From uniformity to choice: UAE LLCs embrace multiple share classes
The United Arab Emirates has always been recognized for its progressive outlook towards commercial laws, which helps provide a very attractive and stable environment for domestic and international business. The Federal Decree‑Law No. 32 of 2021 on Commercial Companies (“the Law”) marked a significant milestone in the UAE’s corporate regulatory framework, consolidating and modernizing the rules governing commercial companies in the country. There were some shortcomings in these laws, one of the significant limitations being its rigid approach to the structure of shares within limited liability companies (LLCs).
Overview of the 2025 Amendments
On 1 October 2025[MP1] , Federal Decree Law No. 20 of 2025 introduced a series of significant reforms. The main aim of this amendment was to streamline company operations, reinforce investor protections, and improve corporate mobility.[1]
Key amendments include:
1. Registration Mobility Preserved
Allows companies to transfer their commercial registration between UAE competent authorities including free zones and financial free zones, while maintaining legal personality, subject to approvals and publications.
2.Market Standard Exit Rights
Permits LLCs and private JSCs to incorporate drag-along and tag-along rights and other shareholder exit mechanisms into their constitutive documents.
3.Flexible Capital Structuring with Safeguards
Enables differentiated share classes and in-kind contributions subject to accredited valuation and regulatory oversight.
4.Governance Continuity for LLCs
Introduces clear rules on manager appointment, resignation, removal, notice obligations, and temporary continuation to ensure operational stability.
5.Clarified Nationality and Scope
Confirms that UAE companies including those in free zones are considered UAE nationals, and clarifies the law’s applicability to onshore operations.
6.Offering Perimeter Discipline
Restricts public offerings to PJSCs while allowing private placements for private JSCs under Securities Authority conditions.
7.Streamlined Conversions
Allows companies to convert their legal form without re-incorporation, simplifying conversions into PJSCs.
New Capital and Share Classification Rules Under Article 76
Prior to the amendment in 2025 Article 76 of the Federal Decree‑Law No. 32 of 2021 stated that the company must have enough capital to achieve its purpose and the capital must be divided into equal-value stakes. It also mentioned capital can be contributed in cash or in kind, and all contributions must be fully paid at incorporation.
After the Article 76 was replaced by virtue of Article 1 of Federal Decree-Law No. 20/2025 which states; the Company must maintain sufficient capital made up of equal-value shares, with the Cabinet empowered to set a minimum capital requirement. Capital contributions may be made in cash or in-kind and must be fully paid at incorporation, with cash contributions deposited in a UAE-licensed bank and released only after evidence of the Company’s registration. The amendment further permits partners’ shares to be divided into different categoriesvarying in value, voting rights, profit-distribution priority, redemption rights, liquidation rights, and other privileges or restrictions provided these are reflected in the Memorandum of Association and recorded in the Commercial Register. The Cabinet, upon the Ministry’s proposal and in coordination with the Competent Authority, will determine the types of share categories and the rules governing them. The clause four of Article 76 was further added by the amendment which specifically states about Recognition of Multiple Share Classes. In the latest amendment added as article 76(4) of the law states that in UAE now LLCs can also create different categories of partner shares each having its own rights such as different voting rights, dividend priority, redemption rights, or liquidation preferences.[2]
Legal Formalities and Requirements
- Different classes of shares must be clearly reflected in the Memorandum of Association or any other official company document.
- These classifications must also be recorded in the Commercial Register to ensure government oversight, legal certainty, and enforceability of rights.
- The Cabinet will issue detailed rules and conditions governing the different share categories at a later stage. These rules will outline the types of permissible share classes, their rights and limitations, and the procedures for registration and compliance.
Capital Contribution Requirements
- Partners may contribute capital either in cash or in kind, and all contributions must be fully paid at the time of incorporation.
- Cash contributions must be deposited in a UAE-licensed bank and evidenced for company registration. The bank may release the funds only after the company provides proof of registration with the Competent Authority.
- In-kind contributions must be assessed by an accredited valuer to determine their fair value. The relevant authority has the power to review or challenge this valuation and may appoint another valuer if necessary.[3]
Practical implications of the Amendment
The 2025 amendment has introduced several practical advantages:
- Greater flexibility in structuring ownership and governance – The introduction of multiple share classes allows companies to design governance structures that suit their needs. Founders may retain decision-making control while still offering investors attractive financial rights.
- Enhanced suitability for family businesses – Families can now separate management rights from economic entitlements, enabling smoother generational transitions and clearer internal governance.
