UAE Updates Companies Law to Boost Competitiveness, Introduce Non-Profit Firms, and Expand Investment Options

The UAE government has introduced amendments to its Commercial Companies Law to strengthen competitiveness and create a more flexible and robust legal framework for businesses.

The new federal decree-law establishes the concept of non-profit companies, which reinvest net profits to achieve objectives rather than distributing them to partners or shareholders. Corporate analysts suggest this provides a structured and transparent framework for social and developmental sectors, encouraging sustainable initiatives and institutional growth.

The legislation also expands capital structure options, allowing multiple classes of shares with defined rights such as voting, profit distribution, and liquidation priorities. This development is seen as a major enhancement in corporate governance, providing greater flexibility for private capital investment.

The amendments regulate company delocalisation, permitting businesses to transfer registration between the seven emirates and financial free zones while maintaining legal status. Observers note that clear procedures reduce commercial disputes, support free movement of businesses, and safeguard minority shareholders.

Private joint-stock companies can now offer securities through private subscriptions on national financial markets, providing new financing options without the need to convert to public joint-stock firms. Modern contractual mechanisms for managing shares, including tag-along and drag-along rights, are expected to protect minority investors while ensuring corporate continuity. Standards for valuing in-kind shares and accrediting appraisers further enhance financial transparency and stability.

Analysts indicate that the reforms simplify corporate procedures and reduce transaction costs for local and international companies. Company migration rules, private placement options, and simplified conversion to joint-stock structures are likely to enhance procedural efficiency, although certain areas -- such as the treatment of repurchased shares following a shareholder’s death and conditions for multiple share classes -- may require additional regulatory guidance.

Since the 2021 law enabling full foreign ownership of onshore companies, the UAE has experienced strong economic momentum. Nearly 40,000 commercial licences were issued in tourism, hospitality, aviation, and digital sectors between January and mid-September 2025, a nearly fourfold increase compared with the same period in 2020. Analysts suggest these trends reflect the UAE’s increasingly robust legal framework and its growing appeal as a competitive jurisdiction for regional and global businesses.

The UAE ranked 10th globally for inbound foreign direct investment last year, with Dh167.6 billion ($45.6 billion) in FDI inflows, a 48% year-on-year increase, accounting for 37% of total regional inflows. The country also ranked second globally in newly announced FDI projects and aims to raise FDI to Dh1.3 trillion by 2031.

Supporting these objectives, the UAE has implemented initiatives such as eased visa restrictions, SME incentives, the NextGen FDI programme, and Comprehensive Economic Partnership Agreements, designed to streamline business operations, reduce trade barriers, and attract strategic foreign investment.

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