The Uae's Federal Decree-law No. 20 of 2025: What Multiple Share Classes, Drag-and-tag Rights and Re-domiciliation Mean, and the 1 January 2027 Regularisation Deadline

The UAE’s Federal Decree-Law 20 of 2025 introduced multiple share classes, statutory drag-along and tag-along protections, and a formal re-domiciliation framework into the country’s Commercial Companies Law, changes that took effect on 15 October 2025. These amendments to Federal Decree-Law No. 32 of 2021 represent the most significant overhaul of the UAE’s corporate governance toolkit since the Commercial Companies Law was itself reissued. Companies that fall within the scope of the amendment must align their constitutive documents with the new regime by the regularisation deadline of 1 January 2027, making the compliance timeline both tight and commercially consequential. This guide explains every major reform, identifies which entities are affected, provides practical drafting guidance, and sets out a step-by-step regularisation checklist.

Executive Summary: What the UAE Commercial Companies Law Amendment Does and Why It Matters

Federal Decree-Law No. 20 of 2025 fine-tunes the framework established by Federal Decree-Law No. 32 of 2021 on Commercial Companies by clarifying jurisdictional boundaries, enhancing shareholder tools, and introducing new corporate structures previously unavailable under federal law. The Ministry of Economy and Tourism (MOET) published explanatory guidance confirming the scope and implementation timetable.

The headline changes can be summarised in four categories:

• Multiple share classes. The amendment permits classifying partners’ shares or company shares into different classes, each carrying differentiated economic, voting or governance rights, for the first time under the federal Commercial Companies Law.
• Drag-along and tag-along rights. Statutory recognition of drag-along and tag-along mechanisms now provides a codified basis for rights that were previously dependent entirely on contractual negotiation.
• Re-domiciliation. Companies may now re-domicile into or out of the UAE under defined procedural steps, enabling corporate mobility without full dissolution and re-incorporation.
• 1 January 2027 regularisation deadline. Existing companies must update their memoranda of association, articles, and related governance documents to comply with the amended law by this date.

Industry observers expect these reforms to accelerate the UAE’s alignment with global best practice in venture capital, private equity, and cross-border holding structures, directly benefiting founders, investors, and corporate service providers.

The Statutory Basis: Federal Decree-Law No. 20 of 2025

Federal Decree-Law No. 20 of 2025 amends several provisions of the Commercial Companies Law (Federal Decree-Law No. 32 of 2021). The consolidated text is published on the UAE Legislation Portal. The amendment was issued in October 2025 and entered into force on 15 October 2025, as confirmed by Norton Rose Fulbright’s published analysis of the changes.

The amendment sits within the broader legislative trajectory that began with Federal Law No. 2 of 2015, was replaced by the 2021 decree-law, and is now supplemented by this 2025 reform. The practical effect is that the UAE now offers a statutory framework competitive with common-law jurisdictions such as the Cayman Islands, the DIFC, and Singapore for structuring equity capital and investor protections.

Key Amended Articles

The MOET explanatory guidance and multiple law-firm commentaries identify the following principal areas of amendment:

• Article 14 (amended). Now provides for drag-along and tag-along rights, giving shareholders a statutory framework to enforce these mechanisms alongside contractual provisions in shareholders’ agreements.
• Provisions on share classification. The amendment permits classifying partners’ shares or company shares into different classes, with differentiated rights that must be set out in the company’s constitutive documents.
• Re-domiciliation provisions. New articles establish a procedural pathway for companies to transfer their domicile into or out of the UAE while preserving legal personality and contractual continuity.
• Transitional provisions. Companies are granted until 1 January 2027 to regularise their position and bring existing constitutional documents into compliance with the new requirements.

Who Is Affected: Entities, Shareholders and Timelines

The scope of the UAE Commercial Companies Law amendment extends to all commercial companies established under federal law, which includes mainland limited liability companies (LLCs), private joint-stock companies (PrJSCs), and public joint-stock companies (PJSCs). Partnerships (general and limited) and other entities governed by the Commercial Companies Law are similarly within scope.

The amendment is significant for investors, founders, and corporate counsel involved in structuring share capital, negotiating shareholder agreements, or planning cross-border corporate reorganisations involving UAE entities.

Deadline and ‘Regularisation’ Defined

Regularisation refers to the obligation on existing companies to align their memoranda of association, articles of association, internal governance policies, and commercial registry filings with the requirements of the amended law. Companies that have already adopted share structures or shareholder protections that conflict with, or are not addressed by, the new provisions must update their documents accordingly.