- Introduction of sophisticated capital rights within LLCs – Differentiated share classes bring advanced investment structures previously common only in JSCs and global jurisdictions into everyday UAE LLC practice. This benefits venture capital, growth equity, and private investment strategies.
- Increased investor protection and attractiveness – Investors benefit from tailored rights such as priority dividends or liquidation preferences, making LLCs a more compelling and secure investment vehicle.
- Stronger legal certainty and enforceability – Requiring share classes and rights to be formalized in the Memorandum of Association and registered in the Commercial Register minimizes ambiguity and reduces the risk of disputes between investors and company management.
Potential Challenges and Risks
The possible challenges that could occur are that companies may have to face administrative and compliance burdens in order to implement multiple share classes. There is a possibility of disputes in valuation for in-kind contributions and also potential conflicts between shareholders with different types of rights.
Key Takeaways
The latest 2025 amendments helped to make the corporate framework of the UAE more modern and flexible by integrating common law principles into a law with a civil law foundation. The amendments helped to make business, especially with respect to LLCs, more flexible, accountable, and investor-friendly. Though there are multiple benefits of allowing different classes, there might be challenges relating to compliance burdens, valuation disputes, and conflicts between shareholders that could occur. In order to overcome that, when the Cabinet releases detailed regulations mentioning all the details of the different classes, their rights, and conditions, it could take into account all of these potential issues and cover them by making rules to solve them too. As the Cabinet issues detailed implementing regulations, businesses must prepare to adopt compliant structures that leverage these new rights while managing the legal and regulatory complexities.
[1] Lexis Middle East, ‘2025 Amendments to the UAE Commercial Companies Law’ (Legislative Insight, 28 November 2025)
[2] United Arab Emirates, Federal Decree‑Law No. 32 of 2021 on Commercial Companies (20 September 2021) (as amended by Federal Decree‑Law No. 20 of 2025).
[3] Lexis Middle East, ‘2025 Amendments to the UAE Commercial Companies Law’ (Legislative Insight, 28 November 2025)
[MP1]I have researched and confirmed this date once again
FAQs
The amended Commercial Companies Law,Federal Decree Law No. 20 of 2025, introduced a series of significant reforms to the existing Federal Decree-Law No.32 of 2021. This amendment aims to streamline company operations, reinforce investor protection and improve corporate mobility.
Yes, companies can transfer their commercial registration between competent authorities within the UAE, including free zones and financial free zones, while maintaining legal personality, subject to approvals and publications.
Ans. They are contractual shareholder protections that regulate how shares may be sold when one or more shareholders decide to exit the company.
A drag-along right allows majority shareholders to require minority shareholders to sell their shares to a third-party buyer when the majority agrees to a sale, provided the sale is on the same terms and conditions for all shareholders.
A tag-along right gives minority shareholders the option to participate in a sale initiated by majority shareholders by selling their shares on the same terms and conditions.
No. Article 76 has been replaced by the amendment under Federal Decree-Law No. 20 of 2025. While an LLC must still maintain sufficient capital and ensure that contributions are fully paid at incorporation, the amended now expressly permits partners’ shares to be divided into different categories. These categories may vary in value, voting rights, profit or dividend priority, redemption rights, liquidation preferences, and other privileges or restrictions, provided they are clearly set out in the Memorandum of Association and recorded in the Commercial Register, with detailed rules to be issued by the Cabinet.
It requires for the different classes of shares to be clearly reflected in the Memorandum of Association (MoA) or any other official company document. These classifications must be recorded in the Commercial Register and the Cabinet will issue detailed rules and conditions governing the different share categories at a later stage. These rules will outline the types of permissible share classes, their rights and limitations, and the procedures for registration and compliance.
Partners can contribute capital in either cash or in kind, but all must be fully paid at the time of incorporation. Cash contributions must be deposited in a UAE-licensed bank and evidenced for company registration, while in-kind contributions must be assessed by an accredited valuer to determine their fair value.
The 2025 amendment brings multiple advantages for the business including the ability to design governance structures that suit their needs, the ability for family businesses to separate management rights from economic entitlements, advanced investment structures in LLCs brought by differentiated share classes, increased protection of investors and stronger legal certainty and enforceability.
Companies may have to face administrative and compliance burdens in order to implement multiple share classes. Disputes may arise in the valuation for in-kind contributions and also potential conflicts between shareholders with different rights.
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