In a significant move to enhance its corporate landscape and reinforce its status as a global business hub, the UAE government has issued a Federal Decree-Law amending key provisions of the Commercial Companies Law. The reforms introduce a more flexible, transparent, and investor-friendly framework, aligning UAE legislation with international standards and expanding options available to companies, investors, and stakeholders.
Introduction of Non-Profit Companies
One of the most notable changes is the creation of a new non-profit company structure. This legal model allows profit-generating entities to reinvest their net earnings into achieving their stated purpose, rather than distributing profits to shareholders.
This development enables private-sector companies, social enterprises, and mission-driven organisations to operate within a transparent, regulated, and purpose-aligned corporate structure. It is expected to strengthen the UAE’s social and developmental sectors while enhancing public–private collaboration.
Here is to understanding business activities in the UAE.
More Flexible Capital Structure Options
The decree-law introduces multiple classes of shares and stakes, each with distinct rights relating to:
- Voting
- Profit distribution
- Redemption
- Liquidation
These enhanced capital structure mechanisms bring the UAE in line with mature global markets. They allow companies especially growing enterprises, family businesses, and investor-backed ventures to tailor shareholding rights according to investor expectations and long-term corporate governance needs.
Experts note that these improvements will boost private capital investment, improve governance, and provide greater flexibility during fundraising and corporate restructuring.
New Fundraising Pathways for Private Joint-Stock Companies
The amendments also allow private joint-stock companies (PJSCs) to offer their securities for private subscription through UAE national financial markets, without having to convert into public joint-stock companies.
This provides an important alternative financing channel, enabling companies to raise capital efficiently while maintaining their existing corporate structure. It also strengthens the UAE’s domestic capital markets by increasing the diversity of securities available to investors.
Facilitating Company Migration Across the UAE
A key amendment regulates the delocalisation or migration of companies across the seven emirates and between mainland jurisdictions and financial free zones.
The updated rules:
- Maintain the company’s legal identity during relocation
- Set clear procedures for re-registration
- Support the free movement of businesses
- Reduce commercial disputes
- Protect minority shareholder rights
This clarity is expected to simplify corporate restructuring and encourage companies to optimise their licensing and operational presence across the UAE.
Modern Shareholder Protection Mechanisms: Tag-Along & Drag-Along Rights
The legislation also introduces widely-used international contractual mechanisms such as:
- Tag-along rights – allowing minority shareholders to join a sale under the same terms as majority shareholders
- Drag-along rights – permitting majority shareholders to compel minority stakeholders to participate in a sale
These mechanisms reduce shareholder disputes, streamline M&A transactions, and provide predictable exit strategies for investors especially in family businesses and private equity-backed companies.
Improved Governance Through Valuation Standards
To enhance transparency, the amendments establish standards for valuing in-kind shares and for accrediting qualified appraisers. This reduces the risk of inflated valuations and strengthens corporate governance protections.
Supporting the UAE’s Economic Vision
The updated Commercial Companies Law aligns with the UAE’s broader strategy to boost its global competitiveness, attract investment, and reinforce its business environment.
Key developments supporting this trajectory include:
- Full foreign ownership reforms (2021)
- CEPA agreements with major global partners
- Reduced visa restrictions and Golden Visa expansions
- The NextGen FDI programme
- Surge in commercial licences in tourism, digital industries, aviation, and hospitality
In 2023 alone, the UAE attracted Dh167.6 billion in foreign direct investment, ranking 10th globally and accounting for 37% of regional FDI.
Industry Reaction
Legal experts note that the reforms will:
- Simplify incorporation and conversion processes
- Reduce procedural complexity
- Lower transaction costs for local and international companies
However, some areas such as treatment of repurchased shares upon a shareholder’s death and conditions for issuing multiple share classes will require clarification through future implementing regulations.
Strengthening the UAE’s Corporate Future
The UAE’s latest amendments to the Commercial Companies Law mark a major leap forward in strengthening its corporate, regulatory, and investment landscape. By introducing non-profit companies, enabling flexible capital structures, facilitating company migration, and expanding fundraising options, the UAE continues to position itself as one of the world’s most competitive, business-friendly jurisdictions.
These reforms not only modernise the country’s corporate environment but also reinforce the UAE’s vision of becoming a leading global hub for commerce, investment, and innovation.