The deadline for completing this process is 1 January 2027. After this date, industry observers expect that non-compliant companies may face administrative consequences, including refusal of registry filings, potential fines, and challenges to the enforceability of provisions that contradict the amended statute. Any entity incorporated under the federal Commercial Companies Law should commence its compliance review without delay.

Do These Changes Apply to Free-Zone Companies?

Free-zone companies are generally governed by their respective free-zone authority regulations rather than the federal Commercial Companies Law. However, the interaction between federal amendments and free-zone frameworks varies by zone. Companies in certain zones, particularly those that expressly incorporate the Commercial Companies Law by reference, will need to assess whether parallel updates are required. The prudent approach is to obtain written confirmation from the relevant free-zone authority and review the zone’s own regulations for any adoption of, or divergence from, the federal amendments.

Multiple Share Classes in the UAE: Mechanics and Consequences

One of the most commercially significant features of Federal Decree-Law No. 20 of 2025 is the introduction of multiple share classes. The MOET explanatory guidance confirms that the amendment permits classifying partners’ shares or company shares into different classes, each with distinct rights attached. This change enables UAE companies to deploy capital structures that were previously available only in free-zone jurisdictions such as the DIFC or ADGM, or through offshore holding vehicles.

Key features of the new share-class regime include:

• Differentiated economic rights. Classes may carry different rights to dividends, distributions on liquidation, and return of capital.
• Differentiated voting rights. One class may carry enhanced or weighted voting rights, while another may be non-voting or carry restricted voting rights on defined matters.
• Conversion and preference mechanics. The constitutive documents may provide for convertible shares (e.g., converting from one class to another upon a trigger event) and preference shares (e.g., carrying a priority dividend or liquidation preference).
• Cross-class protections. The early indications suggest that amendments to the rights of a class will require the consent of the holders of that class, in addition to any broader shareholder approval requirements.

LLC-Specific Mechanics

For LLCs, the most common entity type for private business in the UAE, the ability to create LLC multiple classes addresses a long-standing structural limitation. Previously, LLC equity interests were treated as undifferentiated shares, making it difficult to implement founder-vs-investor economics, vesting schedules, or waterfall distribution structures without relying on complex contractual side arrangements. Under the amended law, an LLC’s memorandum of association can now define distinct classes with different economic and governance entitlements directly at the constitutive-document level.

PJSC and Public Company Considerations

For PJSCs and public companies, the introduction of multiple share classes raises additional considerations around capital-market disclosure, minority protection, and regulatory approval from the Securities and Commodities Authority (SCA). Companies contemplating a dual-class listing structure or weighted-voting arrangement will need to coordinate with the SCA’s prevailing regulations and any applicable stock-exchange listing rules.

Illustrative Share-Class Structure

The following table provides a simplified, illustrative example of how multiple share classes might be structured. This is for general guidance only and does not constitute legal advice.

Drag-Along and Tag-Along Rights Under Federal Decree-Law No. 20 of 2025: What Counsel Must Know

The amendments to Article 14 of the Commercial Companies Law now provide a statutory basis for drag-along and tag-along rights in the UAE. These mechanisms, sometimes referred to as “co-sale” or “bring-along” rights, were previously enforceable only through contractual provisions in shareholders’ agreements and were occasionally subject to uncertainty regarding their enforceability under UAE civil law principles.

Under the amended framework:

• Drag-along rights allow a majority shareholder (or a defined controlling group) that has agreed to sell its stake to a third-party buyer to compel minority shareholders to sell their shares on the same terms and at the same price.
• Tag-along rights protect minority shareholders by granting them the right to join a sale initiated by the majority shareholder, ensuring they can exit on equivalent terms rather than being left in a company with a new controlling party.

The statutory recognition does not necessarily make drag-along and tag-along mandatory for all companies. Rather, it provides a lawful basis for including these provisions in constitutive documents and shareholder agreements, and it reduces the risk that such provisions could be challenged as contrary to public policy or mandatory provisions of the Companies Law.

