Shareholder Agreements in the UAE After the 2025 Companies Law Amendments: What Businesses Should Review

Recent changes to the UAE Commercial Companies Law give businesses more flexibility over ownership, investment, exit and succession, making this a sensible time to review shareholder arrangements.

A shareholder agreement should do more than record who owns a business. It should explain how important decisions are made, what happens when shareholders disagree, how an investor can exit and what protections apply when ownership changes.

Those questions have become particularly relevant following the UAE's 2025 amendments to the Commercial Companies Law. Federal Decree-Law No. 20 of 2025 amended Federal Decree-Law No. 32 of 2021 on Commercial Companies. The amended framework allows limited liability companies and private joint stock companies to include certain agreed sale and succession mechanisms in their constitutional documents. It also introduced a framework for different classes of stakes in LLCs, subject to the conditions and procedures prescribed under the law.

The provisions discussed below concern companies governed by Federal Decree-Law No. 32 of 2021. Companies established in UAE free zones or financial free zones may be subject to their own company laws and regulations where those regimes contain specific provisions, so the applicable framework should be confirmed before documents are amended.

Make the MOA and Shareholder Agreement Work Together

For an LLC governed by the federal Commercial Companies Law, the Memorandum of Association is a core constitutional document. Article 14 requires the MOA and amendments to it to be prepared in Arabic and attested by the competent authority. A separate shareholder agreement may address additional commercial detail, but it should be reviewed alongside the MOA rather than treated as an isolated contract.

Problems can arise where the documents do not reflect the same commercial arrangement. Reserved matters, voting thresholds, management powers, transfer restrictions and exit provisions should therefore be checked together. A corporate and commercial lawyer can also assess which rights should appear in the constitutional documents and which can appropriately be dealt with separately.

Put Exit Rights in Place Before a Sale Is Proposed

Article 14 allows partners in LLCs and shareholders in private joint stock companies to include certain sale rights in the MOA or Articles of Association. These can include a provision allowing one or more partners or shareholders to require the remaining holders to sell their stakes or shares to a third party where specific, pre-agreed conditions are satisfied.

The law also permits provisions allowing another partner or shareholder to join an existing sale on the same terms agreed with the purchaser. These mechanisms are commonly described as drag-along and tag-along rights. The important point is that their wording should reflect the statutory framework and the commercial arrangement agreed between the parties.

Businesses should decide in advance when these rights can be exercised and how they interact with transfer restrictions, approval requirements and any other rights already contained in the company's documents.

Treat Different Classes of LLC Stakes With Care

Article 76 permits LLC partners' stakes to be classified into different classes. The distinctions may relate to value, voting rights, redemption, priority in profit distribution or liquidation and other rights, privileges or restrictions set out in the MOA.

The law also requires the class of each stake and its associated rights, privileges and restrictions to be recorded in the Trade Register. Importantly, Article 76 provides that the Cabinet will determine the permitted classes, their conditions and the rules and procedures governing them. A proposed structure should therefore be checked against the applicable implementing framework and the requirements of the competent authority before it is put into effect.

For founders and investors, the changes can create greater flexibility when considering governance and economic rights. They do not mean that every proposed class structure can automatically be implemented without further regulatory consideration.

Plan for the Death of a Partner or Shareholder

Article 14 also allows LLCs and private joint stock companies to include mechanisms dealing with the stakes or shares of a deceased partner or shareholder. The constitutional documents may provide a pre-emptive right for other partners, shareholders or the company itself to purchase the deceased holder's interest at a price agreed with the heirs.

Where the price cannot be agreed, the competent court may determine the value through one or more experts with relevant technical and financial experience. For closely held and family businesses, succession should therefore be considered before an unexpected ownership change occurs. Valuation, funding, management continuity and the wider succession plan should be reviewed together.

Clarify Management Authority and Deadlock

Ownership and management are separate issues. Under Article 83, unless an LLC manager's appointment contract, MOA or Articles of Association restricts the manager's powers, the manager has broad authority to manage the company. The manager's acts can bind the company where the capacity in which the manager acts is expressly stated.

This makes clear limits on management authority important. Shareholders may want specified decisions to require additional approval, particularly borrowing, major contracts, asset disposals or significant changes to the company's activities. Deadlock also deserves attention where ownership is evenly divided or major decisions require enhanced approval.

A shareholder agreement can establish escalation procedures, negotiation steps, buyout mechanisms or other agreed solutions rather than leaving the company without a practical way forward.

Review the Structure Before the Next Transaction

The 2025 amendments give businesses additional tools for dealing with investment, ownership transfers and succession, but those rights must be documented correctly and implemented in accordance with the applicable law and competent authority procedures.

AY Advocates advises businesses, founders, shareholders and investors on corporate structuring, shareholder agreements, governance, commercial contracts and disputes. Businesses comparing corporate law firms should look for advice that connects the legal documents with the actual ownership, management and exit strategy of the company.

FAQs

1. Does every UAE company need a separate shareholder agreement?

No. Whether a separate shareholder agreement is appropriate depends on the company's structure and ownership arrangements. It can provide additional detail on governance, reserved matters, transfers, funding, confidentiality, deadlock and exit, but it should be reviewed alongside the company's constitutional documents.

2. Can an LLC include drag-along and tag-along provisions in its MOA?

Yes. The federal Commercial Companies Law permits LLCs to include agreed provisions allowing one or more partners to require the remaining partners to sell their stakes to a third party when specified pre-agreed conditions are satisfied. It also permits provisions allowing a partner to participate in another partner's sale on the same terms.

3. Can a UAE LLC have different classes of stakes?

Yes, subject to the applicable regulatory framework. Article 76 permits different classes of LLC stakes based on matters including value, voting rights, redemption and priority in profit distribution or liquidation. The law also provides for the Cabinet to determine the classes, conditions and procedures governing them.

4. When should a business involve a corporate business lawyer?

A corporate business lawyer can be involved before an investment, admission of a new shareholder, restructuring, ownership transfer, financing, major commercial transaction or exit. Early review can identify inconsistencies between the proposed arrangement and the company's existing documents.

5. How should a business choose among top legal firms in Dubai or top law firms in Dubai?

Descriptions such as top legal firms in Dubai or top law firms in Dubai should not be the only consideration. Businesses should assess relevant corporate experience, familiarity with the proposed transaction or dispute, understanding of UAE company law, clarity of advice and the lawyers who will actually handle the matter.

6. What can corporate law firms advise UAE businesses on?

Corporate law firms may advise on company structuring, shareholder agreements, governance, investments, mergers and acquisitions, restructuring, commercial contracts and shareholder disputes. Law firms in UAE have different practice strengths, so businesses should consider whether their matter will be handled by a corporate and commercial lawyer with relevant experience.