UAE M&A merger governance has reached new heights of sophistication following progressive legal reforms enacted in 2025. The UAE continues to assert itself as a premier global business hub, driven by the Federal Decree Law No. 20 of 2025 (the Companies Law), which brought substantial amendments to the Federal Decree Law No. (32) of 2021 on Commercial Companies. As of 2026, this legislation continues to modernize the UAE’s M&A framework by enhancing corporate governance, expanding foreign ownership opportunities, and streamlining merger procedures.

This article provides a detailed examination of the key governance rules, regulatory requirements, and practical considerations shaping mergers and acquisitions in the UAE today. Understanding these developments is critical for companies, investors, and advisors seeking to navigate the UAE’s dynamic market with confidence and compliance. As such, this law focuses on regulating corporate governance, protecting the rights of shareholders and partners, encouraging foreign investment, and promoting corporate social responsibility (Article 2).

Applicability of the Law

The provisions of this law, along with all related regulations issued in its implementation, apply to commercial companies established within the UAE. Additionally, the provisions concerning foreign companies apply to foreign companies that maintain a headquarters in the UAE, conduct activities in the UAE, or establish a branch or representative office within the country (Article 3).

Notably, this law permits companies to operate with a single shareholder and the 2025 amendments introduce the concept of a non-profit company for the first time in UAE corporate legislation. A company can be established for non-profit purposes where net profits are reinvested into the company and used to achieve the objectives for which the company was formed and no profits are redistributed to shareholders and partners (Article 8).

The introduction of non-profit companies creates a practical structure for social and development-focused initiatives, in line with the UAE’s broader sustainability and social impact goals. However, the operation of these entities will depend on further Cabinet-issued rules covering issues such as permitted activities, governance requirements, and any special exemptions. Until those rules are issued, the full scope and effectiveness of this new framework will remain to be seen (https://galadarilaw.com/news/federal-decree-law-20-2025-uae/).

This legislation also reduces the restriction on foreign ownership across various sectors, through the use of free zones and other governmental provisions (Article 336). These legislative changes aim to further modernise and increase the flexibility of UAE markets, as well as encourage and facilitate inbound M&A deals (Mergers & Acquisitions Laws and Regulations 2025 – UAE).

Scope and Exceptions to the Law

Except for matters relating to the registration and renewal of registration in the register of exempted companies, the Securities and Commodities Authority (SCA), and the Competent Authority within their respective jurisdictions, this law does not apply to the following entities (Article 4):

A. Companies exempted by Cabinet resolution, provided such exemption is specifically stated in their Memorandum or Articles of Association, in accordance with regulations issued by Cabinet resolution.

B. Companies fully owned by the federal or local government, including their affiliated institutions, entities, bodies, or subsidiaries, as well as any companies wholly owned by such entities or subsidiaries, where their Memorandum or Articles of Association includes a provision confirming this exemption.

C. Companies in which the federal or local government, or any of their related institutions, agencies, or subsidiaries directly or indirectly own at least 25% of the capital, and that operate in sectors like oil drilling, extraction, refining, manufacturing, marketing, transportation, or energy-related activities (including electricity, gas, water desalination, and distribution), are exempt if this exemption is specified in their governing documents.

D. Companies granted exemption from the provisions of Federal Law No. of 2015 on Commercial Companies, as amended, prior to the enforcement of this Decree Law, where the exemption is recorded in their Memorandum or Articles of Association.

E. Companies exempted from this Decree Law under specific federal laws.

F. Special Purpose Acquisition Companies (SPACs), as regulated by the SCA’s applicable decisions.

G. Special Purpose Vehicles (SPVs), if an exemption is provided within the SCA’s regulatory decisions governing such entities.

Companies referenced in points B, C, and D are required to comply with this law upon selling or offering any of their capital through a public offering, or by listing their shares on a financial market within the State. Companies mentioned in points F and G must align their operations with the provisions of this law, as well as the regulations or decisions issued by the SCA pertaining to entities of that kind (Article 4).

 Free Zone Rules

It should be noted that the provisions of this law do not apply to companies established within free zones if a specific exemption is provided for in the relevant free zone laws or regulations. If governing free zone regulations allow companies to conduct activities outside the free zone, within the UAE, they have the right to establish branches or representative offices outside the free zone, however these establishments will be subject to the Companies Law (Article 5).

UAE M&A Merger Governance Process Regulators

 (Mergers & Acquisitions Laws and Regulations 2025 – UAE, The Legal Framework for Mergers and Acquisitions in the United Arab Emirates)

The following will provide a concise overview of the main regulators which oversee the M&A process:

The Ministry of Economy is the primary authority for merger control and competition law.

