UAE LLCs Can Now Have Different Classes of Shares
What This Means for Hotel & Real Estate Joint Ventures
A Quiet Revolution in UAE Corporate Law
If you’re involved in structuring joint ventures in the UAE—whether as an investor, developer, hotel operator, or legal advisor—there’s a change you need to know about. And frankly, it’s one that should have happened years ago.
UAE limited liability companies can now issue different classes of shares.
That single sentence might not sound like front-page news. But for anyone who has ever spent months negotiating a complex shareholders’ agreement, layering side letters on top of side letters, or routing a perfectly good onshore deal through offshore holding structures just to get the economics right—this is a genuinely significant development.
The UAE has just handed the hotel and real estate sectors one of the most practical corporate structuring tools available in mature markets. And the implications for how joint ventures are set up, managed, and unwound are substantial.
So, What Actually Changed?
Historically, UAE onshore LLCs operated under a straightforward—some would say rigid—framework. Under the Commercial Companies Law (Federal Decree-Law No. 32 of 2021 and its predecessors), all shareholders in an LLC held the same class of shares. Your economic rights, voting power, and entitlement on liquidation were all strictly proportional to your ownership percentage. If you held 40% of the shares, you got 40% of the dividends, 40% of the votes, and 40% of whatever was left if the company wound up.
Clean and simple? Yes. But also profoundly limiting for sophisticated commercial arrangements.
If you wanted to give one partner preferred returns, or separate management control from economic participation, or create a waterfall distribution that rewarded the operating partner only after the capital investor hit a target IRR—you couldn’t do any of that at the share level. You had to build it all into contractual arrangements sitting outside the corporate structure: shareholders’ agreements, side letters, and often a web of offshore SPVs through ADGM, DIFC, or even BVI and Cayman vehicles.
Recent amendments to the Commercial Companies Law, supported by implementing ministerial decisions, have changed the game. LLCs can now create multiple classes of shares with differentiated rights, including:
- Dividend preferences — certain share classes can receive priority distributions before others participate.
- Different voting rights — including enhanced voting, limited voting, or even non-voting shares.
- Liquidation preferences — priority claims on assets if the company is dissolved.
- Management and operational rights — shares that carry specific governance entitlements distinct from economic participation.
This brings onshore UAE LLCs much closer to the flexibility that was already available in the ADGM and DIFC free zones—and, critically, to the toolkit that investors and operators have long relied on in jurisdictions like the US, UK, and Singapore.
What This Means for Hotel & Real Estate Joint Ventures
Let’s be specific, because this is where it gets genuinely exciting for practitioners in the UAE’s hotel and real estate sectors.
The UAE is one of the most active JV markets in the world for hospitality and real estate. Dubai and Abu Dhabi alone see billions of dollars flow into hotel developments, mixed-use projects, and large-scale real estate ventures every year. These deals almost always involve partners with fundamentally different roles, risk profiles, and return expectations.
Until now, reconciling those differences within a single onshore LLC was an exercise in contractual gymnastics. With different share classes, the gymnastics get a lot simpler.
Aligning Returns Between Capital Investors and Operating Partners
Consider a typical hotel JV: an institutional investor provides the equity capital, and a hotel management company provides the operational expertise and brand. The investor wants a preferred return on capital before any profits are shared. The operator wants to be rewarded for performance—ideally with an outsized share of profits once certain thresholds are met.
Previously, structuring this in an onshore LLC meant drafting elaborate provisions in a shareholders’ agreement that effectively overrode the equal-treatment default in the articles of association. Enforcement could be uncertain, and the mismatch between the corporate structure and the commercial deal created friction.
Now, the investor can hold Class A preferential shares with a built-in priority return (say, an 8% preferred dividend). The operator holds Class B shares that carry enhanced management rights but a lower base economic participation—with the right to a disproportionate share of profits once the investor’s preferred return has been satisfied. All of this can be embedded directly in the LLC’s articles of association, giving it corporate-level enforceability rather than purely contractual protection.
