UAE Companies Law Update Governance Enhancements under the 2025 Amendments

Overview

The UAE has enacted Federal Decree-Law No. (20) of 2025, introducing targeted amendments to the Commercial Companies Law that meaningfully enhance the corporate governance landscape. While the amendments do not alter the law’s fundamental architecture, they update more than fifteen (15) articles and introduce a new statutory provision aimed at strengthening investor protection, improving legal certainty, and ensuring business continuity. The reforms address a broad range of practical issues, including management succession and continuity, the regulation of non-profit companies, valuation of in-kind contributions, shareholder rights and exit mechanisms, capital structuring flexibility, and corporate mobility, bringing UAE company law further in line with international investment and transactional standards and directly impacting shareholders, directors, and management teams across all company forms.

Key Governance Developments

The amendments update more than fifteen articles of the Companies Law and introduce a new article, with a clear focus on enhancing legal certainty, strengthening investor protection, and ensuring operational continuity.

Non-Profit Organization

The law introduces a statutory framework for non‑profit companies. Companies may be established for non‑profit purposes, provided that any net profits are reinvested to further the entity’s objectives and are not distributed to its partners or shareholders.

Management Framework

The revised provisions clarify the rules governing the appointment, resignation, and removal of managers, while introducing mechanisms to ensure continuity of management and avoid governance gaps where appointments lapse or resignations occur.

Notably, a manager’s resignation will take effect if the general assembly fails to decide on it within thirty (30) days. In addition, the company is required to notify the competent authority upon the expiry of a manager’s term, and a statutory continuity mechanism is introduced whereby the board of managers may continue to manage the company for up to six (6) months if appointments lapse. Where governance paralysis persists beyond this period, the competent authority may intervene to ensure that the company remains operational.

These changes significantly reduce operational risk arising from technical lapses in management appointments.

In-Kind Contributions

The valuation framework for in-kind contributions has been reinforced through clearer roles for licensed valuers and enhanced oversight by the competent authorities.

For limited liability companies, the law reinforces the requirement that in-kind contributions be valued by one or more approved valuers. The competent authority is expressly empowered to review and challenge valuation reports and, where necessary, appoint an alternative valuer. Importantly, contributors remain personally liable if an overvaluation is subsequently established.

For joint stock companies, the law reinforces the role of the Securities and Commodities Authority and confirms the responsibility of founders and boards for the accuracy, completeness, and sufficiency of valuation information.

These changes reduce valuation risk and provide greater certainty in capital structuring and asset-backed transactions.

Share Transfers and Shareholder Rights

For private joint stock companies, the amendments refine restrictions on share transfers, maintaining lock-up protections while allowing for regulatory exemptions where appropriate. This enables more flexible exit planning without undermining shareholder safeguards.

The amendments also expressly permit companies (both LLCs and private joint stock companies) to embed advanced shareholder arrangements in their constitutional documents, including drag-along and tag-along rights, priority transfer mechanisms, succession mechanisms in the event of a shareholder’s death, and other agreed exit structures.

This statutory recognition aligns UAE company law with international investment practice and enhances enforceability of negotiated shareholder rights.

Capital Structuring and Share Classes

Further flexibility is introduced allowing partners’ shares in LLCs to be classified into different classes carrying distinct economic and governance rights. These may include variations in voting rights, profit distribution priorities, liquidation preferences, and other agreed rights or restrictions.

Corporate Mobility and Continuity

Companies may transfer their commercial registration between competent authorities, subject to regulatory approvals and without loss of legal personality. In addition, the law streamlines the process for transforming a company from one legal form to another, removing the need for re-incorporation.

Practical Impact

Collectively, these changes reflect a legislative intent to balance investor protection with commercial flexibility, supporting both stable corporate governance and efficient transaction execution across the UAE.

Our team continues to advise clients on the practical implications of these amendments and on aligning corporate structures and constitutional documents with the updated legal framework.