Navigating UAE Company Law 2026: Strategies for Raising Capital While Retaining Control

UAE COMPANIES LAW 2026

UAE Company Law 2026: How to Raise Capital Without Losing Control — and the Clauses That Give It Away

Founders in the UAE rarely lose control of their companies in a single dramatic moment. They lose it quietly — one funding round at a time, through a share register that treats every share as equal and a memorandum of association that was copied from a template and never read again.

For years, that was partly the law's fault. An onshore limited liability company was a blunt instrument: one class of shares, votes and profits tracking ownership percentage in lockstep, and no clean way to let an investor put money in without handing over a proportionate slice of control. Founders who wanted anything more sophisticated went offshore, into a free zone, or buried their real deal in a shareholders' agreement that sat uneasily beside the official constitutional documents.

That has now changed. Federal Decree-Law No. 20 of 2025, amending the Commercial Companies Law (Federal Decree-Law No. 32 of 2021), came into force in October 2025 and — for the first time — lets a mainland LLC issue different classes of shares with different rights. Several of the operational details sit in Cabinet-level implementing regulations still being finalised, which is why the practical effect is really being felt through 2026. Used well, the reform lets you fund growth and keep the wheel. Used carelessly, it does the opposite of what you intended. Below is what actually changed, and where the money is won and lost.

1) The legal spine: what actually changed, and when

The governing framework is Federal Decree-Law No. 32 of 2021, as amended by Federal Decree-Law No. 20 of 2025. The amendment took effect the day after its publication in the Official Gazette in October 2025.

The headline for founders is Article 76: a limited liability company may now issue different classes of shares — think Class A and Class B — carrying different rights. Public joint stock companies could already do a version of this (Article 208); the reform pushes the concept down into the LLC, which is the vehicle most UAE founders and family businesses actually use.

Two cautions belong at the top, not buried at the bottom. First, the law reserves much of the detailed mechanics to a future Cabinet decision. Second, a statutory power to create share classes is not the same as a well-drafted structure. The law now lets you do this. It does not do it correctly for you.

2) What "different classes of shares" actually means

Under the amended Article 76, share classes may differ across several dimensions: nominal value, voting rights, redemption rights, economic rights (how profits are distributed and what happens on liquidation or winding up), and other rights, privileges or restrictions.

In plain terms, you can now separate three things that used to move together:

• Money — who receives dividends, and in what order.

• Control — who votes, and on what.

• Exit — who gets paid first, and how much, when the company is sold or wound up.

That separation is the entire game. A founder can hold shares that are light on cash rights but heavy on votes; an investor can hold shares that are heavy on economic protection but light on day-to-day control. Both can be happy — if the documents say so precisely.

3) Design share classes around control, not just cash

The instinct when raising money is to negotiate valuation and percentage. That is the wrong first question. The first question is: after this round, who decides what?

Voting rights no longer have to track ownership. You can structure founder shares with enhanced or weighted voting on the decisions that matter — appointment and removal of managers, budget, new share issues, changes to the constitutional documents — while investor shares carry ordinary voting or reserved-matter consent rights rather than blanket control. The point is not to disenfranchise investors; sophisticated investors will insist on protective consents, and they should get them. The point is to grant control deliberately, matched to specific decisions, instead of letting it leak automatically with every percentage point of equity you sell.

4) Economic rights: dividends, liquidation preferences and redemption

This is where investors focus, and where founders most often give away more than they realiZe.

A separate class can carry a preferential dividend, a liquidation preference (paid out ahead of ordinary shares on an exit or winding up), and redemption rights (the company or the holder can require the shares to be bought back on defined triggers). Each of these is now capable of living inside the company's own constitution rather than only in a side agreement.

The danger is stacking. A "1x non-participating" preference behaves very differently from a "participating" one that pays twice; a redemption right triggered "at any time" is a very different animal from one triggered only on a defined event. These are not drafting flourishes — they change who gets what in the exact moment real money changes hands. Model the waterfall on paper before you sign, not after.

5) The memorandum of association is now the battlefield

Here is the shift that most commentary understates. Because these rights can now be embedded in the constitutional documents — the memorandum of association and, where relevant, the articles — the MOA stops being a formality and becomes the primary source of truth.

Previously, the real deal lived in a shareholders' agreement, and the MOA was a thin public document that often contradicted it. That mismatch is exactly where disputes are born: two documents, two versions of the truth, and a registrar who only recognises one of them. In the new structure, if a class right, a voting arrangement or a transfer restriction is not properly reflected in the constitutional documents, you may find it is far weaker than the shareholders' agreement led you to believe. Get the MOA wrong and you hand away rights you meant to keep.

