TRW & Co · Corporate & Commercial
Shareholder Agreements in the UAE
Shareholder agreements in the UAE decide who controls a company, how investors exit and what happens when owners disagree. Recent reforms to the Commercial Companies Law and a new Civil Transactions Law have widened what founders, joint venture partners and investors can agree, but only if the private agreement and the registered constitution are drafted to work together.
Key pointOnshore, the registered memorandum of association is what authorities, banks and courts rely on first. Any veto, transfer restriction or exit right that matters should be mirrored in the constitution, or the governance should sit at a DIFC or ADGM holding company.
At a glance
Two documents, one deal
A mainland or free zone company has a registered constitution and a private agreement; terms missing from the constitution may not bind the company or third parties.
2025 reforms widen options
Federal Decree-Law No. 20 of 2025 allows LLC share classes, constitutional drag and tag rights, succession clauses and independent directors on board deadlock.
New civil code applies
Federal Decree-Law No. 25 of 2025 replaced the 1985 Civil Code from 1 June 2026, adding a non-excludable duty to negotiate in good faith.
Common-law holding companies
DIFC and ADGM vehicles use articles that can mirror the agreement closely, which is why investors often hold mainland operating companies through them.
Forum shapes remedies
Choose between onshore courts, DIFC or ADGM Courts and arbitration by asking where assets sit and which orders, such as share transfers, you will need.
Swipe or scroll →
What shareholder agreements in the UAE cover
Shareholder agreements in the UAE are private contracts between the owners of a company that sit alongside its registered constitution. They decide who controls the board, how new money comes in, what happens when someone wants to leave, how deadlock is broken and which forum hears a dispute. For founders, joint venture partners and investors, the agreement is where the real deal lives.
The UAE adds a layer most foreign investors do not expect. A mainland company is governed by a memorandum of association registered with the local licensing authority, usually in a standard Arabic-English template, and that document is what the authority, banks and onshore courts look at first. A shareholder agreement that contradicts it can be difficult to enforce against the company or a third party.
The question therefore becomes a legal one at the very start: when you choose the vehicle. A company in the DIFC or ADGM uses common-law articles that can mirror the shareholder agreement closely. A mainland or free zone company needs a deliberate strategy for aligning the two documents, and for deciding which terms must be lifted into the registered constitution to bite.
The legal framework for shareholder agreements in the UAE
Onshore companies are governed by the Commercial Companies Law, Federal Decree-Law No. 32 of 2021, which came into force in January 2022. The Ministry of Economy and Tourism publishes it, with its implementing resolutions, on its companies legislation page. The law sets mandatory rules on capital, transfers, general assemblies, managers and dissolution that a private agreement cannot displace.
The most important recent change is Federal Decree-Law No. 20 of 2025, which amended the Commercial Companies Law in late 2025. It expressly allows limited liability companies to create classes of shares with different voting, dividend, redemption and liquidation rights, recognises drag-along and tag-along rights in constitutional documents, lets the constitution regulate what happens to a deceased shareholder's shares, and allows the licensing authority to appoint independent directors where shareholders deadlock on board appointments.
Several of these tools depend on implementing resolutions, so check the current position before relying on them.
The general law of contract also changed. The new Civil Transactions Law, Federal Decree-Law No. 25 of 2025, replaced the 1985 Civil Code from 1 June 2026. It introduces a statutory duty to negotiate in good faith and to disclose material information, and it keeps the courts' power to adjust contracts that become excessively onerous through exceptional events. Both points matter for pre-signing negotiations and long-term shareholder relationships.
Free zones and the financial centres
Free zone companies are governed by the regulations of their own authority, such as the DMCC or JAFZA company regulations, with the Commercial Companies Law applying where those rules are silent or where the company operates onshore. The DIFC applies its own Companies Law (DIFC Law No. 5 of 2018), administered by the DIFC Registrar of Companies. ADGM applies the ADGM Companies Regulations 2020 and, through its legal framework, English common law directly.