The Central Bank of the UAE (CBUAE) regulates mergers and acquisitions involving banks and financial institutions. Under its Major Acquisitions Regulation, any bank must obtain prior written approval from the CBUAE before acquiring another institution or transferring liabilities.

The Securities and Commodities Authority (SCA) regulates mergers and acquisitions involving public companies and financial firms in securities, commodities, and markets. It enforces detailed takeover rules, including mandatory offers for acquisitions above certain ownership thresholds in listed companies. Requirements for approval or notification differ by the type of financial firm involved.

The Relevant Stock Exchanges (e.g. Dubai Financial Market) provides further oversight to transactions, with specific rules in place involving disclosures and formal requests for certain transactions (Public M&A in United Arab Emirates – Lexology).

The Department of Economic Development (DED) amends or cancels commercial licenses and updates company constitutional documents to reflect changes after a merger.

The Insurance Authority requires branches of foreign insurers operating in the UAE to notify it of any changes in control.

Share Regulations

In order to ensure M&A transactions go smoothly and are in line with the law, it is important to be aware of regulations in connection with the sale of shares. The law enshrines shareholder protections, notably granting shareholders the first right to buy any newly issued shares. Any company provision, whether in the Articles of Association or elsewhere, that states otherwise is invalid. Shareholders can sell their rights to buy these new shares to other shareholders or third parties, following rules set by the SCA’s board (Article 199).

Subscriptions for new shares must follow the same rules of subscription as those for the original shares. The board of directors must publish a summary of the rights issue prospectus, approved by the SCA, in two local newspapers (one being in Arabic) to notify shareholders of their priority to subscribe for the newly issued shares (Article 200).

New shares are allocated to subscribing shareholders in proportion to their existing holdings, but not exceeding the number of shares they applied for. Any remaining shares are then distributed to those who applied for more than their shareholding. If shares still remain, they may be offered to the public if allowed in the capital increase resolution and meet SCA requirements (Article 201).

Partners in limited liability companies and shareholders in private joint stock companies may agree (within the articles of incorporation or the bylaws) to (Article 14):

• Allow one or more shareholders to compel remaining shareholders to sell their shares, contingent upon preagreed conditions being fulfilled (drag-along rights).
• Give shareholders the right to join an existing sale transaction conducted by another party on identical commercial terms (tag-along rights).

This statutory recognition of drag-along and tag-along rights, which are commonly incorporated in international shareholders’ agreements but were not previously addressed in UAE legislation, strengthens legal certainty for transactions, reinforces protections for minority shareholders, and enables more efficient execution of mergers, acquisitions, and exit strategies (Federal Decree Law No. 20 of 2025: Comprehensive Amendments to the UAE Commercial Companies Law – Spencer West).

Merger Process

Notwithstanding the share regulations (as described above), a company may, by special resolution of its General Assembly or an equivalent governing body, proceed with a merger with another company, including during the liquidation process, in accordance with a merger agreement concluded between the parties (Article 285).

Subject to applicable Central Bank regulations, where the merger involves companies licensed by the Central Bank, the Minister will issue a resolution specifying the procedures, conditions, and method for executing such mergers. This does not include Public Joint Stock Companies, for which the Board of Directors of the Securities and Commodities Authority shall issue the relevant resolution (Article 285).

Merger Agreement

The directors or managers of both the merging and merged companies must submit the draft merger agreement to the General Assembly or an equivalent decision-making body for approval, requiring the majority necessary to amend the company’s Memorandum of Association (Article 287). The merger agreement must clearly state the terms and procedures of the merger, including (Article 286):

1. The Memorandum and Articles of Association of the merging or new company.
2. The names and addresses of each director or proposed manager of the merging or new company.
3. How the shares or ownership stakes of the merged companies will be converted into shares or stakes in the merged or new company.

The Memorandum of Association and any amendments must be written in Arabic and officially attested by the Competent Authority; otherwise, they will be considered invalid. If also written in another language, the Arabic version will prevail in legality. Attestation can be done in person or electronically, except in certain cases requiring notarisation where instructed by the Competent Authority (Article 14).

Partners can challenge the validity of the Memorandum or amendments between themselves if these requirements are not met, but cannot do so against third parties. If a court rules the company invalid based on a partner’s request, the invalidity takes effect only once the ruling is final (Article 14).

The General Assembly which convenes to consider the merger must adhere to the following conditions (Article 287):

• The meeting notice must be accompanied by a copy or summary of the merger agreement.
• The merger agreement must explicitly provide that any shareholder or group of shareholders holding at least 20% of the company’s capital, who oppose(s) the merger, have the right to challenge the merger before the competent court within 30 business days following its approval by the General Assembly or equivalent body.

