Two friends start a company in Dubai. Two years later, one wants to sell his stake, the other wants to bring in a new investor, and neither the Memorandum of Association nor a handshake tells them what happens next. This is the gap a well-drafted shareholders agreement UAE businesses rely on is built to close.
So, if you’re setting up a mainland LLC, a free zone company, or a joint venture with a foreign partner, a shareholders agreement in UAE jurisdictions sits alongside your constitutional documents and spells out exactly how ownership, control, and disputes are handled. Federal Decree-Law No. 20 of 2025 amended the UAE Commercial Companies Law, introducing greater flexibility around corporate structuring, share classes and shareholder arrangements, including statutory recognition of drag-along and tag-along mechanisms in relevant company constitutional documents.
Here are the key shareholders agreement UAE clauses businesses should consider in 2026.
What Is a Shareholders’ Agreement, and Why Do You Need One in the UAE?
A shareholders’ agreement (SHA) is a private, confidential contract between the owners of a company. Unlike the Memorandum of Association (MOA), which is filed with the licensing authority and forms part of the public or semi-public record, a UAE shareholders agreement stays between the parties who sign it. It fills in the commercial detail that company law and the MOA simply don’t cover: how decisions get made day to day, what happens if a shareholder wants out, how profits are shared, and what protections a minority investor actually has.
Without one, a company is left to fall back entirely on statutory default rules and whatever is written in its MOA – provisions that are rarely built around what the founders actually agreed to commercially. A dispute that could have been resolved by a clause in an SHA can end up dragging through the courts instead.
The UAE Legal Framework for Shareholder Agreements (2026 Update)
Onshore companies, such as LLCs, joint stock companies, and branches are governed by Federal Decree-Law No. 32 of 2021 on Commercial Companies (the CCL). Federal Decree-Law No. 20 of 2025 introduced targeted amendments to the CCL, with implementing ministerial resolutions rolled out through early 2026, reshaping several areas that directly affect shareholder agreements: multiple share classes and convertible instruments for LLCs, a clearer statutory toolkit for resolving deadlocks, and a formal mechanism (Article 15 bis) for a company to migrate between Emirates or between mainland and free zone status while keeping its legal identity intact.
Free zone companies registered in the DIFC or ADGM sit outside the CCL entirely. They follow the DIFC Companies Law and the ADGM Companies Regulations respectively, common-law-based frameworks that generally give shareholders far more contractual freedom than the onshore civil-law system does.
One point matters more than any other for onshore companies: certain shareholder rights under the CCL are non-derogable. Pre-emption rights on LLC share transfers, for example, are a statutory 30-day right under Article 80 and cannot be fully contracted away – only waived in specific transactions, such as through an explicit drag-along waiver. Any UAE shareholders agreement clause that conflicts with a mandatory provision of the CCL, or with the company’s own MOA, risks being set aside by a UAE court in favour of the statutory default. This is why aligning your SHA with your constitutional documents isn’t optional, it’s the difference between a clause that actually protects you and one that looks good on paper.
Important Clauses in a Shareholders Agreement UAE Businesses Should Include
These are the important clauses in a shareholders agreement UAE companies should treat as non-negotiable, regardless of size or sector.
1. Shareholding Structure and Ownership Rights
Start with the basics. The agreement should clearly identify every shareholder, their percentage ownership, the number or class of shares or interests held, and any special rights attached to those interests.
Where relevant, it should also address future share issues, dilution and the rights attached to different classes.
The amended UAE Commercial Companies Law provides greater flexibility for certain companies to have different classes of shares or interests with different rights, privileges or restrictions, subject to the applicable requirements and registration.
This makes it even more important to document exactly what each shareholder owns and what those ownership rights actually mean.
2. Shareholder Rights and Responsibilities
A good shareholder agreement for companies in UAE should clearly establish what shareholders can expect from one another.
This could include rights to:
- Receive financial information
- Attend and vote at shareholder meetings
- Participate in new share issues where applicable
- Receive dividends when properly declared
- Inspect specified company records
- Nominate directors or managers, where agreed
It should also define responsibilities such as funding commitments, compliance with the agreement, confidentiality and cooperation with company procedures.
