UAE Trends and Developments Contributed by: Ahmed Ibrahim, Malack El Masry and Maryam Quadri, Ibrahim N Partners
investors assess jurisdictions not only on growth pros - pects but also on the enforceability of control trans - fers and liquidity pathways. Legal certainty around change-of-control mechanics directly affects pricing, structuring and risk appetite. The codification of drag-along and tag-along rights within the CCL by way of these new amendments sig - nals a structural maturation of the mainland regime. Statutory recognition of drag-along rights A drag-along right is a mechanism that permits a majority shareholder (or shareholders holding a speci - fied ownership threshold) to require minority share - holders to sell their shares to a third-party purchaser as part of a sale of the company. It is typically trig - gered when the majority shareholder agrees to trans - fer its stake and wishes to include all remaining shares in the transaction. This right previously existed by contract and now exists under the reformed CCL. It sets out defined conditions under which minority shareholders must participate in the sale. These conditions usually include a minimum ownership threshold to exercise the right, formal notice requirements, and an obliga - tion for minority shareholders to transfer their shares on the same terms and price as the majority. The stat - utory framework expressly recognises the ability of partners or shareholders to agree such mechanisms within the company’s constitutional and contractual documentation, thereby integrating drag-along rights into the corporate law regime rather than leaving them solely to private ordering. In essence, a drag-along right enables the majority to “drag” minority shareholders into a sale so that the purchaser acquires the entire share capital of the company, rather than only the majority stake. Effects of codification of drag-along rights As explained above, historically, drag rights in main - land companies existed purely as contractual con - structs within shareholders’ agreements. Although freedom of contract under UAE law generally sup - ported such provisions, their enforceability depended on careful drafting, alignment with constitutional doc - uments and compliance with formal transfer proce -
dures. In contested exits, minority shareholders could create procedural delays or challenge implementation. The 2025 amendments to the CCL provide express statutory recognition of drag-along rights. This strengthens the legal foundation for co-ordinated exits and reduces the risk that such mechanisms are perceived as inconsistent with mandatory corporate provisions. Further, it reduces the risk of procedural delay. However, statutory recognition and the reduction of procedural risk do not eliminate procedural com - plexity. Onshore share transfers continue to require notarisation, regulatory filings and corporate approv - als. Execution discipline remains essential. What the CCL reform does is reduce conceptual ambiguity and strengthen enforceability in principle. Transfers of shares in mainland limited liability companies must still comply with notarised documentation require - ments and registration with the relevant licensing authority, and joint stock companies remain subject to their own statutory transfer procedures. From a litigation risk perspective, codification also narrows potential arguments grounded in abuse- of-right principles under the UAE Civil Transactions Law. While good faith remains a governing principle, a drag right exercised in compliance with statutory and agreed thresholds is less susceptible to chal - lenge. This alignment between corporate and civil law principles contributes to greater coherence within the UAE’s broader legislative framework. The cumulative effect is enhanced transactional con - fidence. While codification enhances legal certainty, it does not eliminate all interpretive questions. As with any modern legislative reform, practical contours will con - tinue to develop through application. The boundaries of drag-along enforcement have yet to be tested in UAE courts, and the interaction between majority exit rights and civil law principles will ultimately be shaped through judicial interpretation. The reform nonetheless strengthens the statutory foundation, with its practical parameters expected to mature through experience and jurisprudence.
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