UAE decree-law introduces the concept of non-profit company

Dubai: The UAE government has issued a Federal Decree-Law amending key provisions of the Commercial Companies Law, marking another step in the ongoing modernisation of the country’s corporate framework. The update aims to strengthen the business environment, align legislation with global standards, and expand options available to investors and stakeholders.

A central feature of the amendment is the introduction of the non-profit company, a legal structure that allows profit-generating entities to reinvest their earnings to achieve their stated purpose rather than distribute them to shareholders. The move is designed to give social and developmental sectors an institutional model that operates with flexibility, transparency, and accountability.

Officials said the change supports the UAE’s goal of fostering sustainable economic activities that balance profit motives with broader social impact.

The decree-law also introduces more sophisticated capital structure options through multiple classes of shares and stakes, each with distinct rights related to voting, profit distribution, redemption, and liquidation. These mechanisms are expected to enhance corporate governance and attract more private capital into diversified sectors.

In terms of financing, the new law allows private joint-stock companies to offer securities for private subscription through national financial markets. This provides an added fundraising route without requiring a shift to public joint-stock status, offering greater flexibility for family businesses and growth-stage firms.

The decree-law further facilitates the movement and re-registration of companies across emirates and within financial free zones, while retaining their legal identity. By clearly outlining the process, authorities aim to ensure smoother business operations, reduce potential disputes, and safeguard minority shareholder rights.

It also introduces contemporary contractual mechanisms such as tag-along and drag-along rights, reinforcing stability in ownership transitions and ensuring continuity in cases such as the death of a shareholder.

The decree-law reinforces standards for valuing in-kind shares and accrediting independent appraisers. Authorities said these controls aim to ensure fairness, transparency, and investor protection, key pillars of a sound corporate environment.

The government said the decree-law aligns with the UAE’s long-term vision of maintaining a dynamic, investor-friendly regulatory environment and strengthening its position as a leading hub for commerce and enterprise.