Under Regulation 570 of the Companies Regulations 2020, shares in an ADGM company may be divided into different classes provided that all shares within the same class carry identical rights. The law itself does not limit the number or type of classes that may be created.
Crucially, the Articles of Association are the primary document that defines: voting rights, dividend rights, capital and liquidation rights, redemption or conversion mechanics, and any restrictions attached to a class.
ADGM’s Model Articles clearly allow companies to issue shares with whatever rights or restrictions are approved by an ordinary resolution, unless the Articles themselves set stricter limits. In practice, more complex share structures are usually created through customised Articles, rather than by relying on the standard model.
Structural Features Unique to ADGM Share Capital
Before examining individual classes, two foundational features of ADGM law must be noted.
No Nominal (Par) Value
Unlike mainland UAE companies, ADGM companies issue no-par value shares. There is no concept of “face value” or “share premium.” The company’s share capital simply reflects the consideration received for shares.
This feature which is derived from modern UK company law greatly simplifies fundraising and avoids artificial capital maintenance rules.
By contrast, companies governed under the onshore law used to operate within a par value framework which influences capital maintenance rules and limits the mechanics of equity restructuring.
Fractional Shares
Fractional shareholding allows a company to issue shares in parts rather than whole units, making it easier to allocate precise ownership percentages among shareholders. ADGM law permits fractional shareholding, particularly in SPVs(Special Purpose Vehicles) and private companies.
This enables precise equity allocations, employee equity participation, and complex joint-venture structures.
Main Classes of Shares under ADGM Law
Ordinary Shares
Ordinary shares are the default equity instrument in ADGM companies. It is specifically mentioned under Regulation 519.
Unless modified by the Articles, ordinary shares typically confer voting rights at general meeting, dividend rights (participation in profits when declared), and Capital rights (proportional allotment on winding up).
ADGM law allows ordinary shares to be subdivided into subclasses enabling non-voting ordinary shares,
weighted voting shares, or differential dividend entitlements. This is commonly used for employee participation or founder control structures.
Preference Shares
ADGM law permits preference shares, provided their rights are clearly set out in the Articles.
Typical preference rights include:
- Dividend priority
- Cumulative or non-cumulative dividends;
- Liquidation preference (priority return of capital on exit); and
- Participation rights (sharing surplus proceeds after preference is satisfied).
The rights of preference shareholders are protected by the class-rights regime in Chapter 7 of the Companies Regulations. Any variation of these rights generally requires consent of at least 75% of the holders of that class, and an amendment to the Articles by special resolution.
In contrast, UAE mainland law historically treated all shares equally. Under Federal Law No. 2 of 2015 AD On Commercial Companies, which was the old law, stated that the company shall not issue different classes of shares. So classic preference shares were effectively prohibited. However, recent reforms have changed this. Federal Decree-Law No. 32/2021 added Article 76(4), expressly allowing multiple share classes in an LLC.
Redeemable Shares
Redeemable shares are expressly recognised under Regulation 623 of the Companies Regulations.
An ADGM company may issue shares:
- redeemable at the option of the company,
- redeemable at the option of the shareholder, or
- redeemable upon a specified event.
Key requirements:
- redeemable shares must be fully paid on issue;
- the terms of redemption must be stated in the Articles or authorised by resolution; and
- redemption may be funded from distributable profits or, subject to solvency safeguards, capital.
This mechanism provides a flexible exit route for investors without a full capital reduction process.
By contrast, UAE mainland law did not talk about redeemable shares until recently. A mainland company could only buy back shares through a formal capital reduction and only if its capital is fully paid which is again subject to regulatory limits. This was changed in the Federal Decree-Law No. (20) of 2025 where it allows for multiple share classes
Convertible Shares
Although the Companies Regulations do not use the label “convertible shares,” they clearly accommodate them. In practice, companies issue convertible preference shares, or convertible instruments that transform into shares on specified triggers. ADGM’s common-law environment ensures that these provisions are interpreted in line with international investment practice.
As long as uniformity within each class is maintained (Regulation 570), the law imposes no substantive restriction on design.
Mainland UAE law likewise now allows convertible structures indirectly. While the new company law amendments (Federal Decree-Law No. 20 of 2025) do not single out “convertible shares,” the ability to classify shares by varying rights means companies can achieve conversion through their constitutional documents like their Articles.
Allotment and Variation of Rights
Allotment of Shares
Directors may allot shares if authorised by the Articles, or a shareholder resolution. Statutory pre-emption rights apply by default to cash issuances, protecting existing shareholders from dilution unless disapplied by special resolution. Allotments and class details must be reported to the ADGM Registrar through the company’s confirmation statement.
Variation of Class Rights
Any change to class rights triggers class-holder approval (typically 75% of that class), and notification to the Registrar within 14 days. This ensures minority protection and transparency.
The ADGM Companies Regulations 2020 provide one of the most flexible and investor-friendly share-capital regimes in the region. By grounding corporate law in English common-law principles, ADGM allows companies to tailor share classes to commercial reality rather than statutory rigidity.
ADGM’s framework has also been in place for several years and is well understood by regulators, courts, and market participants. By contrast, the mainland regime’s reforms in the Federal Decree-Law No. 32 of 2021, as further clarified and expanded by Federal Decree-Law No. 20 of 2025 are extremely recent and continue to evolve, with companies still awaiting further executive regulations to fully operationalise the new flexibility.
So although UAE mainland law now formally recognises multiple share classes, it remains more prescriptive and administratively driven, with greater dependence on ministerial and cabinet-level implementation. As a result, the practical application, regulatory interpretation, and judicial treatment of multi-class share structures in the mainland regime remain evolving, in contrast to the ADGM framework, which has already been tried, interpreted, and embedded within established commercial practice. It also continues to offer a more mature, contract-centric, and internationally familiar environment for sophisticated share-capital structuring.