Family-owned businesses have an extra option. Federal Decree-Law No. 37 of 2022 on Family Companies allows a family business to adopt a family charter and contains rules on share transfers and dispute resolution that can work alongside a shareholder agreement. For holding structures above an operating company, our page on corporate governance in the UAE explains how board rules and reserved matters fit together.
Choosing where the shareholder agreement will bite
The vehicle decides how much of the bargain you can enforce through the constitution. That choice is often made by a setup agent on cost alone, and the consequences surface years later when an investor wants to exit. The table compares the main options for shareholder agreements in the UAE.
| Regime | Constitutional document | Flexibility to mirror the agreement | Default dispute forum |
|---|---|---|---|
| Mainland LLC (Dubai, Abu Dhabi and other emirates) | Memorandum of association registered with the local licensing authority, often on a template | Improved by the 2025 amendments (share classes, drag and tag, succession), but bespoke drafting still meets registry practice | Onshore courts unless a valid arbitration clause applies |
| Free zone company (for example DMCC, JAFZA, RAKEZ) | Articles of association under the free zone's company regulations | Varies by zone; many accept tailored articles, some prefer standard forms | Usually onshore courts of the emirate, or arbitration |
| DIFC private company | Articles of association under DIFC Law No. 5 of 2018 | High; common-law style articles can track the agreement closely | DIFC Courts, or arbitration |
| ADGM private company limited by shares | Articles under the ADGM Companies Regulations 2020 | High; English-law concepts apply directly | ADGM Courts, or arbitration |
A common structure for international investors is a DIFC or ADGM holding company that owns a mainland operating company. The shareholder agreement and the detailed articles sit at the holding level under common-law rules, while the mainland subsidiary has a single shareholder and a simple memorandum. Our pages on mainland company structures and free zone company formation explain the trade-offs on licensing and operations.
If a right matters enough to litigate over, it belongs in the registered constitution as well as in the shareholder agreement.
Key terms in shareholder agreements in the UAE
Every agreement should be built around the business plan, not a template. Even so, the same clusters of terms recur in well-drafted shareholder agreements in the UAE, and each has a local twist.
Control, board seats and reserved matters
Onshore LLCs are run by one or more managers appointed under the memorandum or by the general assembly, rather than by a board in the English sense. Investors therefore negotiate the right to appoint or remove managers, a list of reserved matters needing their consent, and information rights. Reserved matters should be written so that the manager's authority registered with the licensing authority reflects them, otherwise a third party dealing with the manager may not be bound.
Transfers, pre-emption and exit rights
The Commercial Companies Law gives existing LLC partners a statutory right of pre-emption when a partner sells to an outsider. The 2025 amendments allow drag-along and tag-along rights to appear in the constitution, but commentators note that in an LLC their exercise still interacts with the pre-emption regime. Good drafting includes an advance waiver of pre-emption for agreed exits, a power of attorney to sign transfer documents, and a mechanism for notarising the transfer before the licensing authority.
Share classes, funding and leaver terms
Before the 2025 amendments, preferred economics in a mainland LLC had to be achieved contractually or through a holding company. Share classes now make liquidation preferences and differentiated dividends possible in the constitution itself, subject to the implementing rules and registration of each class. Funding obligations, anti-dilution protection, good and bad leaver provisions and option pools should be checked against this new framework; our guide to employee share option plans covers the incentive side.
Deadlock and succession
Fifty-fifty ventures need an exit from paralysis: escalation to senior executives, mediation, a casting vote for a rotating chair, put and call options, or a buy-sell mechanism. The new statutory power for the licensing authority to appoint independent directors on a board deadlock is a backstop, not a substitute. Succession clauses matter because, without one, a deceased shareholder's heirs may step into the company under the applicable inheritance rules.
How we put shareholder agreements in the UAE in place
Timing depends on the regime and the number of parties. The sequence below reflects how a typical new joint venture or investment round runs.
