Greater Contractual Freedom Under UAE Companies Law 2025: What IT Means for Shareholders
Exploration of expanded contractual freedom for shareholders under the UAE Companies Law 2025 and its implications.
Engineer shareholder empowerment through the transformative contractual freedoms introduced by the UAE Companies Law 2025.
A cornerstone of the UAE's new Commercial Companies Law (Federal Decree Law No. 20 of 2025) is the significant expansion of contractual freedom for shareholders. This is a transformative change that moves away from a rigid, one-size-fits-all approach to corporate governance and empowers shareholders to create bespoke arrangements that are tailored to their specific needs. This guide explains what this new contractual freedom means for you and your business.
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The Challenge: A Rigid Corporate Framework
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Under the previous Commercial Companies Law, the ability of shareholders to customize their corporate governance arrangements was limited. The law prescribed a rigid framework for many aspects of corporate life, from the conduct of shareholder meetings to the rights and obligations of directors. This could make it difficult for shareholders to create a governance structure that was truly fit for purpose, particularly in the context of joint ventures and other complex business arrangements.
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The legal framework: A More Flexible and Empowering Corporate Law
The new law addresses this issue by providing for much greater contractual freedom. This means that shareholders are now free to agree on their own rules for the governance of their company, as long as these rules do not contravene the mandatory provisions of the new law.
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Key Areas of Enhanced Contractual Freedom
1. Bespoke Shareholder Agreements
The new law explicitly recognizes the validity of shareholder agreements and gives shareholders wide-ranging freedom to agree on the terms of these agreements. This means that shareholders can now create a bespoke governance framework for their company that covers a wide range of issues, including:
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- Board Composition: The number of directors, the process for their appointment and removal, and the allocation of board seats between different shareholders.
- Decision-Making: The matters that require the approval of the board, a super-majority of the board, or the shareholders.
- Share Transfer Restrictions: Restrictions on the transfer of shares, such as rights of first refusal and tag-along and drag-along rights.
- Dividend Policy: The company's policy on the distribution of profits to shareholders.
- Deadlock Resolution: A mechanism for resolving any deadlock that may arise between the shareholders.
2. Flexible Memorandum and Articles of Association
The new law also provides for greater flexibility in the drafting of a company's memorandum and articles of association. This means that companies can now tailor their constitutional documents to their specific needs and circumstances, rather than being bound by a rigid, one-size-fits-all template.
3. Modern Governance Tools
The new law also embraces modern governance tools, such as virtual and hybrid shareholder meetings and electronic voting. This will provide greater flexibility for companies and will make it easier for them to engage with their shareholders, particularly in the context of a globalized business environment.
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Conclusion: A More Empowered and Investor-Friendly Corporate Environment
The new contractual freedom under the UAE Commercial Companies Law is a major step forward in creating a more empowered and investor-friendly corporate environment. It will provide greater flexibility for businesses, will enhance the rights of shareholders, and will partner with to attract new investment to the UAE. All businesses in the UAE should review their corporate governance arrangements to ensure that they are taking full advantage of the new contractual freedoms.
At Nour Attorneys Law Firm, our corporate law specialists can provide expert advice on all aspects of the new UAE Commercial Companies Law. We can partner with you to draft a bespoke shareholder agreement and to tailor your company's constitutional documents to your specific needs. Contact us to create a corporate governance framework that is fit for the future.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
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