Clarity at this stage can prevent the common problem of one shareholder assuming they have rights that were never actually agreed.
3. Voting Rights and Decision-Making Authority
Ownership percentage does not necessarily answer every governance question. The agreement should establish how ordinary decisions are made and which major decisions require a higher voting threshold.
These may include:
- Changing the company’s business activity
- Issuing new shares
- Taking on significant debt
- Acquiring or selling major assets
- Approving substantial related-party transactions
- Changing the company’s constitutional documents
- Mergers, acquisitions or restructuring
- Winding up the business
These are often called reserved matters.
The key is to be selective. Giving a minority shareholder veto rights over every operational decision can make the company impossible to run. Reserved matters should focus on decisions that could materially affect ownership, value or the long-term direction of the business.
4. Board and Management Arrangements
Shareholders own the company, but day-to-day management may be handled by managers or directors.
The agreement should therefore clarify:
- Who appoints and removes managers or directors
- Board composition
- Meeting and quorum requirements
- Chairperson arrangements
- Management responsibilities
- Authority limits
- Matters requiring shareholder approval
- Reporting obligations
This is particularly important where one shareholder is actively running the company while others are primarily investors.
5. Funding and Future Capital Contributions
What happens when the company needs another AED 1 million to expand?
If the answer is simply “the shareholders will contribute,” disagreements may arise over how much each person must provide.
A shareholders’ agreement can establish whether additional funding will come through:
- Further shareholder contributions
- New shares
- Shareholder loans
- External financing
- A combination of these
It should also explain what happens if a shareholder does not participate in a future funding round, including potential dilution where legally and commercially appropriate.
6. Dividend Distribution
Profits do not automatically mean that shareholders should immediately take money out of the business.
The agreement can establish a dividend policy covering matters such as:
- When dividends may be considered
- Whether profits will be reinvested
- Minimum cash or reserve requirements
- Distribution proportions
- Approval procedures
The policy should remain subject to the company’s financial position and applicable UAE company law requirements.
A clear approach to dividend distribution can prevent disagreements between shareholders who want growth and those who want immediate returns.
7. Share Transfer Restrictions and Pre-Emption
One of the most important shareholders agreement UAE clauses concerns what happens when a shareholder wants to sell.
Without suitable restrictions, shareholders may face the possibility of an unwanted third party entering the ownership structure.
The agreement can establish:
- Who can buy shares
- Whether existing shareholders get a first opportunity to purchase
- Notice requirements
- Valuation procedures
- Permitted transfers to affiliates or family members
- Restrictions on transfers to competitors
- Conditions for third-party sales
For UAE LLCs, statutory pre-emption rules can also apply to transfers to third parties. The agreement should therefore be drafted to work with the applicable statutory and constitutional requirements rather than assuming that a private transfer mechanism operates independently.
8. Drag-Along and Tag-Along Rights
These are increasingly important for UAE businesses with multiple shareholders and outside investors.
Drag-along rights can allow qualifying majority shareholders to require minority shareholders to participate in a sale, helping a buyer acquire the intended ownership stake without a minority holdout.
Tag-along rights give minority shareholders the ability to participate in a sale initiated by a majority shareholder, generally on the same terms.
The UAE’s 2025 amendments expressly recognise drag-along and tag-along arrangements and allow relevant provisions to be included in the MOA or Articles of Association of LLCs and private joint stock companies, subject to applicable requirements and approvals.
For practical protection, the agreement should still specify details such as triggering thresholds, notice periods, sale terms, valuation, consideration and completion procedures.
9. Minority Shareholder Protection
A shareholder with 10% or 20% ownership may not have the same influence as a majorityshareholder.
A well-designed agreement can provide appropriate minority shareholder protection through mechanisms such as:
- Reserved matters
- Information rights
- Board nomination rights
- Pre-emption rights
- Tag-along rights
- Anti-dilution or participation mechanisms where appropriate
- Protection against related-party transactions
The goal is not to give a minority shareholder control over everyday business operations. It is to prevent their economic or governance rights from being unfairly undermined.