- Map the deal and the vehicle. Agree the commercial term sheet, then confirm the jurisdiction, legal form and any regulated-activity licences before drafting begins, because the vehicle dictates what the constitution can carry.
- Diligence the parties. Check corporate documents, beneficial owners, sanctions exposure and authority to sign for each shareholder, including powers of attorney that will need notarisation and legalisation.
- Draft the agreement and the constitution together. Prepare the shareholder agreement and the memorandum or articles in parallel, with a table showing which clauses must be mirrored, and arrange Arabic translation where the registry requires it.
- Negotiate and sign. Resolve the governance, transfer and exit terms, then sign the agreement and execute any ancillary documents such as share pledges, call option deeds and powers of attorney.
- Register the constitution. File the memorandum or articles with the licensing authority or registrar, notarise where required, and update the commercial register and beneficial ownership records.
- Complete funding and issue shares. Pay up capital, register new shares or classes, and record managers or directors and their signing authority.
- Operate and review. Hold the meetings the agreement requires, keep minutes, and review the documents whenever capital, ownership or the law changes.
Documents to assemble
Missing documents are the main cause of delay. Licensing authorities and notaries in the UAE usually want originals or certified copies, and foreign corporate documents normally need notarisation, legalisation or an apostille-equivalent chain and a legal translation into Arabic.
- Signed term sheet and cap table, including any convertible instruments.
- Constitutional documents and good standing certificates for each corporate shareholder.
- Board resolutions and powers of attorney authorising signatories, legalised for use in the UAE.
- Passports and residency details of individual shareholders and proposed managers or directors.
- Beneficial ownership information for the register required by Cabinet Decision No. 109 of 2023, or the equivalent DIFC or ADGM rules.
- Valuation reports for any in-kind contributions, which the 2025 amendments subject to approved valuation standards.
- Existing contracts that contain change-of-control clauses affected by the new ownership.
Keep a single signed "conformity schedule" listing every term of the shareholder agreement that also appears in the registered memorandum or articles. When ownership changes, the schedule tells you which filings to update, and in a dispute it shows the court or tribunal that the parties intended the two documents to work together.
Risks and common mistakes
Most disputes over shareholder agreements in the UAE trace back to a handful of avoidable drafting and process errors.
Signing a bespoke agreement but registering a template memorandum
This is the most frequent problem. A carefully negotiated agreement provides for investor vetoes and drag rights, but the registered memorandum gives the manager broad powers and is silent on transfers. Banks, the licensing authority and third parties rely on the registered document. In a dispute, the investor is left with a contractual damages claim against the other shareholder rather than a right that the company and the registry will recognise.
The fix is to negotiate the memorandum as part of the deal, use the flexibility the 2025 amendments introduced, and where the registry will not accept a term, move the governance to a holding company in the DIFC or ADGM.
Choosing a forum that cannot grant the relief you need
An arbitration clause in the shareholder agreement may not bind the company unless the company is a party, and certain corporate matters such as dissolution or changes to the commercial register may need a court order.
Conversely, a clause choosing the DIFC Courts for a mainland company dispute should be considered carefully against the enforcement route you will actually need. Decide the forum by asking where the assets are, which remedies matter (specific performance, injunctions, share transfer orders), and how the award or judgment will be enforced. Arbitration under Federal Law No. 6 of 2018, commonly administered by the Dubai International Arbitration Centre, is often the better fit for cross-border investors. Our pages on UAE-seated arbitration and DIFC Courts proceedings explain the options.
Assuming English-law concepts work onshore
Concepts such as liquidated damages, indemnities, good faith and penalty clauses do not operate onshore exactly as they do in London or Singapore.
UAE courts may adjust agreed compensation to reflect actual loss, and the new Civil Transactions Law imposes a good faith duty in negotiations that the parties cannot contract out of. A shareholder agreement governed by English law but enforced in onshore courts may also face questions about proving foreign law. Draft remedies that a UAE judge can apply, and test each key clause against the forum you have chosen.
