UAE Mainland LLC Share Classes: What Your MOA Still Misses

A founder called us last month with a problem that sounded like good news. An investor wanted to put AED 2 million into his Dubai software company for a 30% stake, and asked for two things: his money back first if the company is ever sold, and a bigger share of the dividends until then. The founder said yes to both without thinking. Then he opened his memorandum of association. Every share in his company carried exactly the same rights. His shares, the investor's shares — identical. There was no way to give the investor what he had just promised him.

His first instinct was the one most founders have: write it into the shareholders' agreement and move on. That is how it used to work. The side agreement carried the real deal, the memorandum carried the formal one, and the licensing authority never saw the side agreement. It worked until a sale, a dispute or a second investor made the gap between the two documents the whole negotiation.

That gap has now closed, at least on paper. Federal Decree-Law No. 20 of 2025, issued on 1 October 2025, rewrote parts of the UAE Commercial Companies Law for the first time since 2021. A mainland LLC can now split its shares into classes, write drag-along and tag-along rights into its memorandum, and record all of it in the commercial register. The founder raising money in 2027 on a 2024 memorandum is negotiating a structure in a document that does not know it exists.

What Federal Decree-Law No. 20 of 2025 actually changed

The decree amends Federal Decree-Law No. 32 of 2021, the Commercial Companies Law that governs mainland companies in every emirate. It was published in the Official Gazette on 14 October 2025, and most law firms date it in force from 15 October 2025. One firm, Clyde & Co, dates its effect from 15 November 2025 instead — so if a date matters to a transaction, check the Gazette text rather than taking anyone's summary for it.

Before the amendment, every share in a mainland LLC carried the same rights. A founder who put in the idea and an investor who put in AED 2 million held identical shares, and anything different had to live in a side agreement the licensing authority never saw. Now an LLC can split its shares into classes — Class A and Class B, for example — with different rights over voting, dividends, liquidation and redemption. The classes and their rights must be written into the memorandum of association, and they must be recorded in the commercial register. A class that sits only in a shareholders' agreement does not count.

The same decree lets LLCs write drag-along and tag-along rights into the memorandum, tightens the rule on in-kind capital — a founder contributing equipment, property, intellectual property or another asset as share capital needs an accredited valuer, and without an accredited valuation the contribution is invalid — and lets the constitutional documents set how the shares of a deceased partner are bought, at an agreed value or one set by a court.

One more thing before the detail: nothing in the decree forces an existing company to act by a fixed date. The changes are options, not obligations. Nobody's memorandum becomes invalid overnight. What changes is what your memorandum can do when you need it to.

Class A and Class B: what UAE mainland LLC share classes can do

Each class can carry different rights over voting, dividends, liquidation and redemption.

Voting. Founders keep control while an investor holds a bigger economic stake. Class A shares can carry the votes; Class B shares can carry the money. A founder who owns 40% of the economics can still hold the votes that decide the company's direction.

Dividends. One class is paid first, or at a fixed rate. The investor who put in AED 2 million can hold a class that receives dividends before the founders' class. On the mainland it used to be a side-agreement promise. Now it can be a registered right.

Liquidation. One class gets its money back first if the company is sold or wound up. This is the clause the founder in our opening story needed: the investor's money back first on a sale, the founders paid after. It also decides who loses what when a sale price comes in low.

Redemption. The company can buy a class back on agreed terms, so a class issued to an early backer can be bought back when the agreed trigger is met without disturbing the rest of the cap table. The terms have to be written into the memorandum.

Two conditions attach to all of it. The classes must be written into the memorandum of association and recorded in the commercial register. And the Cabinet will prescribe the categories and classes of shares, the conditions attached to each class, and the rules governing them — several provisions of the decree still depend on Cabinet rules that are being issued. Some of the detail is still arriving, so a structure drafted today has to follow the rules in force on the day it is signed.

There is also a boundary worth stating plainly. These are mainland tools. DMCC companies remain governed exclusively by the DMCC Companies Regulations and are not subject to the Commercial Companies Law, so a DMCC company does not pick up share classes from this decree. The free-zone 0% rules work on a different test too.

Drag-along and tag-along: the exit clauses your MOA never had

The second change decides what happens when the company is sold. Drag-along lets the majority force the minority to sell on the same terms, so one small holder cannot block a sale. Tag-along lets the minority join a sale on the same terms, so the majority cannot sell out alone and leave them behind.

Picture the sale every founder dreams about. A buyer offers a good price for the whole company. The founders, holding 80%, want to accept. One holder of 5% refuses — the price is wrong, the timing is wrong, or the holder simply wants more. Without a drag-along clause, that 5% can hold the deal hostage. With a drag-along clause in the memorandum, the majority can compel the minority to sell on the same terms, and the deal closes.

Now reverse it. The founders sell their 80% and walk away. The minority holder, who believed in the company and stayed, is left holding 20% of a company now owned by a stranger, with no buyer for the stake. With a tag-along clause, the minority can join the sale on the same terms and leave with the founders, at the founders' price.

Both clauses used to live in shareholders' agreements. Now they can sit in the memorandum itself, where a buyer, a licensing authority and a court can all see them. The exit terms are now part of the company's registered constitution.

There is a catch. The statutory right of first refusal for LLC partners still applies, so the drafting has to fit around it. A drag-along clause that ignores pre-emption can fail at the moment it is needed, and the sale stalls while the lawyers argue about which clause wins.