Drafting Checklist for Shareholders’ Agreements

When implementing drag-along and tag-along provisions in a shareholder agreement under UAE law, counsel should address the following elements:

• Trigger event. Define the threshold (e.g., a sale of 75% or more of the total shares) that activates the drag or tag right.
• Valuation and price. Specify whether the minority is entitled to the same price per share as the majority, and how any price adjustment mechanism (e.g., independent valuation) operates.
• Notice period. Set out the minimum notice that must be given to the affected shareholders, including the form of notice and any cooling-off period.
• Payment mechanics. Confirm whether payment is in cash, consideration shares, deferred consideration, or a combination, and address escrow or holdback provisions.
• Excluded transactions. Carve out intra-group transfers, pledges, and other transactions that should not trigger the drag or tag mechanism.
• Dispute resolution. Designate the forum (UAE courts, DIFC courts, or arbitration) and the governing law for any disputes arising from the exercise of drag or tag rights.

Sample Drag-Along Clause (Illustrative Only)

The following clause is for illustrative purposes only and should not be adopted without independent legal advice tailored to the specific transaction and jurisdiction.

“If one or more Selling Shareholders holding in aggregate not less than [75]% of the Shares propose to transfer all of their Shares to a bona fide third-party purchaser (a ‘Drag Sale’), the Selling Shareholders may require all other Shareholders to transfer their Shares to the same purchaser, on the same terms and at the same price per Share, by delivering written notice not less than [30] days prior to the proposed completion date. The dragged Shareholders shall execute all documents and take all steps reasonably required to effect such transfer.”

Re-Domiciliation in the UAE: Permitted Directions and Procedure

Federal Decree-Law No. 20 of 2025 introduces a statutory re-domiciliation framework permitting companies to transfer their registered domicile into the UAE (inbound re-domiciliation) or out of the UAE (outbound re-domiciliation) while preserving legal personality, existing contracts, and regulatory authorisations.

This development is particularly relevant for multinational groups seeking to consolidate holding structures in the UAE, and for UAE companies pursuing strategic relocations to other jurisdictions as part of a broader restructuring. Prior to the amendment, achieving the same outcome required dissolution in one jurisdiction and re-incorporation in another, a time-consuming and commercially disruptive process.

Practical Timeline, Re-Domiciliation Step by Step

Tax and contractual implications must be assessed before commencing a re-domiciliation. The UAE’s corporate tax regime, transfer-pricing rules, and any bilateral tax treaties should be reviewed alongside the contractual change-of-control and assignment provisions in the company’s material agreements.

Sectoral and Free-Zone Interaction: Which Entities Fall Inside or Outside the Federal Regime

The federal Commercial Companies Law applies to mainland companies but does not automatically override the regulations of individual free zones. However, the interaction is nuanced:

• Financial-services entities regulated by the Central Bank, the SCA, or the Insurance Authority remain subject to their sector-specific regimes, which may adopt, modify, or supplement the federal amendments.
• DIFC and ADGM companies operate under their own company laws (based on English common-law models) and are generally not directly affected by federal amendments, although group-level structuring may require coordination where mainland subsidiaries or affiliates are involved.
• Other free zones (e.g., JAFZA, DAFZA, SAIF Zone, RAKEZ) typically have their own commercial regulations. Where a zone’s rules incorporate the federal Commercial Companies Law by reference, the amendments will apply. Where they do not, companies should seek zone-authority confirmation.

Practical Examples

A technology start-up incorporated in a mainland LLC with venture-capital investors will directly benefit from the ability to create multiple share classes and codify drag-along tag-along rights in the UAE. An energy company operating through a JAFZA entity will need to verify whether JAFZA’s regulations adopt the federal amendments before restructuring its share capital. A financial-services firm regulated by the SCA must coordinate any share-class restructuring with the SCA’s own governance requirements.

Compliance Playbook: Steps to Regularise Before 1 January 2027

The 1 January 2027 regularisation deadline requires existing companies to complete a series of legal, governance, and administrative steps. The following ten-step playbook provides a structured approach:

1. Conduct a gap analysis (Month 1). Review current memorandum and articles of association against the requirements of Federal Decree-Law No. 20 of 2025. Identify provisions that conflict with, or are not addressed by, the amended law.
2. Assess share-structure requirements (Month 1–2). Determine whether the company intends to adopt multiple share classes and, if so, define the class structure, rights, and restrictions.
3. Review existing shareholders’ agreements (Month 2). Evaluate whether drag-along, tag-along, and other shareholder protection provisions need to be updated to align with the statutory framework.
4. Prepare draft amendments to constitutive documents (Month 2–3). Engage legal counsel to draft revised memoranda, articles, and any necessary board or shareholder resolutions.
5. Obtain board approval (Month 3–4). Present the proposed amendments to the board of directors (or managers, in the case of an LLC) for formal approval and recommendation to shareholders.
6. Convene shareholder meeting and pass resolutions (Month 4–5). Call a general meeting (or circulate written resolutions, if permitted) to approve the amendments. Ensure that applicable quorum and majority requirements are met.
7. File amended documents with the commercial registry (Month 5–6). Submit the updated memorandum, articles, and shareholder resolutions to the relevant Department of Economic Development or MOET registry.
8. Update ancillary documents (Month 6–7). Amend corporate governance policies, board charters, delegation-of-authority matrices, and any related internal manuals to reflect the new provisions.
9. Notify counterparties and stakeholders (Month 7–8). Inform banks, key contractual counterparties, and regulatory authorities (where applicable) of changes to the company’s constitutive documents and share structure.
10. Confirm completion and archive (Month 8, by 1 January 2027). Maintain a compliance file evidencing each step, including signed resolutions, registry acknowledgements, and updated copies of all constitutive documents.

Companies with complex group structures, cross-border shareholders, or sector-specific regulatory requirements should commence the process no later than mid-2026 to allow adequate time for approvals and filings. A comprehensive understanding of corporate services can help organisations identify the right advisers to manage this process efficiently.

Risk Areas, Transitional Issues and Enforcement

Several practical risks and transitional issues arise from the 2025 amendments that companies should proactively address:

• Inconsistent constitutive documents. Companies that fail to update their memoranda and articles may find that provisions in their existing documents conflict with the amended law, creating uncertainty about which terms govern.
• Minority shareholder disputes. The introduction of drag-along rights, in particular, may generate disputes around valuation methodology, price fairness, and the adequacy of notice periods, especially where minority shareholders did not negotiate the original contractual terms.
• Cross-border tax implications. Re-domiciliation, share reclassification, and changes to economic rights may trigger tax consequences under the UAE corporate tax law, applicable double-taxation treaties, or the tax laws of shareholders’ home jurisdictions.
• Contractual change-of-control clauses. Material contracts (financing agreements, joint-venture agreements, government licences) frequently contain change-of-control provisions. A reclassification of shares or the exercise of drag-along rights could inadvertently trigger these clauses. Companies that face the practical consequences of leaving the UAE with debt or unresolved contractual obligations should be particularly cautious.

Dispute Resolution and Typical Litigation Risks

The likely practical effect of statutory drag-along and tag-along recognition is that more disputes will be channelled through the designated forum (UAE civil courts, DIFC courts, or arbitration) rather than argued on the preliminary question of enforceability. Counsel should ensure that shareholders’ agreements clearly specify the dispute-resolution mechanism and governing law, and that any valuation methodology is defined with sufficient precision to reduce the scope for post-transaction challenges.

Comparison Table: Key Dates and Obligations by Entity Type

Conclusion and Recommended Next Steps

The UAE’s Federal Decree-Law No. 20 of 2025 marks a turning point for corporate structuring in the country, giving mainland companies access to multiple share classes, codified drag-along and tag-along protections, and a formal re-domiciliation pathway, tools that were previously the preserve of free-zone and offshore jurisdictions. The 1 January 2027 regularisation deadline means that every affected company must act now to audit its constitutive documents, identify gaps, and implement the necessary amendments.

For businesses navigating these changes, the recommended immediate steps are: (1) commission a legal gap analysis against the amended law; (2) engage experienced UAE corporate counsel through the Global Law Experts directory to draft updated documents; and (3) schedule board and shareholder approvals in sufficient time to complete registry filings well before the deadline. Companies that delay risk administrative complications, potential enforceability challenges, and missed commercial opportunities that the reformed law is designed to unlock.

Sources

1. UAE Legislation Portal, Federal Decree-Law on Commercial Companies
2. UAE Ministry of Economy and Tourism, Explanatory PDF on 2025 Amendments
3. Norton Rose Fulbright, Key Amendments to the UAE Commercial Companies Law
4. Cleary Gottlieb, UAE Companies Law Update 2025
5. Lexis Middle East, Comprehensive Analysis of the 2025 Amendments
6. Afridi & Angell, Amendments to the UAE Federal Companies Law
7. Reed Smith, UAE Commercial Companies Law: Key Changes
8. Horizons & Co, Federal Decree-Law No. 20 of 2025 Explained