10. Deadlock Resolution
What happens when two shareholders each hold 50% and cannot agree? This is where a deadlock resolution clause becomes extremely valuable.
The agreement can create a staged process, for example:
- Discussion between the shareholders
- Escalation to senior representatives
- Mediation
- Expert determination for technical matters
- A final buy-sell or exit mechanism where appropriate
11. Exit and Buyout Provisions
A shareholder may eventually want to leave the business because of retirement, a change in career, a disagreement, financial circumstances or another opportunity. The agreement should explain what happens.
Possible mechanisms include:
- Right of first refusal
- Put or call arrangements where legally appropriate
- Agreed buyout procedures
- Valuation by an independent expert
- Sale following specified events
- Death, incapacity or insolvency provisions
- Change-of-control arrangements
The valuation formula deserves particular attention. A clause saying “shares will be bought at fair market value” may still lead to disagreement over what fair market value actually means.
12. Confidentiality and Shareholder Obligations
Shareholders may have access to sensitive information about customers, suppliers, pricing, financial performance, intellectual property and business strategy.
A confidentiality clause should define what information is protected, how it can be used and what happens after a shareholder leaves. Depending on the business and applicable law, the agreement may also address non-solicitation, intellectual property, conflicts of interest and other post-exit obligations.
These provisions should be drafted carefully and proportionately rather than copied from a generic overseas template.
Shareholders’ Agreement vs MOA: Do You Need Both?
In most multi-shareholder structures, it is better to think of the documents as complementary rather than interchangeable.
The shareholders’ agreement can contain detailed commercial arrangements between the parties, while the MOA or Articles of Association contain the company’s constitutional framework and provisions required or recognised under applicable law.
This distinction has become particularly important following the UAE’s recent company-law reforms. Certain shareholder arrangements, including drag-along and tag-along mechanisms, can now be reflected in constitutional documents, strengthening the connection between private shareholder arrangements and the company’s formal corporate structure.
Businesses should therefore avoid having contradictory provisions across the SHA, MOA, Articles and company records.
Common Mistakes to Avoid
- Signing an SHA that contradicts the MOA – in a conflict, UAE courts generally give weight to the registered constitutional documents.
- Adding drag-along or tag-along clauses without an explicit pre-emption waiver.
- Naming a defunct arbitration institution (such as the old DIFC-LCIA) instead of a currently operating one like DIAC.
- Leaving dividend policy to informal understanding rather than a written distribution mechanism.
- Treating the SHA as a one-time document instead of updating it after funding rounds, new share classes, or ownership changes.
How Shuraa Business Setup Can Help
Drafting a shareholders agreement UAE authorities and courts will actually uphold takes more than a template – it means aligning the Shareholder’s Agreement with your MOA, your jurisdiction’s rules, and the commercial deal your shareholders actually agreed to. Shuraa Business Setup’s advisory team works with founders, investors, and joint venture partners across mainland, free zone, and offshore structures to draft, review, and align shareholder agreements with current UAE company law, so the document holds up if it’s ever tested.
Frequently Asked Questions
1. Is a shareholders’ agreement legally required in the UAE?
No. Unlike the MOA, an SHA is not a mandatory filing requirement. It is a private contract, but in practice it’s considered essential for any company with more than one shareholder, since it fills gaps the MOA and statutory law leave open.
2. Can a shareholders’ agreement override the UAE Commercial Companies Law?
No. An SHA cannot override mandatory statutory rights under the CCL, such as statutory pre-emption on LLC share transfers. Where a clause conflicts with the law or the MOA, UAE courts will generally apply the statutory or constitutional provision instead.
3. What happens if there’s no shareholders’ agreement in place?
The company falls back entirely on the CCL’s default rules and whatever is stated in the MOA. This often leaves gaps around dividend policy, deadlock scenarios, and exit terms – areas an SHA is specifically designed to address.
4. Do free zone companies in the DIFC or ADGM need a different type of SHA?
Yes. DIFC and ADGM companies fall under common-law-based company regulations rather than the CCL, which generally allows for more contractual freedom. An SHA drafted for a mainland LLC should not simply be reused for a DIFC or ADGM entity without review.