Merger of Holding Companies and Subsidiaries (Article 288)

A holding company can merge with one or more of its wholly owned subsidiaries into a single company without the requirement of a formal merger agreement. Such a merger must be approved through a Special Resolution passed by the majority necessary to amend the Memorandum of Association of each company involved.

Two or more companies wholly owned by the same holding company may also merge into a single entity without entering into a merger agreement. For mergers involving a holding company, the merger provisions outlined in this law and its implementing regulations apply to its wholly owned subsidiaries.

Share Value Redemption – Exit Mechanism (Article 289)

Except for joint stock companies, any partner or shareholder who opposes the merger resolution may submit a written request to withdraw from the company and redeem their shares within 15 business days from the date of the merger resolution.

The value of the withdrawn shares shall be determined by mutual agreement, however if the parties fail to agree on the valuation, the matter shall be referred to a committee appointed by the Competent Authority to resolve the dispute before either party can pursue court action. It should be noted that the undisputed value of the withdrawn shares must be paid to the respective shareholders prior to completing the merger, and before the committee adjudicates any disputed valuation.

This simplification of exit and entry mechanisms means that UAE companies will be more attractive to foreign buyers, thus increasing the number of viable M&A options in the market (Mergers & Acquisitions Laws and Regulations 2025 – UAE).

Post-Merger Obligations

Following approval of the merger by the General Assembly, every merging or merged company must notify its creditors within 10 business days. The notification must (Article 290):

1. Clearly state the company’s intent to merge with one or more specified companies;
2. Be delivered in writing to each creditor of the company;
3. Be published in two daily local newspapers issued in the State, including one Arabic-language publication;
4. Inform creditors, bondholders, Sukuk holders, and other stakeholders of their right to oppose the merger. Any opposition must be filed at the company’s headquarters and a copy should be submitted to the SCA, as applicable, within 30 days from the date of the notice.

A creditor who submits a notice of opposition to the company under point 4 (stated above) and whose claim remains unpaid or unsettled within 30 days from the date of the notice can apply to the competent court for an order to suspend the merger. After reviewing the application, if the court determines that the merger would cause unfair prejudice to the applicant’s interests, it may issue an order to suspend the merger, subject to any conditions it considers appropriate (Article 291).

The merger will remain suspended until the opposition is either withdrawn, dismissed by a final court judgment, or the company settles the outstanding debt if due, or provides adequate security if the debt payment is deferred. Failure to submit an opposition to the merger resolution within the prescribed timeframe under point 4 is deemed as implicit acceptance of the merger (Article 291).

Once the merger resolution is approved by the relevant authority, whether the Ministry or the Securities and Commodities Authority (SCA), the Registrar will be notified to update the company records accordingly. The Competent Authority will then amend its records to reflect the dissolution of the merged company and will notify the Ministry or the SCA, as appropriate, of the termination (Article 292).

The merger results in the dissolution of the merged company or companies as separate legal entities, with the merging company or newly formed entity stepping into their place as the legal successor. This successor company assumes all rights, obligations, and liabilities previously held by the merged entities (Article 293).

Recent Legislative Updates (2025 Amendments) – Key Updates on M&A Legal Framework

The UAE issued Federal Decree-Law No. (20) of 2025 amending key provisions of Federal Decree-Law No. (32) of 2021 Concerning Commercial Companies (the “Amendment”). New Regulations are effective following publication in the Official Gazette (mid-October 2025). The amendments introduce common law concepts and principles into the UAE’s civil law-based framework, enhancing corporate flexibility through shareholder arrangements and governance tools aligned with common law practices. They also introduce new provisions for shareholder arrangements, capital structuring, and corporate transformations.

Among the most remarkable developments are:

1. Introduction of Multi-Class Shares in Limited Liability Companies (LLCs)

The amendments permit LLCs, subject to regulatory approvals and constitutional documents, to issue different classes of shares with varying rights relating to voting, dividends, and liquidation preferences. This development enhances structuring flexibility for private equity, venture capital, and strategic investors, and facilitates more sophisticated shareholder arrangements in acquisition and joint venture transactions.

2. Statutory Recognition of Shareholder Exit Mechanisms

The amended law expressly allows for contractual mechanisms such as drag-along and tag-along rights to be included in shareholders’ agreements and constitutional documents. This provides greater certainty in exit scenarios and supports smoother execution of share sale transactions and corporate restructurings.

3. Further Clarifications on Free Zone and Onshore Operations

The amendments also clarify aspects of the interaction between free zone companies and onshore commercial activity, reinforcing the legal basis for certain licensing models that permit free zone entities to operate in the mainland subject to regulatory approval. This is particularly relevant where mergers or group reorganizations involve entities across different UAE jurisdictions.

