Has Your UAE Company Outgrown Its Structure? What the 2025 Law Changes Mean

When a UAE company is first set up, its structure reflects what the business needs at that moment. Years later the company may have more employees, new investors and a different strategy. On 15 October 2025, amendments to the UAE Commercial Companies Law came into effect under Federal Decree-Law No. 20 of 2025, which amends Federal Decree-Law No. 32 of 2021. For established businesses the bigger question is whether the current structure still supports the company it has become.

Key takeaways

• The amendments took effect on 15 October 2025 and created a framework for different classes of ownership interests in LLCs governed by the federal Commercial Companies Law.
• They expressly recognise drag-along and tag-along rights for relevant LLC and Private Joint Stock Company structures, subject to the applicable requirements.
• They introduced a framework for transferring a company’s registration between competent authorities while keeping its legal personality.
• Free zone companies generally follow their own authority’s rules, so the federal changes do not automatically apply to them.
• Detailed categories, conditions and procedures still depend on implementing rules and authority procedures.

The Question Behind the Law

At launch, a company often has one shareholder and a free zone licence, or a business partner and no outside investor. Shareholder exits, succession, raising capital or moving jurisdiction may not be part of the conversation.

Businesses evolve, and the law has evolved with them. Compliance is only one part of the picture. The real question is whether your structure would still be your choice if you were setting up today with your current owners, operations and plans.

Three Changes Worth Knowing

1. Different Ownership Classes in an LLC

The amendments introduce a framework that lets LLCs governed by the federal Commercial Companies Law have different classes of ownership interests. Those classes can carry different rights relating to voting, profit distribution, redemption, liquidation, value and other privileges or restrictions.

Consider a founder who brings in an investor. The investor may want an attractive economic return, while the founder wants to keep greater voting control. A family business may want different rights for founders, the next generation and outside investors. Different investors may also need different economic or exit rights. The framework gives more flexibility in how those relationships can be structured.

Does this apply to every free zone company?

No. Free zone companies generally follow the corporate regulations of their own authority where those rules specifically govern the matter. Some free zones already allow different classes of shares under their own frameworks.

DMCC, for example, has permitted different types or classes of shares under its own company regulations since 2 January 2020. DIFC and ADGM also work under their own corporate law frameworks. A free zone company should not assume that the October 2025 federal amendment automatically changes its share structure. The question to ask is what your specific jurisdiction and company type allow.

There is also an implementation point. Although the federal law creates the framework for LLC ownership classes, the detailed categories, conditions and procedures remain subject to implementing rules and authority procedures. Before you agree a particular investor or ownership structure, confirm that it can actually be implemented.

Our guide to UAE company legal structures compares the main forms, and our shareholders agreement guide explains how investor rights are recorded.

2. What Happens If One Shareholder Wants to Sell?

Partners spend time discussing how to build the company, and far less time on how someone leaves it. The amended framework expressly recognises arrangements known as drag-along and tag-along rights for relevant LLC and Private Joint Stock Company structures, subject to the applicable requirements.

Drag-along

A buyer wants to acquire the company, but one minority shareholder refuses to sell. A properly structured drag-along provision can allow qualifying shareholders to require the others to take part in the sale on agreed conditions.

Tag-along

Now reverse the situation. A majority shareholder receives an offer and wants to sell, and the minority shareholder does not want to stay with a new owner they never chose. A tag-along provision can allow that minority shareholder to join the transaction on the applicable terms.

Shareholder relationships change. Partners leave, investors want returns, buyers make offers and ownership may pass between generations. Corporate documents should cover how shareholders separate as well as how they work together. If your Memorandum of Association, shareholders’ agreement or investment agreement is several years old, check whether it still reflects your ownership and plans.

3. Moving Jurisdictions Without Starting Again

This may matter most for companies that have outgrown their first jurisdiction. The amended law introduced a framework that allows a company to transfer its registration from one competent authority to another while keeping its legal personality. It also contemplates transfers between a free zone and the relevant mainland authority, subject to the applicable conditions and approvals.

Think of a company that started in a free zone years ago with one shareholder, a small team and a simple model. Today it may have more employees, more UAE customers, new activities, different office needs, new investors and a different expansion plan. The jurisdiction that suited the launch may no longer fit.

In the past the obvious question was whether to close the company and open a new one. There is now a second question: can the existing company itself be transferred? The potential advantage is that the company’s legal personality can continue instead of treating the move as a new incorporation.

This is not automatic

• Both the transferring and the receiving authority must permit the transfer.
• The relevant registration systems and procedures must support it.
• Additional approvals can apply, depending on the company, its activities and the jurisdictions involved.
• Transfers involving financial free zones are subject to separate controls.

Confirm the practical route with the authorities involved before you build plans around a move. Our guide to converting a free zone company to the mainland explains the routes that work today.

Should an Existing Company Review Its Structure?

Not every company needs to restructure because the law changed. A review makes sense in situations such as these:

• The company was set up several years ago.
• The business has grown significantly.
• New shareholders have joined.
• An investor may be coming in.
• Shareholders now have different roles or expectations.
• The company has outgrown its original jurisdiction.
• A move between free zone and mainland is under consideration.
• Succession has never been addressed.
• A future sale of the company is possible.
• Shareholder documents were prepared years ago.

Remember that what UAE law makes available is not available in the same way to every company. Mainland authorities, individual free zones, DIFC and ADGM can each have different frameworks, procedures and implementation requirements. A structure that is new for a mainland LLC may already exist under a free zone’s regulations, and a legal framework can exist before every practical procedure has been put in place. Our DIFC company setup guide shows how one of those separate frameworks works.

Three Questions Before You Restructure

1. What does the law allow?
2. What does the relevant jurisdiction currently allow?
3. Does the change make commercial sense for the business?

An Example: A Growing Consultancy

This illustration is not legal advice. A consultancy launched in a free zone with one owner. Five years later it has 25 staff, mainland customers and an investor who wants a share.

• The investor asks for different rights. The owner asks whether the licensing authority allows share classes, and what the company regulations say.
• The owner asks about exits. The new investment agreement includes drag-along and tag-along terms, checked against the applicable rules.
• The company asks about its base. The owner asks whether a transfer to the mainland authority is possible instead of closing the company and starting again.

In each case the first step is confirming what the specific authority allows. Our comparison of mainland, free zone and offshore helps frame the options.

Common Mistakes

• Assuming federal changes apply to every company. Free zones follow their own rules where those rules apply.
• Agreeing investor terms before checking they can be implemented. The framework may exist before the procedure does.
• Leaving old shareholder documents unreviewed. They may not reflect today’s ownership.
• Treating a jurisdiction move as automatic. Both authorities must allow it.
• Ignoring succession. A sale or generational handover needs terms agreed in advance.

Summary: What to Remember

• The Commercial Companies Law amendments took effect on 15 October 2025 under Federal Decree-Law No. 20 of 2025, amending Federal Decree-Law No. 32 of 2021.
• LLCs under the federal law now have a framework for different ownership classes.
• Drag-along and tag-along rights are expressly recognised, subject to the applicable requirements.
• A company may be able to transfer its registration between authorities while keeping its legal personality.
• Free zone, DIFC and ADGM companies follow their own frameworks, so confirm what applies to you.

To review your own structure, speak to an EZONE advisor. This article is general information, not legal advice, and what is available depends on the jurisdiction, licensing authority, company type, activity, implementing rules and approvals. Our sister site companyformationinuae.com has more on company formation.

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