The UAE has enacted Federal Decree-Law No. (20) of 2025 (“Amendment Law”), introducing targeted amendments to the Commercial Companies Law (CCL) that meaningfully enhance the corporate governance landscape. The amendments updated over fifteen articles and added a new statutory provision with the goals of enhancing investor protection, increasing legal certainty, and guaranteeing business continuity, all without changing the essential structure of the legislation.

The reforms bring UAE company law closer to international investment and transactional standards and have a direct impact on shareholders, directors, and management teams across all company forms. They address a wide range of practical issues, such as management succession and continuity, the regulation of non-profit companies, valuation of in-kind contributions, statutory drag-along and tag-along rights, succession mechanisms, and re-domiciliation.

KEY GOVERNANCE DEVELOPMENT

The UAE government has increased its efforts in recent years to enhance accountability, transparency, and governance in both the private and public sectors. Private enterprises are the target of guidelines or draft regulations produced by regulatory authorities like the Securities and Commodities Authority, the Ministry of Economy, and other free-zone regulators. Investor expectations and international norms are reflected in these measures. This implies that stricter rules pertaining to stakeholder involvement, risk management, board composition, and reporting may soon be imposed on private businesses.

The amendments aim to modernise the UAE’s corporate law framework, enhance governance standards, offer capital flexibility, provide minority protections, and increase procedural efficiency, while aligning the regime with international best practice.

BOARD INDEPENDENCE THRESHOLD RAISED

At least 75% of board members must be independent if the Chairman and CEO roles are unified. This means that the board of a firm planning to list needs to be structured with independence in mind from the beginning. All permanent board committees must consist entirely of independent directors. This threshold is high and may require some boards to rethink their current composition and succession planning well in advance to ensure they remain compliant.

Under the amendments to UAE Federal Decree-Law No. 32 of 2021 on CCL, board members are now regarded as active fiduciaries who must exercise due care, diligence, loyalty, good faith, and sound business judgment in all corporate decisions. Directors who violate these requirements could be held personally liable, especially in cases involving fraud, abuse of power, conflicts of interest, or unacceptable poor management. Delegating operational duties does not exempt directors from their supervisory responsibilities; the board retains final responsibility, reinforcing a higher standard of governance and individual accountability.

MANAGEMENT ACCOUNTABILITY

The amended provisions (Article 85) 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.

If the general assembly does not make a decision within thirty days, the manager’s resignation becomes effective. A statutory continuity mechanism allows the board of managers to continue managing the company for up to six months if appointments lapse, and the company must notify the appropriate authority when a manager’s term expires. The authority may intervene to keep the business running if governance paralysis lasts longer.

RE-DOMICILIATION

One of the most significant reforms is the formal recognition of re-domiciliation within the UAE while preserving continuity of legal personality. Article 15 bis introduces a mechanism allowing a company to transfer its commercial registration from one UAE jurisdiction to another—mainland to free zone, free zone to mainland, or between financial free zones—without losing its legal identity.

Previously, similar outcomes required asset transfers, contractual novation, employee migrations, and eventual liquidation of the original entity, creating cost, disruption, and counterparty risk. The new mechanism provides corporate flexibility for businesses seeking continuity when relocating within the UAE. Cabinet-issued rules will further define the framework.

NON-PROFIT COMPANIES

For the first time, Article 8 of the Amendment Law formally recognises non-profit companies. These entities may pursue social, philanthropic, cultural, or developmental purposes, must reinvest revenues in line with their objectives, and are prohibited from distributing profits. Detailed licensing and governance rules are expected in implementing resolutions, opening the door for social enterprises, NGOs, and ESG- or CSR-driven initiatives to establish regulated not-for-profit vehicles onshore.

IN-KIND CAPITAL CONTRIBUTIONS

Article 78 introduces changes to in-kind capital contributions. Shareholders in LLCs may now offer shares in kind in exchange for shares in the company. In-kind contributions must be valued by accredited valuers or agreed by partners, with the value reviewed and approved by the competent authority.

STATUTORY DRAG-ALONG, TAG-ALONG, AND SUCCESSION MECHANISMS

Drag-along rights allow majority owners to compel minority owners to join in a sale of the company. Tag-along rights allow minority shareholders to join a majority shareholder’s sale on the same terms. Previously, these protections existed only contractually, creating uncertainty in joint ventures and private company exits. The amendments now allow these rights to be embedded in constitutional documents of LLCs and private JSCs.

Article 14 clarifies how shares may be transferred on death at an agreed price, giving the company or existing shareholders priority to acquire the shares of a deceased shareholder. These provisions enhance certainty for shareholder exits and succession planning, aligning onshore practice with financial free zone standards.

SUMMARY TABLE OF AMENDMENTS AND IMPLICATIONS

Not-for-profit companies: Allows social initiatives to be formally structured.
Drag-along / tag-along rights: Enhances exit procedures, though may be constrained by statutory pre-emption powers.
Succession of shares: Facilitates planning.
In-kind contributions: New rules regarding private company valuations will be issued.
Re-domiciliation: Preserves legal identity.

CONCLUSION

The Amendment Law delivers greater flexibility, certainty, and alignment with international practice. Boards must actively participate in governance, risk supervision, and moral leadership. Management teams must operate transparently and within defined authority. The amendments strengthen governance, minority protection, capital flexibility, and transparency. Companies should promptly assess the impact of the amendments, update governing documents, and align internal controls and reporting practices to avoid penalties and ensure a smooth transition.

KEY TAKEAWAYS

Federal Decree-Law No. (20) of 2025 strengthens the framework under UAE Federal Decree-Law No. 32 of 2021, aligning UAE corporate governance with international standards and enhancing investor confidence. Boards must act independently and exercise real oversight, understanding that personal liability may arise from misconduct or poor governance. Management structures must be stable and transparent, with clearer rules to prevent leadership gaps. Companies now have more flexibility, including the ability to redomicile within the UAE without losing legal identity. The law recognises non-profit companies, supports in-kind capital contributions, and gives statutory backing to drag-along, tag-along, and succession rights, making shareholder exits and transitions more predictable.

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