Leaving deadlock and exit to goodwill
Joint ventures are usually signed in optimism. Without a working deadlock mechanism, a fifty-fifty company can stall for months while each side refuses to sign renewals, bank mandates or visa paperwork. The statutory power for the licensing authority to appoint independent directors helps only where the deadlock concerns board appointments. Build an escalation ladder, an objective valuation method and a clear put, call or buy-sell route. Make sure the mechanism can be executed without the defaulting party's cooperation, for example through an irrevocable power of attorney.
Ignoring succession and personal status rules
Where an individual shareholder dies, the default position can bring heirs into the company under the applicable inheritance regime. That can disrupt control, banking and licensing at the worst moment. The 2025 amendments allow the constitution to regulate succession, including giving surviving shareholders or the company priority to buy the shares at an agreed or expert-determined price. Pair that clause with personal estate planning, such as a registered will, and consider holding shares through a corporate vehicle or foundation.
Cross-border angle
Many UAE ventures have shareholders in Bangladesh, India, the UK, Singapore, China or Saudi Arabia. Each brings its own approval, tax and enforcement questions. Outbound investment approvals in the investor's home country, foreign exchange controls and the tax treatment of dividends and exit gains can all shape the agreement's economics.
Governing law is a strategic choice. Since the reforms summarised on the UAE government portal, most mainland companies can be wholly foreign owned, so many ventures have no local partner at all.
Parties often choose English law for a DIFC or ADGM holding company, and UAE law for a mainland company where the agreement must be enforced onshore. If an exit or enforcement may happen in Riyadh, Mumbai or Dhaka, check how a UAE court judgment or an arbitral award will be recognised there, and draft the dispute clause accordingly.
TRW & Co's network across Dhaka, Singapore, London, Dubai and China helps coordinate these questions in one workstream. Where an investment involves inbound capital into a regulated sector, read our overview of foreign direct investment in the UAE; where the parties are contributing businesses rather than cash, our joint ventures page sets out the structuring options.
How TRW & Co helps with shareholder agreements in the UAE
We act for founders, family groups, corporate joint venture partners and investors. Our work is advisory, drafting and coordination. Where representation before UAE onshore courts or the DIFC/ADGM Courts is required, we work alongside locally licensed advocates and registered practitioners.
Structuring and vehicle choice
We compare mainland, free zone, DIFC and ADGM options for the specific deal, and design holding structures that let the governance terms sit where they can be enforced.
Drafting and negotiation
We prepare or review the shareholder agreement, the memorandum or articles, and the ancillary documents, with a clause-by-clause conformity schedule between them.
Investment rounds
For venture and growth investment we align share classes, preferences, anti-dilution and leaver terms with the 2025 company law changes. See our venture capital practice.
Joint venture governance
We design reserved matters, deadlock ladders, put and call options and exit valuation mechanisms that can be executed without the other side's cooperation.
Registry and implementation
We coordinate translation, notarisation and filings with licensing authorities, the DIFC Registrar or the ADGM Registration Authority, and the beneficial ownership register.
Health checks and disputes
We review legacy agreements against the 2025 and 2026 law changes and, when relationships break down, advise on strategy for shareholder disputes.
Checklist for decision-makers
- Is the vehicle the right one for the governance you need, or should the agreement sit at a DIFC or ADGM holding company?
- Which terms of the shareholder agreement must also appear in the registered memorandum or articles?
- Have you used the new share class, drag-along, tag-along and succession tools, and are the implementing rules in place?
- Does the transfer mechanism deal with statutory pre-emption and the notarisation steps for an onshore transfer?
- Is there a deadlock route that ends in a decision, and can it be executed without the other party signing?
- Does the dispute clause bind the company and lead to a remedy you can enforce where the assets are?
- Are beneficial ownership filings and the commercial register up to date after every change?
- When did you last review legacy shareholder agreements in the UAE against the new Civil Transactions Law?
Our article on the Commercial Companies Law amendments tracks the implementing rules as they appear. To discuss a new agreement or a review of an existing one, contact our Dubai team, or browse our practices for related corporate work.
