What the Best Lawyers in Dubai Look for in a UAE Shareholder Agreement
By Dr Sunil Ambalavelil
Global Executive Chairman, Kaden Boriss
A shareholder agreement should define control, funding, transfers, deadlock and exit before business pressure tests the arrangement.
A shareholder agreement is often negotiated when the founders are aligned and the business is moving forward. That is precisely when the difficult questions should be addressed. Who controls major decisions? What happens if one shareholder stops funding the company? Can a partner sell to an outsider? What happens if the owners reach a deadlock?
In my experience, the work expected from top lawyers in Dubai is not to make the agreement unnecessarily long. It is to understand how the business is intended to operate and make sure the legal documents reflect that commercial reality.
The applicable corporate framework also depends on where the company is established. This article focuses primarily on mainland UAE limited liability companies. Businesses established in the DIFC, ADGM or other free zones may be subject to separate company regulations and constitutional requirements.
Start With the Company’s Existing Documents
When I review a mainland UAE shareholder arrangement, I first examine the legal form of the company, its licence, Memorandum of Association, existing resolutions and the authority given to its managers.
A private shareholder agreement should not be drafted separately from the company’s constitutional documents. Rights agreed between shareholders may need to operate alongside provisions already contained in the Memorandum of Association and the applicable Commercial Companies Law.
For a mainland limited liability company, Federal Decree-Law No. 32 of 2021 on Commercial Companies, as amended by Federal Decree-Law No. 20 of 2025, regulates matters including management, ownership rights and transfers of partners’ stakes.
Article 83 provides that an LLC may be managed by one or more managers. Unless their authority is restricted by the Memorandum of Association, appointment contract or other applicable terms, managers may have broad powers to manage the company.
That makes it important to establish who can sign contracts, borrow money, operate bank accounts or commit the company to significant transactions.
Control Is More Than an Ownership Percentage
A 50 per cent shareholder does not automatically control every important decision.
Ownership, voting rights, management authority and reserved matters need to be considered separately. This is particularly important following the 2025 amendments to the Commercial Companies Law.
The amended framework provides greater flexibility for mainland LLCs to create different classes of partners’ stakes with different rights, subject to the applicable legal requirements. Those differences may concern voting, profits, redemption or other economic and governance rights.
Shareholders should therefore identify which decisions require ordinary approval and which deserve a higher threshold. These may include issuing additional equity, taking substantial debt, changing the company’s activity, acquiring another business, selling important assets or transferring intellectual property.
The approval structure should reflect the particular company rather than being copied from another transaction.
Plan Transfers and Exit Before Anyone Wants to Leave
Exit provisions are much easier to negotiate before somebody has decided to leave.
A shareholder may exit because of retirement, disagreement, financial pressure, a third-party offer or a change in business strategy. The legal documents should anticipate those possibilities.
Article 79 of the Commercial Companies Law permits an LLC partner to assign or pledge a stake in accordance with the Memorandum of Association. The assignment or pledge becomes effective against the company and third parties once it is recorded in the commercial register.
Article 80 contains a specific procedure where a partner intends to transfer a stake to a non-partner. The transferring partner must notify the other partners through the company manager of the proposed transferee and the terms of the transfer. Existing partners may request redemption within 30 days from the date on which the manager is notified of the agreed price.
A shareholder agreement should therefore work with the statutory transfer process rather than attempt to replace it.
Drag-Along and Tag-Along Rights Now Matter More
The 2025 amendments also make modern exit mechanisms particularly relevant when drafting shareholder arrangements.
The amended Commercial Companies Law expressly recognises structures such as drag-along and tag-along rights. These provisions can become important when a majority shareholder wants to sell the business or a minority shareholder wants protection during a sale.
A drag-along mechanism may allow the required majority to compel other shareholders to participate in a qualifying sale, subject to the agreed and applicable legal conditions. A tag-along mechanism can give minority shareholders the right to participate where another shareholder sells its stake.
Where these rights are intended to operate at company level, the shareholder agreement should be reviewed together with the Memorandum of Association. Good lawyers in Dubai should test whether the documents support the intended exit rather than assuming that a private agreement alone will solve the issue.
Deadlock Clauses Need a Real Outcome
Equal ownership can work well until the owners disagree on a decision that the business cannot postpone.
