The second is a capital increase <\/strong><\/h3>\n\n\n\nThe company issues new shares to the investor. The investor puts money in, the total share capital increases, and they receive a new stake in return. This route is common when the goal is raising funds for the business rather than restructuring existing ownership. <\/p>\n\n\n\n
Both methods ultimately lead to the same outcome \u2013 the new party becoming an official shareholder. However, there are slight differences in documentation, procedure, and repercussions. Regardless of the method chosen, the company’s MOA needs to be modified and duly recorded by the appropriate government body. This is an absolute requirement in the UAE. <\/p>\n\n\n\n
Do existing shareholders have the right of first refusal? <\/h2>\n\n\n\n
Yes, and this is the step most people overlook entirely. As per the UAE Commercial Companies Law (Federal Decree Law No. 32 of 2021), mainland shareholders in the LLC have what is known as a pre-emption right. Existing shareholders must first be offered the shares on exactly the same terms as those offered to the new investor. <\/p>\n\n\n\n
The right allows for the existing shareholders to keep or expand their shareholding before an external party enters the picture. The time period they have is 30 days after notification. If nobody acts within that window, the transfer can proceed to the new investor. If more than one existing shareholder wants in, the available shares are split between them proportionally, based on what they already hold. <\/p>\n\n\n\n
This is not a formality you can skip. It exists by law. Any transfer that bypasses pre-emption rights can be legally challenged after the fact, even once the deal is done. The practical approach is to collect written waivers from existing shareholders upfront. That clears the path cleanly and avoids the 30-day delay.<\/p>\n\n\n\n
What shareholder approval is needed before adding an investor? <\/h2>\n\n\n\n
After addressing the pre-emption rights of the existing shareholders (i.e., the right of first refusal), the remaining shareholders should provide their approval for the admission of the new investor at a General Assembly (GA) meeting. <\/p>\n\n\n\n
In terms of a Mainland LLC,<\/strong> the applicable guidelines are set out in Federal Decree-Law No. 32 of 2021 regarding the Commercial Companies Law (CCL): <\/p>\n\n\n\n\n- Default quorum for a GA meeting is at least 50% of the total share capital held by the shareholders (unless otherwise stated in the MOA of the corporation in question \u2013 often seen). <\/li>\n<\/ul>\n\n\n\n
\n- At least 75% majority of the shares represented at the GA meeting must vote in favour of admitting the new investor, increasing the share capital or amending the MOA. <\/li>\n<\/ul>\n\n\n\n
<\/p>\n\n\n\n
If the first meeting does not achieve the required quorum, a second meeting can be called within 5 to 15 days<\/strong> of the first. Decisions taken at the second meeting are valid regardless of the number of shareholders present or the percentage of share capital represented. This safeguard prevents the process from being blocked by absent or unresponsive shareholders. <\/p>\n\n\n\nThe process for Free Zone LLCs (FZ-LLCs) <\/strong>is nearly the same. Although Free Zones are governed by their own regulatory authorities rather than the CCL on the mainland, most free zones, such as DMCC, JAFZA, Meydan, RAKEZ, DDA, and others follow very similar rules: <\/p>\n\n\n\n\n- Quorum requirements and voting thresholds should be detailed in the MOA\/AOA, typically requiring at least 50% (often increased to 75%) quorum, and a 75% majority vote for amendments to the MOA and capital changes. <\/li>\n<\/ul>\n\n\n\n