6) Drag-along and tag-along: now inside the constitution, not just the side letter

The amendment also lets LLCs and private joint stock companies embed drag-along and tag-along rights directly in their constitutional documents.

Drag-along lets a majority compel a minority to sell into a clean exit — invaluable when a buyer wants 100% and one small holder refuses. Tag-along protects the minority, letting them join a majority sale on the same terms rather than being left behind with a new, unwanted controlling shareholder. Moving these from a private agreement into the company's own constitution strengthens their enforceability as a matter of corporate mechanics. But onshore transfers still run through notarial execution and local authority processes, so the drafting has to specify the mechanics — notices, timelines, completion steps — not just the principle.

7) Pre-emption rights are still the default — waive them on purpose

A crucial point that trips people up: the amendment does not abolish pre-emption. Under the Commercial Companies Law, existing shareholders retain a default right of first refusal on new issues and transfers. That default sits on top of your new share-class structure.

So if your funding plan depends on issuing a new class to an incoming investor, or on transferring shares free of existing holders' claims, the pre-emption position has to be addressed and, where appropriate, waived — clearly, in the constitutional documents, by the right majorities. A beautifully engineered share class is worth little if a legacy shareholder can exercise pre-emption and unwind the round.

8) Share classes as a retention and incentive tool

The same machinery that raises capital also solves a founder problem: keeping key people. Different classes can support management-incentive arrangements — economic participation without full voting control — and "good leaver / bad leaver" mechanics, where shares can be redeemed at nominal value if someone departs in breach, and at fair value if they leave cleanly. For growth companies that cannot match multinational salaries, a properly drafted incentive class is one of the most effective retention tools now available onshore. It only works if the leaver triggers and valuation mechanics are unambiguous.

9) What is still pending — and why "2026" is the honest date

It would be misleading to present this as a finished, fully-mapped regime. Several pieces sit with the Cabinet and the Ministry of Economy: the detailed rules on share classes under Article 76, valuation standards for in-kind contributions, and aspects of redomiciliation and related tools. Some structures — certain put and call options and compulsory-transfer triggers — are still best handled contractually alongside the class rights, because the statute does not yet spell them out.

The practical read: the strategic door is open now, but the fine print is still being written. Structure with today's law, draft with tomorrow's regulations in mind, and build in the flexibility to align once the implementing rules land.

10) The expensive mistakes — where founders actually lose control

In practice, control is lost through a short and repeatable list of errors: selling ordinary shares when a bespoke class was the right instrument; letting voting track equity by default instead of allocating it to specific decisions; agreeing a liquidation preference without modelling the exit waterfall; leaving the real deal in a shareholders' agreement that the MOA quietly contradicts; ignoring pre-emption until a legacy holder invokes it; and drafting drag/tag rights as slogans rather than as step-by-step mechanics. None of these is exotic. Each is avoidable with disciplined drafting — and expensive without it.

What founders should do before the next raise

1. Decide the control map first. List the decisions that must stay with you, and design voting rights around those decisions — not around percentages.

2. Model the economic waterfall. Run dividends, liquidation preference and redemption through a real exit scenario before agreeing terms.

3. Rebuild the MOA, don't patch it. Make the constitutional documents the single source of truth and reconcile them with any shareholders' agreement.

4. Handle pre-emption deliberately. Confirm what is owed to existing holders and obtain clean, properly-approved waivers where needed.

5. Draft drag/tag as mechanics. Specify notices, timelines and completion steps that survive notarial and registrar processes.

What investors should check before wiring funds

1. That your class rights live in the constitution, not only in a side agreement that the registrar does not recognize.

2. That your preference is the one you negotiated — participating vs non-participating, and where it ranks.

3. That pre-emption and transfer restrictions cannot be used to trap or dilute you later.

4. That reserved matters and consent rights are specific and enforceable, not decorative.

Contact Juris Maestro

Raising capital in the UAE is no longer a question of whether you can keep control — the law now lets you. It is a question of whether your documents actually do what you think they do. That is a drafting problem, and drafting problems are cheap to prevent and painfully expensive to litigate.

Juris Maestro's position is simple: we do not draft documents that look impressive and fail when tested. We design share classes around control, rebuild the constitutional documents to match, and lock investor rights in terms that hold when real money is on the table.

Planning a raise? Let's structure your share classes properly — before the round, not after.

For Corporate and Investment Structuring Guidance, Contact Juris Maestro.