Frequently asked questions
01Is a shareholder agreement legally binding in the UAE?
Yes. A shareholder agreement is a binding contract between the parties who sign it, and UAE courts and arbitral tribunals will enforce it as such. The difficulty is that it binds the signatories, not necessarily the company or third parties. Onshore, the memorandum of association registered with the licensing authority governs the company itself, and a conflicting private term may only give rise to a damages claim. That is why the key governance and transfer terms should be mirrored in the constitution, or the structure should use a DIFC or ADGM holding company.
02What changed for shareholders under the 2025 Commercial Companies Law amendments?
Federal Decree-Law No. 20 of 2025 expressly allows limited liability companies to issue classes of shares with different rights, recognises drag-along and tag-along rights in constitutional documents, allows the constitution to regulate succession on a shareholder's death, and lets the licensing authority appoint independent directors where shareholders deadlock on board appointments. It also introduced redomiciliation between emirates and free zones. Some of these tools need implementing resolutions, so existing agreements should be reviewed and new ones drafted with the current rules confirmed.
03Can we choose English law for a shareholder agreement in the UAE?
Parties are generally free to choose a foreign governing law for the contract, and English law is common for DIFC and ADGM companies, where English-law concepts sit comfortably. For a mainland company, the company law rules on transfers, general assemblies and managers still apply regardless of the chosen law, and an onshore court may require the foreign law to be proved. Many investors therefore choose UAE law for mainland agreements, or move the shareholder relationship to a common-law holding company.
04Are drag-along and tag-along rights enforceable in a mainland LLC?
Since the 2025 amendments, drag-along and tag-along rights can be included in the constitutional documents of onshore LLCs and private joint stock companies, which significantly improves enforceability. In an LLC, their exercise still interacts with the statutory pre-emption right of other partners, so the agreement should include an advance waiver of pre-emption for permitted exits, a power of attorney for signing transfer documents, and a clear process for the notarised transfer before the licensing authority.
05How should deadlock be handled in a fifty-fifty UAE joint venture?
Use a ladder that ends in a decision: escalation to senior executives, then mediation, then a mechanism such as put and call options, a buy-sell clause or a sale of the company. The statutory power for the licensing authority to appoint independent directors helps only where the deadlock is over board appointments. Ensure the mechanism has an objective valuation method and can be implemented without the defaulting party's signature, for example through an irrevocable power of attorney.
06Should disputes go to arbitration or the courts?
It depends on the remedies you need and where enforcement will happen. Arbitration under Federal Law No. 6 of 2018, for example at DIAC, offers confidentiality and international enforceability, but some corporate measures, such as amending the commercial register or dissolving the company, may need a court. The DIFC and ADGM Courts suit companies in those centres. Make sure the company itself is party to the dispute clause if you may need orders against it.
07Do shareholder agreements need to be in Arabic or notarised?
A private shareholder agreement can usually be signed in English without notarisation. The registered memorandum or articles, share transfers and many powers of attorney, however, often must be in Arabic or bilingual and notarised before the licensing authority or a notary public. Foreign corporate documents normally need legalisation and a legal translation. DIFC and ADGM filings are made in English through their registries.
Sources and official materials
- Companies legislation (Ministry of Economy and Tourism) — Commercial Companies Law and implementing resolutions
- Full foreign ownership of commercial companies (u.ae) — Ownership rules for mainland companies
- DIFC Registrar of Companies — Registration and filings for DIFC companies
- ADGM legal framework — ADGM Companies Regulations and application of English law
- Dubai International Arbitration Centre — DIAC Arbitration Rules and services
- DIFC Courts — Common-law court for DIFC company disputes
General information only, current as at 27 October 2026. It is not legal advice and does not create a lawyer–client relationship. UAE law differs between the onshore jurisdiction, the DIFC, ADGM and the free zones, and changes frequently; check current official sources and take advice on the facts of your matter.