4. Ongoing Interaction with Competition Law Regime

In parallel, merger control in the UAE is governed by Federal Decree-Law No. (36) of 2023 on Competition Regulation, with Cabinet Decision No. (3) of 2025 (Article 3) introducing turnover and market share thresholds triggering mandatory notification to the Ministry of Economy. As a result, certain M&A transactions may now require pre-closing clearance, in addition to corporate and sector-specific approvals.

These developments do not replace the merger procedures set out in Articles 285–293 of the Commercial Companies Law, but they materially affect transaction structuring, shareholder arrangements, and regulatory strategy in both private and public M&A deals. Accordingly, parties should assess not only corporate law requirements but also competition and licensing considerations at an early stage of transaction planning.

What This Means for Investors and Founders

The 2025 amendments to the UAE Companies Law significantly enhance flexibility in corporate structuring, investment entry, and exit strategies. The introduction of multiple share classes and clearer rules on in-kind (real estate, machinery, IP rights etc) contributions supports more sophisticated financing arrangements, making UAE entities more attractive for venture capital and strategic investors.

For founders, improved succession rules, re-domiciliation options, and governance continuity mechanisms reduce operational risk, while private joint stock company fundraising and simplified PJSC conversion facilitate scale-up and Initial Public Offering (IPO) planning without early-stage over-regulation.

At the same time, several reforms remain subject to implementing regulations, and certain statutory protections, such as pre-emption rights in LLCs, may continue to limit the practical effectiveness of contractual exit rights. As such, careful drafting of shareholders’ agreements and constitutional documents remains critical to fully leverage the new framework while maintaining regulatory compliance.

Labor Law Considerations

In addition to M&A specific laws, business owners must also consider the labour law implications and potential complications that come with mergers, particularly in asset sales. Making sure that all formalities are complied with is essential to avoiding any potential issues both from regulatory bodies and from employees.

As there are no transfer legislations within the UAE, employees are not automatically transferred to the new business entity when a merger or acquisition takes place. Instead, the original company would have to terminate each employee’s contract and cancel any employee visas and work permits in accordance with Federal Decree by Law No. (33) of 2021 Concerning Regulating Labor Relations (Article 42). The newly formed company to whom the employees are being transferred, must enter into new employment contracts and issue new visas and work permits (where necessary) to the employees.

These requirements also mean that employers must fulfill all termination accruements in accordance with UAE Labor Law. Upon termination, employers must pay workers their end of service gratuity. UAE nationals should be paid in accordance with UAE pension and social security laws. Foreign full-time workers with at least one year of continuous service are entitled to gratuity calculated on their basic wage: 21 days’ wage per year for the first five years, and 30 days’ wage per year thereafter, capped at two years’ wages. Any partial years of service will also be prorated for gratuity, however any unpaid absences are not counted towards the total length of service.

It should be noted, however, that the law allows for employers and employees to agree on alternative arrangements, therefore if both parties agree, it would be possible to transfer liability for the gratuity to the new company and receive payment upon termination of contract with the new company (Article 51). Employees are also entitled to be paid for any accrued unused benefits upon termination, such as any leftover annual leave, though this can also be rolled over to the new contract, should both parties agree (LABOUR & EMPLOYMENT 2022).

This is less of an issue in share sale transactions, as buyers will simply acquire the liabilities from a seller, without there being a change in the legal employer. As such, the employment contract will generally remain the same (unless otherwise agreed) and the transaction will have no effect on the employees work permit or visa (What is the impact of an asset sale on employees?).

Cross Border Considerations

In cases of cross-border M&A transactions involving the UAE, companies must consider the extended reach of UAE competition and corporate laws, which apply to conduct outside the UAE impacting local competition. Harmonizing notifications, managing confidential disclosures, and anticipating differing legal standards across jurisdictions are crucial for smooth deal execution. Early engagement with legal counsel experienced in UAE and foreign jurisdictions is recommended to navigate regulatory complexities and reduce delays.

Conclusion

The evolving regulatory landscape under the Commercial Companies Law has established a robust governance framework for mergers and acquisitions within the UAE, balancing shareholder protections with market flexibility. From clear rules on merger agreements, shareholder rights, and post-merger notifications, the law encourages transparency, accountability, and investor confidence. However, as the UAE’s market attracts increasing cross-border interest, complexity in regulatory and operational requirements also rises.

Proactive legal and strategic planning, tailored to the company’s sector, ownership structure, and growth ambitions, remains indispensable.

For tailored advice and support navigating UAE M&A merger governance procedures, consulting with an experienced law firm in UAE like Economic Law Partners ensures you manage mergers and acquisitions efficiently and avoid costly mistakes.