GLA & Company

Federal Decree-Law No. 20 of 2025 introduces a wide-ranging set of amendments to the Commercial Companies Law (Federal Decree-Law No. 32 of 2021). The reforms clarify the interface between onshore and free-zone regimes, strengthen the legal framework for investment and governance, and provide greater flexibility in corporate structuring and capital arrangements. While free-zone entities remain subject to their own regulatory rules, the amendments bring the UAE’s corporate environment closer to international standards and enhance its usability for investors, founders and multinational groups operating in or from the UAE. This overview highlights the key changes and their practical implications for companies active in the UAE. 1) Clearer Scope Across Onshore, Free Zone and Foreign Companies The law now provides more explicit guidance on how it applies to foreign companies with a UAE presence and to free zone entities conducting activities outside their zone. Free zone companies continue to be governed by their own regulatory frameworks within the boundaries of the free zone; however, when they carry out activities in the mainland—whether through a branch, representative office, or otherwise—they must comply with the Commercial Companies Law and other applicable federal legislation. The amendments also confirm that free zone companies are considered UAE juridical persons for the purposes of UAE law. This clarification reduces long-standing uncertainty in cross-border structuring and offers greater predictability for groups operating across both mainland and free zone jurisdictions. 2) Introducing Non-Profit Companies For the first time, UAE company law expressly recognises non-profit companies. These entities must reinvest all revenues to advance their stated objectives and are prohibited from distributing profits to shareholders or partners. Detailed rules on their governance, permitted activities, licensing requirements and any regulatory exemptions will be issued at Cabinet level. Once implemented, this framework will provide a purpose-built legal vehicle for philanthropic, cultural, community and social initiatives, offering greater clarity and legitimacy for organisations pursuing non-commercial purposes in the UAE. 3) Common-Law Style Shareholder Rights Embedded in LLCs and PJSCs The amendments introduce statutory recognition of drag-along and tag-along rights for limited liability companies and private joint stock companies, allowing these mechanisms to be included directly in the memorandum or articles. This enhances enforceability, reduces reliance on side agreements, and increases certainty in exit and share-transfer scenarios—particularly relevant for M&A, venture capital, private equity, and family business restructurings. The detailed conditions and procedures for exercising these rights will be clarified through implementing regulations. Succession Planning for Shares Companies and shareholders may now agree in advance on how a deceased shareholder’s interest will be dealt with. These arrangements may include priority purchase rights for remaining shareholders or, importantly, acquisition of the shares by the company itself. The valuation may be agreed with the heirs or determined by the competent court, with independent valuation experts engaged in case of dispute. While this is a welcome development that provides greater certainty in succession planning, further guidance is expected on the post-acquisition treatment of such shares—specifically whether they may be held as treasury shares, cancelled, or reissued to third parties. 4) Greater Share Class Flexibility for LLCs Mainland LLCs can now issue multiple classes of shares with different voting, dividend, liquidation, redemption, and other rights. This represents a significant modernization that brings UAE practice closer to international standards commonly used in growth equity and venture financing. Cabinet-issued rules are expected to clarify the precise parameters, but the policy direction is clear: private companies now have the flexibility to structure their capital in line with strategic objectives. 5) In-Kind Capital Contributions The law reinforces the ability to make in-kind contributions to LLC capital, provided that , among other things ,such contributions are valued by one or more accredited valuers. If an accredited valuation is not obtained, the in-kind contribution will be considered invalid. This approach balances flexibility—particularly relevant for asset-intensive and technology-driven businesses—with safeguards against inflated or subjective valuations. 6) Private Placements by Private Joint Stock Companies Private joint stock companies may now raise capital through private placements within UAE financial markets, subject to the procedures and conditions set by the Securities and Commodities Authority. A private placement allows a company to sell shares or other securities directly to a limited group of investors—such as institutional investors or high-net-worth individuals—rather than through a public offering. This closes a historical gap in the fundraising pathway, enabling issuers to access domestic capital efficiently without relying on offshore structures or parallel vehicles. 7) Governance Continuity and Deadlock Solutions The amendments address day-to-day governance challenges that often arise in closely held entities. A manager’s resignation becomes effective after 30 days if the company takes no action, unless otherwise agreed. Companies must notify the competent authority when a manager’s term expires and appoint a successor within 30 days. Boards may continue to operate for up to six months after their term lapses to maintain operational continuity. If shareholders fail to appoint a new board, the competent authority may appoint directors who are not shareholders. This provides a practical mechanism to resolve deadlocks and restore functionality through a neutral or independent board composition. 8) A Unified Framework for Re-Domiciliation (Migration/Continuation) Perhaps the most transformative change is the introduction of a statutory framework for corporate migration (continuation) that preserves a company’s legal identity, contractual continuity, and corporate history. Companies can now re-domicile from foreign jurisdictions into the UAE, between mainland authorities, from mainland to free zones (including financial free zones) and vice versa, as well as between different free zones. This flexibility is subject to shareholder approval (typically via a special resolution or other prescribed majority), compatibility between registries, absence of prohibitive annotations or blocks, approvals from the relevant licensing authorities (and the Ministry of Economy or Securities and Commodities Authority where applicable), and compliance with the necessary publication and disclosure requirements. For regional groups and multinationals, this creates a powerful tool to realign licensing, tax, governance, and operational structures without the need for liquidation or reincorporation. Practical Implications for Companies The 2025 amendments reflect a deliberate shift toward a more adaptable, investor-friendly regime that builds on the UAE’s strengths in regulatory clarity. The ability to issue multiple share classes, embed drag-along and tag-along rights, structure thoughtful succession mechanisms, conduct private placements, and re-domicile across jurisdictions will simplify corporate life cycles and support more sophisticated capital formation. Companies operating across the mainland–free zone divide will benefit from clearer rules, while mission-driven organisations will finally have a fit-for-purpose legal vehicle for non-profit activities. The net effect is enhanced certainty for transactions and governance, fewer structural workarounds, and closer alignment with international practices. The UAE continues to position itself as a jurisdiction capable of hosting complex cross-border operations while maintaining the stability that underpins long-term investment and growth. Authors: Suzanne Hashem, Legal Director and Khaled Abu Orabi, Senior Associate