The in-kind trap: no accredited valuation, no contribution

The third change is the one most likely to catch a founder by surprise. Founders can contribute equipment, property, intellectual property or another asset as share capital instead of cash. The amendment confirms that route — and then tightens one rule. The asset must be valued by one or more accredited valuers. If there is no accredited valuation, the contribution is invalid.

Think about how this usually happens. A founder builds a software platform for two years, then forms the company and contributes the platform as capital. The value of that contribution becomes the founder's stake. Now it is a formal step: an accredited valuer, and the contribution stands or falls on that valuation.

The order matters. The valuation has to be ordered before the memorandum is signed, not after — a contribution made without it is invalid, and an invalid contribution is not fixed by valuing the asset later and hoping nobody notices. If you are contributing anything other than cash, the valuer is the first appointment, not the last.

The succession clause nobody writes

The fourth change is the one nobody wants to talk about and every founder should. The decree lets the constitutional documents set how the shares of a deceased partner are bought — at an agreed value, or one set by a court.

Most memorandums written before October 2025 say nothing about share classes, exits or succession. That last silence is the most expensive one. A partner dies, and the shares pass to heirs who never signed the memorandum, never worked in the business, and may have no interest in it — while the surviving partners have no agreed mechanism to buy the shares back, no agreed price, and no agreed valuer. The company carries on with a shareholder it did not choose.

The decree gives founders a way to settle this while everyone is alive and reasonable: write into the memorandum how the shares are bought, at what value, and by whom. An agreed value, a formula, or a court-set value — the mechanism matters less than the fact that it exists before it is needed. It is the paragraph that decides whether a death becomes a transition or a dispute. Family-held companies should read this change twice: a family office is a taxable company in the UAE too, and the succession clause belongs in the constitutional documents, not in a conversation that never happened.

What the change does not do

Three honest limits, because a compliance firm that oversells a reform is worse than one that ignores it.

First, it does not rewrite your memorandum for you. The new options are available; the old document still says what it said. A company that does nothing keeps a memorandum that says nothing about share classes, exits or succession — and that is a lawful position. The risk is negotiating a raise, a sale or a succession with a document that cannot carry the terms.

Second, it does not remove the need for advice. Several provisions depend on Cabinet rules that are still being issued, and the permitted patterns for share classes will be set by Cabinet decision. A structure drafted on today's understanding may need adjusting when the rules land, and the drafting has to leave room for that.

Third, it does not change the tax picture by itself. A share class is a commercial document, not a tax position. The dividend rights you write into the memorandum will interact with the corporate tax return, with the 0% band on the first AED 375,000 of taxable income and the 9% rate above it. A raise is priced on cash, not on paper profit — and the class structure that looks right on the term sheet has to be modelled on the numbers the business will actually produce.

Before your next raise: a four-point check

If you are raising money, adding a partner, or contributing an asset in the next year, four checks before you sign anything.

One — read your own memorandum. Not the summary your formation agent sent you, the document itself. Does it say anything about share classes, drag-along, tag-along, or what happens to a partner's shares on death? If it was written before October 2025, the honest answer is almost certainly no.

Two — decide the structure before the term sheet. Who keeps the votes, who is paid first on dividends, who gets money back first on a sale, and who can be bought back on what terms. These are commercial decisions, and they are cheaper to make in a quiet week than in the last 48 hours before a signing.

Three — order the valuation first. If any founder is contributing an asset rather than cash, the accredited valuer is the first appointment. A contribution without one is invalid, and invalid does not become valid because the company has already started trading on it.

Four — check the register, not just the agreement. The classes have to be written into the memorandum and recorded in the commercial register. A shareholders' agreement that says one thing and a register that says another is the gap the decree was written to close. Confirm with your licensing authority what it is applying to new memoranda and addenda. On the Dubai mainland, the memorandum must be in Arabic or bilingual with Arabic prevailing, signed by all partners and notarised before the licence is issued.

The bottom line

For years, the advice to a mainland founder raising money was to move to ADGM or DIFC, where the structure investors expect already existed. The decree changes that calculation: a mainland LLC can now carry the structure investors expect, without first moving the company. That saves time and fees, and it keeps the company where its customers and its licence already are.

But the decree gives you the tools. It does not use them for you. The memorandum written before October 2025 says nothing about share classes, exits or succession. Registration is the easy part; the data behind it is the deadline — and the same is true here. The filing is the easy part. The structure behind it is the work.

Read your memorandum this week. If it was written before October 2025, it predates the tools. The question is not whether the law has changed — it has. The question is whether your company's founding document has changed with it.

If you want your next raise structured properly — the classes, the exit clauses, the valuation and the cash model handled together — that is what our company formation and CFO advisory services are built for. Escrow is led by a Chartered Accountant (UAECA, CPA and FCCA). Book a consultation at escrowconsultinggroup.com. Bring your memorandum, and we will start with the only question that matters before a raise: does the document you already have carry the deal you are about to promise?

Sources and honesty note: the positions in this post are published readings of Federal Decree-Law No. 20 of 2025 amending Federal Decree-Law No. 32 of 2021, as summarised by the firms cited below. The decree was issued on 1 October 2025 and published in the Official Gazette on 14 October 2025; most firms date it in force from 15 October 2025, while Clyde & Co dates it from 15 November 2025 — if a date matters, check the Gazette text. Several provisions depend on Cabinet rules still being issued. This post is general information, not legal advice. Sources: entityz.ae — UAE Company Law Changes 2026; Al Tamimi & Company — UAE Updates Commercial Companies Law After Four Years.