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For most of the past decade, the UAE presented founders with a quiet contradiction. It marketed itself, credibly, as one of the most ambitious places on earth to build a company. Yet the legal vehicle most of those companies used, the mainland limited liability company, could not do the one thing that nearly every venture capital term sheet in London, Delaware or Singapore takes for granted. It could not easily issue a preferred share.

That sounds like a technicality. It was not. It was a structural gap that shaped where capital flowed, how deals were papered, and how much founders paid in legal fees before they had raised a single dirham. In October 2025 the government closed it. The change has been described, accurately, as the most significant reform of UAE company law since the framework was overhauled in 2021. And almost no content written for founders has explained what it actually unlocks.

What changed, and when

The reform arrived through Federal Decree-Law No. 20 of 2025, which amends the Commercial Companies Law (Federal Decree-Law No. 32 of 2021). It was issued on 1 October 2025, published in the Official Gazette on 14 October, and entered into force the following day. In practice, the Ministry of Economy and Tourism treats 2026 as the first year of implementation, and several of the most consequential provisions will only take full effect once the Cabinet issues detailed implementing regulations, some of which remained pending as of mid-2026.

That timing caveat matters, and we will return to it. But the direction of travel is unambiguous. The amendments import a set of common law structuring tools into a traditionally civil law system, and they were designed, in the Ministry’s own framing, to reduce the need for the offshore and free zone workarounds that sophisticated founders have relied on for years.

Four provisions deserve a founder’s full attention.

Provision one: the share class that makes venture capital possible

The headline change sits in Article 76. Mainland LLCs and joint stock companies may now issue multiple classes of shares carrying different rights: different voting power, different dividend entitlements, different redemption terms, and, critically, different liquidation priorities. The UAE is among the first jurisdictions in the Middle East to extend this right to LLCs rather than restricting it to public joint stock companies.

To understand why this is the single most important sentence in the entire reform, you have to understand what a venture investor is actually buying. A VC pays a high price per share for a minority stake, betting on an outcome large enough to justify the risk across an entire portfolio. The liquidation preference is the mechanism that protects that bet. It ensures that if the company sells for less than everyone hoped, the investor recovers their capital, or an agreed multiple of it, before the common shareholders see anything. Preferred shares with liquidation preferences are not an exotic feature of venture financing. They are the load-bearing wall of it.

Until this reform, a mainland LLC could not build that wall directly. Founders and their lawyers replicated it artificially, usually by layering a DIFC or ADGM holding company above the operating business and writing the economics into that vehicle instead. The structure worked, but it added cost, complexity, and a layer of administration that existed for no commercial reason other than to route around a gap in the law.

Article 76 removes the gap. A founder raising a Series A can now, in principle, issue preferred shares with a liquidation preference at the mainland LLC level itself, written into the Memorandum of Association, without first restructuring offshore. For investors, startups, family businesses and growth-stage companies alike, the mainland becomes a place where institutional capital can be structured the way institutional capital expects to be structured.

Provision two: moving without starting over

The second change addresses a problem that has quietly cost UAE businesses years of accumulated value. Under the old regime, a company that wanted to move between jurisdictions, say from a free zone to the mainland, was treated as a brand new entity. It had to liquidate and re-establish itself, surrendering its legal identity, its contracts, and its operating history in the process.

The reform introduces a re-domiciliation framework allowing a company to transfer its registration between emirates, between free zones, and between free zones and the mainland, while preserving the same legal personality, contracts and obligations. The Ministry’s principal legal adviser put the practical effect plainly: previously, a firm that had traded for ten or twenty years lost its entire history when it relocated. Now the commercial registry moves with it, and the company’s lifetime continues uninterrupted.

The real-world scenarios this solves are specific and common. A logistics company that incorporated in a free zone for tax efficiency, but now wants mainland access to GCC customs and trade-treaty benefits, can make that move without renegotiating every contract and rebuilding its credit profile. A fintech that began onshore and wants ADGM’s common law framework can migrate without dissolving. The reform turns a once-irreversible decision into a reversible one, which changes how founders should think about their initial jurisdiction choice in the first place.

One honest boundary: the amendment governs movement within the UAE. It does not yet address the redomiciliation of foreign companies from outside the country into the mainland, and whether future regulations extend the framework that far remains an open question.

Provision three: clean exits, with a caveat that matters

The third change concerns who controls an exit. The reform now expressly recognises drag-along and tag-along rights and permits LLCs and private joint stock companies to write them into their constitutional documents.

