The UAE’s 2025 amendments to the Commercial Companies Law (Federal Decree-Law No. 20 of 2025 amending Federal Decree-Law No. 32 of 2021), represent a meaningful recalibration of the mainland corporate framework. The reform functions as a targeted legislative update aimed at modernizing how companies raise capital, allocate control, and plan exits.
In practical terms, the amendments introduce greater structural flexibility for onshore limited liability companies. Founders and investors now have access to multi-class shares, statutory drag-along and tag-along rights, and the ability for companies to move between Emirates, the mainland, and free zones without losing identity. Together these changes move the onshore regime far closer to global venture capital and private equity practices, reducing transaction friction, improving exit certainty, and potentially expanding the pool of capital available to UAE companies, especially in tech and growth sectors.
What Changed?
At the core of the reform is a shift in how control and economic rights can be structured within UAE companies. Under the new framework, holding a larger number of people does not necessarily translate into greater decision-making power. Instead, control can be deliberately structured through differentiated voting and economic rights attached to distinct share classes.
With this reform, companies are now able to tailor control, risk allocation, and return in a way that better reflects commercial reality rather than pure shareholding percentages. In this sense, the reform aligns legal form more closely with commercial reality.
The amendments also strengthen exit architecture by recognizing drag-along and tag-along rights at a statutory level, allowing these mechanisms to be embedded directly into a company`s constitutional framework. This reduces reliance on purely contractual enforcement and increases predictability in sale transactions.
Finally, the law introduces a regime of corporate mobility. Companies may transfer their registration between Emirates, between free zones and the mainland, and vice versa, while preserving legal personality, contractual relationships, and operating history (subject to regulatory approvals). This framework is intended to avoid the need for liquidation and reincorporation when business strategy or regulatory considerations change.
Why This Matters for Startups
Fundraising that Reflects Global Venture Practice
For startups, the introduction of multi-class shares fundamentally changes the dynamics of early-stage fundraising. Founders can now separate control from economic ownership in a way that mirrors international venture capital markets. Decision-making power is no longer accidental or solely dependent on the number of shares held but is instead structured ex ante through differentiated voting rights and agreed governance rules. In concrete terms, founders may retain enhanced voting rights to preserve strategic direction, while investors receive priority economic protections. This makes it possible to design fundraising rounds that balance founder control with investor confidence, without relying on offshore or financial free zone structures purely for share-class flexibility.
This shift also reduces the traditional tension between growth and control. Weighted voting structures can allow founders to pursue long-term vision during periods of rapid expansion, while investors remain protected through robust downside safeguards and clearly defined existing mechanisms. Importantly, while the legal framework now enables these structures, their practical implementation will depend on forthcoming regulations and registry practice. Early coordination with licensing authorities and legal advisors will therefore be key as the system is operationalized.
The recognition of drag-along and tag-along rights significantly improves exit dynamics for startups. By reducing the ability of minority shareholders to block transactions, these mechanisms lower the risk of deal breakdowns at critical moments. At the same time, minority investors retain the right to participate in exits on equal terms. The result is a more predictable and efficient exit environment, aligned with common international practices and more attractive to institutional investors.
It`s equally relevant to mention the ability for startups to evolve structurally without losing legal identity. Companies can begin in the jurisdiction that best suits their early stage needs and later migrate as licensing, regulatory or commercial considerations to change without restarting their corporate existence or losing contractual history. This flexibility supports founder-led growth and reduces the legal and operational disruption traditionally associated with scaling.
Why This Matters for Investors
From an investor perspective, the reform introduces a level of structural and portfolio flexibility that was previously difficult to achieve onshore. Investments can now be structured using familiar instruments – such as preferred economics, conversion mechanics, and anti-dilution protections within a framework that supports enforceable governance and exit rights at the constitutional level.
This strengthens deal of certainty, particularly at exit. Embedding drag-along rights into a company`s constitutional documents reduce enforcement friction and mitigates the risk of minority holdouts. For acquirers, this increases confidence that a transaction can result in full ownership without prolonged negotiation or litigation risk. For investors, it means more predictable exit outcomes and more accurate pricing of risk.
The introduction of corporate mobility further enhances portfolio management. Investors can plan future migrations or re-domiciliation in response to licensing, banking regulatory, or listing considerations without triggering a loss of legal identity or operating history. This allows value to be preserved while adapting corporate structure to evolving commercial needs.
Free Zone–Mainland Interface & “UAE Nationality”
The amendments also clarify the relationship between free zone entities in mainland. Where free zone or financial free zone companies conduct activities onshore, they fall within the scope of the Commercial Companies Law (CCL) for those activities, while remaining governed by free zone rules inside their zones. Importantly, the law confirms free zone companies as UAE juridical persons for national purposes. This reduces the ambiguity in private international law and facilitates cross-border recognition, while enabling more coherent planning for dual-license models and group governance structures.
Conclusion
The 2025 Commercial Companies Law reform does not simply introduce new technical tools; it recalibrates the foundations of UAE onshore corporate structuring. By enabling multi-class shares, reinforcing statutory exit mechanisms, and allowing corporate mobility without discontinuity, the UAE has addressed structural constraints that historically pushed growth companies offshore.
For startups, the reform lowers the psychological and structural barriers to fundraising, supports founder-led growth, and allows companies to scale without corporate rebirth. For investors, it delivers greater certainty in governance, exit planning, and risk allocation. While effective implementation will depend on regulatory practice, the direction of travel is clear.
The UAE onshore regime is increasingly positioned as a credible and sophisticated venue for venture and growth of capital, reflecting international standards while adapting them to the local legal environment.