Entering into a hotel management agreement (“HMA”) in Dubai is a high-stakes decision for any property owner. The emirate’s hospitality sector operates under a complex regulatory framework overseen by multiple authorities, including the Dubai Department of Economy & Tourism (“DET”), Dubai Civil Defence, the UAE Federal Tax Authority, and various federal labour and data-protection regulators. While hotel managers oversee day-to-day operations, the ultimate responsibility for legal and regulatory compliance almost always rests with the property owner. 1. Licensing and Regulatory Compliance One of the most significant challenges for owners lies in licensing and operational compliance. Hotel operating licences and related permits are typically issued in the owner’s name, which makes the owner directly liable for renewals, record-keeping, and any violations—even when the management company is at fault. To mitigate this exposure, the HMA should: Acknowledge the owner as the licence holder; Obligate the manager to comply with all operational regulations and filing deadlines; Require the prompt provision of supporting documents; and Include robust indemnities and audit rights so that any fines caused by the manager’s actions can be recovered. 2. Financial and Tax Compliance Financial compliance presents another layer of complexity. Hotel managers typically collect the Tourism Dirham fee, municipality service charges, and VAT on behalf of the owner. However, it is the owner who remains the taxable person responsible for filings and remittances. Any misreporting can result in significant penalties. An effective HMA should therefore: Require detailed reconciliations and regular tax reports; Include warranties regarding the manager’s accounting systems and tax codes; Provide indemnities and clear audit rights to ensure transparency and accountability. 3. Health, Safety, and Employment Obligations Dubai enforces strict health and safety standards under the UAE Fire and Life Safety Code and other municipal regulations. Violations can lead to fines, closures, or costly remediation orders. The agreement should: Assign daily safety compliance duties to the manager; Mandate comprehensive record-keeping; and Grant the owner step-in rights and cost-recovery mechanisms in cases of manager negligence. Employment compliance is equally important. If the owner is the employer of the hotel workforce, they are liable for payroll, visa sponsorship, and end-of-service gratuities. The HMA should  clearly specify: The employer of record; The manager’s obligations under Federal Decree-Law No. 33 of 2021 and MoHRE regulations; and Indemnities covering any breach of employment laws. 4. Financial Reporting and Insurance Transparent and consistent financial reporting is fundamental to every successful HMA. Without it, owners risk revenue discrepancies, tax errors, and operational disputes. To prevent these risks, the HMA should: Mandate standardized monthly and annual financial reports; Grant the owner direct access to management and accounting systems; Require independent audits; and Include data migration and system integration provisions to ensure business continuity upon termination. Insurance provisions also warrant careful drafting. The owner should be: Named as an additional insured on all policies; Provided with proof of renewal annually; and Protected by clauses excluding liability caps for regulatory fines, gross negligence, and wilful misconduct. 5. Ownership and Management Changes Changes in ownership or management can trigger regulatory complications. Transfers of ownership or control often require prior approval from DET or other authorities. Failure to secure such approval can affect the status of the property’s operating licences. To manage these scenarios, the HMA should: Require written notice of any change; and Mandate cooperation in obtaining regulatory approvals. 6. Data Protection and Cybersecurity Hotels manage large volumes of personal and financial data, making compliance with privacy laws critical. HMAs must adhere to the UAE Personal Data Protection Law (Federal Decree-Law No. 45 of 2021) and, where applicable, the DIFC Data Protection Law. Key data-protection provisions should include: A data-processing addendum defining roles, transfer restrictions, and breach-response procedures; Compliance with global payment-card standards (PCI-DSS); and Integration of anti-money-laundering (AML) and counter-terrorist-financing (CTF) obligations under Federal Decree-Law No. 20 of 2018, supported by cyber-insurance coverage and immediate breach-notification duties. 7. Performance Tests and Capital Expenditure Performance tests are critical owner protections. Without objective benchmarks—such as Revenue per Available Room (RevPAR) or Gross Operating Profit (GOP)—owners risk being locked into underperforming management arrangements. An HMA should therefore establish: Measurable performance metrics; Defined cure periods and termination rights; and Step-in rights for the owner in cases of significant non-compliance. For capital expenditure (capex), the agreement should: Distinguish routine maintenance from capital projects; Create a Furniture, Fixtures & Equipment (FF&E) reserve (typically 3–5% of gross revenue); and Require annual capex plans subject to owner approval. 8. Governing Law and Dispute Resolution The governing law and dispute-resolution mechanism are key strategic considerations. Many owners choose UAE law and the jurisdiction of the Dubai Courts, while others prefer arbitration—for instance, under the Dubai International Arbitration Centre (DIAC) or DIFC-LCIA—to ensure neutrality and enforceability. Conclusion HMAs in Dubai require more than sound commercial terms—they demand a carefully structured legal framework that anticipates regulatory complexity and allocates risk with precision. Owners who put in place strong legal protections, including indemnities, audit rights, performance standards, and compliance obligations, position themselves to safeguard their investment and maintain operational excellence in one of the world’s most competitive hospitality markets. Authors: Suzanne Hashem, Legal Director and Khaled Abu Orabi, Senior Associate.