The logic is worth spelling out because it determines whether a company can be sold cleanly. Drag-along rights allow majority shareholders to compel a minority to participate in a sale on the same terms, which prevents a single holdout from blocking an acquisition or extracting a premium for their consent. Tag-along rights run the other way, protecting minority shareholders by guaranteeing them the right to sell alongside the majority on identical terms. Acquirers almost always want one hundred percent of a target. Before this reform, the structural leverage that UAE minority shareholders held in transfer scenarios made that difficult to deliver, and gave dissenting holders an outsized ability to hold up a deal.

Here is the caveat that less careful coverage omits. Inside an LLC, the exercise of these rights remains subject to the existing pre-emption regime, which can complicate their enforceability. The statutory recognition strengthens these arrangements, but it does not yet make a shareholders’ agreement redundant. Sophisticated founders should still negotiate a detailed drag-and-tag framework in their shareholders’ agreement, including an explicit waiver of pre-emption rights where exit certainty matters. The law has moved the floor up. It has not removed the need for good drafting on top of it.

Provision four: a question of nationality

The fourth change resolves a long-standing ambiguity. The amended law confirms that companies established in the UAE, including those incorporated in free zones and financial free zones such as DIFC and ADGM, are formally recognised as Emirati companies for corporate purposes, regardless of the nationality of their shareholders. The minister was careful to clarify that this confers status on the company, not citizenship on its owners, in exactly the way a company registered in Germany is a German company.

The practical payoff is in market access. Emirati corporate status strengthens a company’s standing under the UAE’s growing network of Comprehensive Economic Partnership Agreements, which reduce tariffs and ease customs procedures, and it resolves cases where free zone entities had previously struggled to be recognised as eligible UAE suppliers for certain federal procurement.

The limitation founders must respect

For all its ambition, the reform is not yet fully operational, and treating it as if it were is the most likely way to get into trouble. The detailed mechanics of share-class registration, the procedural rules for re-domiciliation, and the standards for valuing in-kind contributions all depend on implementing regulations that the Cabinet and Ministry are still issuing. As of mid-2026, several of these had not been published, and the Ministry has indicated further guidance is expected through the year.

The implication is concrete. A founder should not assume that a DED office or a notary will process a multi-class share structure on demand today simply because the primary legislation permits it. Until the sector-specific rules arrive, the practical steps for registering, say, a non-voting share remain uncertain. The sensible posture is to plan structural changes now while avoiding irreversible commitments that may need revision once the detailed rules land, and to take corporate counsel before relying on any provision that remains pending.

What this means strategically

For the founder, the calculus around jurisdiction has shifted. The single most common reason ambitious companies routed through DIFC or ADGM was to access the share-class flexibility the mainland lacked. That reason is weakening. As the implementing regulations mature, the mainland becomes a viable, and potentially cheaper, home for venture-style structuring, which means the offshore holding company should no longer be a reflexive default. It should be a deliberate choice justified by something other than share classes alone, such as a genuine preference for a common law court system or a specific regulatory regime.

For the investor, the reform lowers the friction of deploying capital into onshore UAE companies. Liquidation preferences, redemption rights and enforceable exit mechanics can increasingly be documented where the business actually operates, rather than in a structure built to compensate for the law’s old limits.

For the policymaker watching from elsewhere in the region, the signal is the more interesting story. The Ministry of Economy expects the amendments to lift new company registrations by between ten and fifteen percent in their first year. That projection sits inside a larger ambition: the UAE has attracted roughly 760,000 companies since the Commercial Companies Law was first issued in September 2021, added around 250,000 in 2025 alone, and now counts more than 1.4 million active firms, on the way to a stated target of two million by the end of the decade. The reform is the institutional infrastructure required to make that number plausible.

The deeper takeaway

The most useful way to read this reform is not as a list of new rights but as a system catching up with its own ambition. For years the UAE asked founders to build world-class companies inside a legal chassis that could not hold world-class capital structures, and they responded with workarounds that quietly taxed the entire ecosystem in legal fees and complexity. Article 76 and its companions remove that tax.

The state has signalled, in the most concrete language a state has, statute, that it intends the mainland itself to be venture-ready. The founders who benefit most will be the ones who stop treating offshore structuring as the obvious answer and start asking a sharper question: now that the tools exist where I actually operate, what reason do I still have to build my company anywhere else?