A shareholders agreement protects co-founders and investors in a UAE company. Here is the complete 2025 guide to UAE shareholders agreements.
Why You Need a UAE Shareholders Agreement
A UAE company’s Memorandum of Association (MOA) and Articles of Association (AOA) are public documents filed with the relevant authority (DED, free zone authority, MOHRE). They do not contain sensitive commercial arrangements (vesting schedules, drag-along rights, put/call options). A shareholders agreement fills that gap: it is a private contract between shareholders. It governs: decision-making rights (what requires unanimous consent vs. majority), share transfer restrictions (right of first refusal, lock-up periods), founder vesting (ensures founders earn their shares over time), exit mechanisms (drag-along, tag-along, buyout obligations), and dispute resolution between shareholders.
Key Clauses in a UAE Shareholders Agreement
Share transfer restrictions: Right of First Refusal (ROFR): before selling to a third party, a shareholder must offer their shares to existing shareholders first. Lock-up period: shares cannot be sold for X years from incorporation. Founder vesting: standard in venture-backed companies: 4 years with 1-year cliff. If a founder leaves in year 1: 0% vesting. If a founder leaves in year 2: 25% vesting. Board composition: who appoints board members, quorum requirements. Reserved matters (requiring supermajority or unanimity): raising new capital, changing the business plan, selling major assets, entering into contracts above AED X value. Drag-along rights: majority shareholders can force minority shareholders to sell in a company sale (prevents minority vetoes of M&A transactions). Tag-along rights: minority shareholders can participate in a majority shareholder sale at the same price (prevents founders from exiting and leaving investors stuck). Governing law: UAE law (enforced in UAE Courts), DIFC law (enforced in DIFC Courts), or English law (requires DIFC or ADGM jurisdiction to enforce).