Preferred Equity for Land Contributors
Here’s another common scenario in the UAE: a local landowner contributes a prime plot of land to a development JV, while a developer contributes cash and project management expertise. The landowner wants certainty—a guaranteed minimum return on the value of the land before any upside is shared. The developer wants maximum flexibility to manage the project and capture the development premium.
With different share classes, the landowner can receive preferential shares that carry a fixed cumulative dividend tied to the appraised land value, plus a liquidation preference ensuring the land value is returned first in any exit or wind-up. The developer holds ordinary shares with full management rights and the residual upside. Clean, transparent, and enforceable at the corporate level.
Simplifying Waterfall Distributions
Waterfall distribution mechanisms—where profits are allocated through tiers based on return hurdles—are standard in real estate and hotel JVs globally. In the UAE, these have traditionally been purely contractual constructs, sitting in the shareholders’ agreement and often requiring a separate distribution agent or escrow mechanism to administer.
Different share classes allow the waterfall to be hardwired into the share structure itself. Each tier of the waterfall corresponds to a class of shares with specific dividend entitlements that mirror the intended economic split. The result: a cleaner structure, lower administration costs, and fewer disputes about interpretation.
Reducing the Need for Offshore Structures
This is perhaps the biggest practical benefit. Many UAE JVs have historically been structured through offshore or free zone holding vehicles—not because the parties wanted to be offshore, but because it was the only way to access the corporate flexibility they needed. A BVI or Cayman holding company, or an ADGM SPV, could issue different share classes even when the underlying onshore LLC could not.
That workaround added cost, complexity, regulatory burden, and sometimes reputational risk. With onshore LLCs now offering the same flexibility, there is a compelling case to simplify: bring the structure onshore, reduce the number of entities, and deal directly with the commercial reality at the level of the operating company.
Closing the Gap with Global Best Practice
It’s worth stepping back to appreciate what this means in a broader context.
In the United States, Delaware LLCs have long offered virtually unlimited flexibility in structuring member interests—different classes, series, bespoke economic and governance rights. In the UK, private limited companies routinely issue multiple share classes as a standard part of JV and investment structuring. Singapore’s private limited companies offer similar capabilities.
The UAE’s adoption of multiple share classes for LLCs is a deliberate and welcome step toward that same level of sophistication. It reflects the country’s ongoing commitment to modernising its commercial law framework and making onshore structures genuinely competitive with free zone and international alternatives.
For international investors and operators who are already familiar with multi-class structures in their home jurisdictions, this removes a significant friction point. The UAE now speaks the same corporate structuring language.
What Should You Do Now?
If you’re involved in hotel or real estate joint ventures in the UAE—or if you’re advising clients who are—here are three immediate steps to consider:
- Review your existing JV structures. If you have onshore LLCs that rely on complex shareholders’ agreements or offshore holding vehicles to achieve economic differentiation, there may now be an opportunity to simplify. Converting to a multi-class share structure could reduce costs, improve enforceability, and streamline governance.
- Structure new deals with share classes in mind. For upcoming JVs, start the structuring conversation with the assumption that different share classes are available. This may change where you incorporate, how you draft the articles of association, and whether you need offshore vehicles at all.
- Get specialist legal advice. The regulatory framework is still evolving, and implementation details matter. Work with legal advisors who understand both the new UAE corporate law amendments and the practical realities of hotel and real estate JV structuring. The flexibility is there—but it needs to be implemented correctly to deliver its full benefits.
The UAE’s commercial law framework has taken a major step forward. For those of us who spend our days structuring deals in the hotel and real estate space, this is one of those rare changes that genuinely makes life easier—and, more importantly, makes the structures we build for our clients more robust, more transparent, and more aligned with how business actually works.
The tools are now on the table. The question is whether you’re going to use them.
Disclaimer
This article is provided for informational purposes only and does not constitute legal advice. The regulatory landscape in the UAE continues to evolve, and the applicability of multi-class share structures to specific transactions depends on the particular circumstances involved. Readers are encouraged to seek independent legal counsel before making any structuring decisions based on the developments discussed herein.
Created by: Mohamed Darwish – Founder of Darwish Legal Consultants – Hospitality and real estate lawyer