A weak deadlock provision may require negotiation but say nothing about what happens if negotiation fails. That simply delays the dispute.
Depending on the ownership structure, the agreement may use escalation between principals, mediation, a buy-sell mechanism or an agreed exit process. The method should be chosen carefully because a poorly drafted mechanism can create pricing disputes or give one shareholder disproportionate leverage.
The question is not whether a deadlock clause sounds sophisticated. It is whether the mechanism can actually bring the dispute to an end.
Funding and Guarantees Need Separate Rules
Many shareholder disagreements begin with money.
One shareholder may expect further investment while another believes the original capital contribution was sufficient. The agreement should therefore explain how additional funding will be raised and whether it will come through new equity, shareholder loans, external borrowing or another agreed route.
It should also address what happens if a shareholder does not provide funding that has been properly approved.
Personal guarantees deserve separate treatment. Two shareholders may own identical percentages of a company while carrying very different financial exposure if only one has guaranteed company debt.
Intellectual property should also be addressed where brands, software, domains, designs or proprietary processes are central to the business. Ownership should be clear before the company becomes dependent on an asset that is legally held by an individual shareholder.
Dispute Clauses Must Fit the Structure
The governing law, court or arbitration forum, seat, language and enforcement position can materially affect how a shareholder dispute is handled.
This becomes more important where shareholders, assets or contractual obligations are spread across different jurisdictions.
The UAE’s current Civil Transactions Law was introduced through Federal Decree-Law No. 25 of 2025 and replaced Federal Law No. 5 of 1985 from 1 June 2026. Agreements drafted or reviewed in 2026 should therefore be checked against the current legal framework rather than copied from older precedents without review.
Draft for the Difficult Day
Labels such as Best Indian Lawyer in Dubai, “best lawyers” or other ranking expressions should never replace the substance of the work.
A shareholder agreement proves its value when the parties disagree, an investor enters, somebody wants to sell or additional capital is required.
The same principle applies whether a client instructs Indian lawyers in the UAE, Indian lawyers in Abu Dhabi or advisers from another professional background. What matters is relevant legal knowledge, the registration or licensing applicable to the work, commercial judgment and disciplined drafting.
A well-structured shareholder agreement should tell the parties who has authority, how important decisions are made, how funding works, how interests can be transferred and what happens if the commercial arrangement stops working.
Before You Sign
If you are entering a UAE business with partners, bringing in an investor or reviewing an existing ownership structure, the shareholder agreement should be tested before commercial pressure exposes its weaknesses.
A focused review can identify gaps between the Memorandum of Association, management authority, shareholder rights, funding obligations, transfer restrictions and exit mechanisms while there is still room to negotiate them properly.
FAQs
1. Is a shareholder agreement the same as a company’s Memorandum of Association?
No. The Memorandum of Association forms part of the company’s formal constitutional structure. A shareholder agreement is a separate contractual arrangement. The documents should be drafted so that they operate together rather than creating conflicting rights or obligations.
2. Can a mainland UAE LLC shareholder sell a stake to an outsider?
Yes. A transfer may be made subject to the Memorandum of Association and the applicable Commercial Companies Law provisions. Article 80 requires notification through the company manager and gives existing partners a 30-day period to request redemption from the date the manager is notified of the agreed price.
3. Can shareholders have different voting or economic rights in a UAE LLC?
Yes. Following the 2025 amendments to the Commercial Companies Law, mainland LLCs have greater flexibility to create different classes of partners’ stakes carrying different rights, subject to the applicable legal and registration requirements.
4. Can a UAE shareholder agreement contain drag-along and tag-along rights?
Yes. The amended Commercial Companies Law expressly recognises these types of exit mechanisms. Their drafting should be coordinated with the company’s Memorandum of Association and the applicable statutory requirements.
5. Should a shareholder agreement include a deadlock clause?
Yes, where the ownership and voting structure creates a genuine risk of deadlock. The mechanism should explain what happens if negotiation fails and should reflect the company’s finances, ownership structure and commercial circumstances.
6. What should I consider when choosing a lawyer for a UAE shareholder agreement?
Look at relevant corporate experience, knowledge of current UAE legislation, appropriate professional registration for the work involved, drafting quality and the ability to understand the commercial arrangement behind the legal documents. The strongest advice connects the legal structure with how the company will actually operate.
