The structural question comes before the drafting. A **mainland LLC** has inflexible share arrangements, notarised transfers and DED approval on every change — which is why most UAE venture deals are done at an **ADGM or DIFC holding company** above the operating entity. Decide where this agreement sits before writing it.
Shareholders’ Agreement
Investors, control and exit
The structural question comes before the drafting. A mainland LLC has inflexible share arrangements, notarised transfers and DED approval on every change — which is why most UAE venture deals are done at an ADGM or DIFC holding company above the operating entity. Decide where this agreement sits before writing it.
| Item | Detail |
|---|---|
| Company | [COMPANY NAME], [licence / registration] [NUMBER] |
| Jurisdiction of the company | [Mainland LLC / Free zone / DIFC / ADGM] |
| Is this the operating entity or a holdco? | [DETAIL] — see Section 1 |
| Founders | [NAMES] |
| Investors | [NAMES] |
| Date | [DATE] |
| Share classes | [Ordinary; Preference] — check the entity permits classes |
| Board or managers | [NUMBER] — [composition] |
| Investor consent threshold | [Holders of a majority of the Preference Shares] |
| Drag threshold | [PERCENTAGE] [including the Investor Majority] |
| Constitution aligned on | [DATE] |
| Governing law and forum | [DIFC / ADGM / Emirate of ______ / Arbitration] |
1. Where This Agreement Should Sit
| Structure | Workability | Note |
|---|---|---|
| Mainland LLC | Difficult | Share classes are constrained; every transfer needs notarisation and DED approval; option schemes are awkward; the MOA is the operative constitutional document and it is in Arabic |
| Free zone company | Varies by zone | Some zones support classes and straightforward transfers; confirm with the zone before assuming |
| ADGM or DIFC company | Workable | Common law, English language, familiar share structures, option pools, and courts that apply the agreement predictably |
| Offshore holdco above a UAE operating entity | Common | Investment sits above; the UAE entity operates. Adds a layer but solves the mechanics |
1.1A shareholders’ agreement over a mainland LLC binds the parties contractually, but the MOA governs the company — and the MOA is notarised, in Arabic, and amended only before a notary with DED approval. Provisions in the agreement that the MOA does not reflect are difficult to give effect to.
1.2Decide the structure before drafting. Retrofitting a holdco after an investment has closed is materially harder than building it first.
2. Relationship with the Constitutional Documents
2.1The parties shall exercise their rights so as to give effect to this agreement, and shall procure that the [Memorandum of Association / Articles] are amended to be consistent with it.
6 more pages in the Word file
This is page 1 of the Word document, exactly as it appears when you open it. Fields shown like THIS are placeholders for you to complete.
These notes accompany the template and explain the drafting choices, the compliance points and the mistakes most often made with this document. They appear as a final page in the Word file, intended to be deleted before the document is executed.
A mainland LLC is a poor venture vehicle: share classes are constrained, every transfer requires notarisation and DED approval, and option schemes are awkward to operate. Most UAE venture deals place the equity layer at an ADGM, DIFC or offshore holding company above the operating entity. Retrofitting that after an investment closes is materially harder than building it first.
Over a mainland LLC, the notarised Arabic Memorandum of Association is the constitutional document. This agreement binds the parties contractually, but provisions the MOA does not reflect are difficult to give effect to — and amending the MOA means a notary, DED approval and, for overseas parties, attested powers of attorney.
Clause 6.8 makes the point that catches investors: a mainland share transfer requires notarisation, DED approval and a licence amendment before it takes effect. Weeks, not days, and it needs the parties or attested attorneys present. Build it into every closing timetable.
Board seats are visible; consent rights determine who can actually do anything. A minority investor with a veto over budgets, hiring, borrowing and material contracts controls the business. Set thresholds high enough that ordinary operations do not require consent, and negotiate the list line by line.
Clause 4.2 treats consent as given if not refused within ten business days. Without it an unresponsive investor — a fund wound down, a partner who has left — can stop the company acting entirely. Small clause, serious problem prevented.
Clause 6.7 confines a dragged party to title and capacity warranties with several, capped liability. Without it a minority holder can be compelled to sell and then give full business warranties on a company they do not run. Founders and small holders should insist on this.
Making a transfer in breach of tag-along void, rather than merely a breach of contract, is what gives the right teeth. A damages claim against a seller who has already exited is a poor remedy.
A buyback of unvested founder shares in a mainland LLC requires a notarised transfer with DED approval, and a departing founder who will not attend the notary is a real obstacle. This is one of the strongest practical arguments for holding the equity at a common-law holdco.
A participating preference means the investor takes its money back and shares the balance, which at modest exit values can leave founders with very little. Run the numbers at realistic exit values, not just the optimistic case.
A shareholder who has not acceded is not bound by transfer restrictions, drag, tag or information rights. This is the step most often skipped on small transfers and option exercises, and it undermines the whole agreement.
A transfer or issue crossing the 25 per cent threshold changes the beneficial ownership position, and the register must be updated and filed on the change rather than at renewal. It is checked in banking and licensing.
DIFC and ADGM courts apply this kind of agreement in English under common law, predictably. Onshore courts operate in Arabic with translated documents and a different procedural tradition. For an investment agreement the forum choice materially affects enforceability of the mechanics.
Clause 5.3 allows information rights to be suspended where a shareholder becomes a competitor, typically because an investor has backed a rival. Without it the company must keep supplying management accounts to a competitor.
Clause 9.3 requires the Company, a founder majority and the investor majority. An amendment clause needing only the investor majority allows the terms to be changed against the founders — check this in any draft presented as standard.
Reflects UAE law and practice current as of {{DATE OF USE}}. The Commercial Companies Law was amended by Federal Decree-Law 20 of 2025, including redomiciliation provisions, and DIFC, ADGM and free zone company rules change — take UAE legal advice on the holding structure before an investment closes, not after.
This is a ready-to-use template provided for convenience. Laws and requirements change, and every situation is different — please have it reviewed by a qualified professional (a lawyer, corporate secretary, or accountant as relevant) before you rely on it.