The UAE has issued a landmark update to its Commercial Companies Law, introducing significant changes designed to modernize the corporate framework and enhance the nation’s appeal to startups, investors, and global businesses. The amendment, analyzed by legal experts at Al Tamimi & Company, integrates common law principles into the UAE’s civil law system, aiming to streamline operations, increase corporate flexibility, and better integrate the country’s onshore and free zone ecosystems.
The new legislation introduces powerful tools for shareholder agreements, capital structuring, and corporate transformations that are set to have a profound impact on the local startup scene.
Bridging The Mainland and Free Zone Divide
A key update provides much-needed clarity on the relationship between mainland and free zone companies. The Commercial Companies Law now explicitly applies to branches or offices of free zone companies when they conduct business on the mainland. This alignment reduces ambiguity for businesses with operations across multiple jurisdictions and facilitates smoother integration by allowing them to operate under a more unified set of rules.
Furthermore, the amendment formally recognizes free zone companies as carrying UAE nationality, simplifying cross-border operational planning.
Adopting Common Law M&A And Governance Tools
In a significant move that aligns the UAE with global investment standards, the law now formally authorizes mainland Limited Liability Companies (LLCs) to embed drag-along and tag-along mechanisms directly into their Memorandums of Association (MOA). These provisions are standard in venture capital deals and provide crucial protections for both majority and minority shareholders during M&A events.
The amendment also permits bespoke clauses governing the shares of deceased shareholders, creating clearer pathways for succession and business continuity. These changes bridge the gap between civil law formality and the contractual flexibility common in jurisdictions like the DIFC and ADGM, reducing transactional friction for startups and investors.
A Game-Changer For Venture Capital Structuring
Perhaps one of the most impactful changes is the new ability for mainland LLCs to create different classes of shares. This allows companies to issue shares (e.g., Class A and Class B) with varying rights related to voting power, dividend priority, and liquidation preferences.
This represents a step-change for private capital structuring in the UAE, enabling venture-style economics, such as preferred shares for investors, within the most commonly used corporate vehicle. This flexibility is crucial for startups seeking sophisticated, multi-stage funding from local and international venture capital firms.
Unlocking Corporate Mobility With Re-Domiciliation
The law introduces the concept of re-domiciliation, a legal process that allows a company to transfer its registration from one jurisdiction to another while maintaining its legal identity, history, and track record.
This new “portability” enables companies to move their legal presence between countries, between different UAE free zones, or between a free zone and the mainland. This operational agility allows businesses to align their registration with their strategic objectives, whether to access tax benefits in a free zone or to leverage GCC trade treaties as a mainland entity, without the need to dissolve and re-establish the company.
Expanding Access To Capital
While public offerings remain restricted to public joint stock companies, the amendment explicitly permits private joint stock companies to offer securities through private placements on UAE markets, subject to conditions from the Securities and Commodities Authority (SCA). This change broadens access to capital markets for private companies, supporting their pre-listing and growth-stage funding strategies.
About Al Tamimi & Company
Al Tamimi & Company is a leading law firm in the Middle East and North Africa, with 17 offices across 10 countries. The firm combines deep expertise in UAE corporate law with practical execution across all major onshore, free zone, and financial free zone authorities, advising on corporate structuring, governance, and capital markets transactions.
Source: Al Tamimi & Company
