UAE Commercial Companies Law: Unveiling the Most Progressive Corporate Legal Framework in the Region

UAE Commercial Companies Law: Unveiling the Most Progressive Corporate Legal Framework in the Region

Estimated reading time: 10 minutes

Key Takeaways

• Federal Decree-Law No. 32 of 2021 on Commercial Companies remains the principal corporate statute in the United Arab Emirates as at November 2025, supported by implementing decisions issued by the Ministry of Economy and the Securities and Commodities Authority (source).
• 100% foreign ownership For most mainland business activities is permitted; strategic-impact sectors remain subject to Emirati ownership and conditions under Cabinet Resolution No. (55) of 2021.
• The law recognizes Limited Liability Companies, Public Joint Stock Companies, Private Joint Stock Companies, Special Purpose Vehicles and Special Purpose Acquisition Companies; governance and registrar procedures for such vehicles are regulated by subsequent decisions of the Securities and Commodities Authority and the Ministry of Economy.
• Disclosures of the Real Beneficiary (commonly referred to as Ultimate Beneficial Owner) are governed by Cabinet Resolution No. (109) of 2023; annual auditing and tax-reporting obligations apply under the Companies Law and tax legislation respectively, in line with prevailing AML/CFT requirements.
• Federal corporate income tax is levied at nine percent on taxable profits exceeding AED 375,000 under Federal Decree-Law No. (47) of 2022 (as amended); relief for qualifying free-zone persons is provided under Cabinet Decision No. (100) of 2023 and Ministerial Decision No. (265) of 2023. A domestic minimum top-up tax of fifteen percent applies from 1 January 2025 to in-scope multinational enterprise groups. The United Arab Emirates does not impose a separate ‘digital services tax’ at this time.
• In respect of listed Public Joint Stock Companies, governance obligations are governed by the Securities and Commodities Authority Governance Guide (Decision No. 3/R.M of 2020) and subsequent amendments; sustainability and ESG-reporting obligations are principally directed at listed companies and exchange-regulated issuers, and should not be presented as universally mandatory for all companies under the Companies Law.

The Governing Law and Legislative Status: Federal Decree-Law No. 32 of 2021

The primary law that governs commercial companies in the United Arab Emirates is Federal Decree-Law No. 32 of 2021 on Commercial Companies. This legislation is not only the authoritative corporate law as of November 2025, but it has also been expressly validated by the UAE’s legislators and regulators as the currently operative framework (source).

Significantly, the law has weathered post-2021 economic and regulatory changes, cementing its place as the nation’s bedrock for commercial regulation. It has been refined—but not replaced—by various ministerial updates and decisions, most notably the Ministerial Decision No. 50 of 2025, aimed at boosting corporate flexibility and efficiency (notably in share transfers and governance) (source).

Any previous company law regimes or pre-2021 frameworks should now be disregarded for legal and practical purposes, as the new law consolidates all relevant provisions into a harmonized and modernized legal code (source).

Key 2025 Features and Developments in the UAE Commercial Companies Law

1. 100% Foreign Ownership on the Mainland: A Transformative Opening

Perhaps the most revolutionary change in UAE corporate law is the complete abolishment of the previous 51% UAE national shareholding requirement for most onshore (mainland) corporate structures. As of 2025, foreign nationals and entities may own up to 100% of commercial companies in permissible sectors (source).

2. Corporate Entity Forms and Enhanced Flexibility

Federal Decree-Law No. 32 of 2021 introduces a modern suite of corporate vehicles—LLCs, PJSCs, SPVs, and SPACs—offering unprecedented agility. Reserve requirements for LLCs have been reduced, governance regimes simplified, and compliance obligations eased. For more on formation, see our guide to company formation in the UAE.

3. Ultimate Beneficial Owner (UBO) Disclosure: Raising the Bar on Transparency

All companies must now maintain accurate, updated records of their ultimate beneficial owners and file these with the competent authorities. This aligns the UAE with global AML standards and enhances regulatory transparency (source).

4. Compliance, Auditing, and Reporting: Modernizing Accountability

The law mandates annual auditing and financial reporting for almost all entities. Recent reforms introduce transfer pricing rules, expanded disclosures, and economic substance declarations aligned with OECD best practices. See also our guide on corporate governance compliance in Dubai.

5. Corporate Taxation: The New Fiscal Reality

Since June 2023 the UAE applies a 9% federal corporate tax on profits above AED 375,000. Recent enhancements clarify group relief, exemptions for Free Zone entities, and upstream oil and gas activities. Digital service tax provisions and transfer pricing documentation requirements now reflect the UAE’s shift toward a digital economy. For full details, consult our corporate tax law UAE guide.

6. Enhanced Audit and Governance Standards

Legislation now requires comprehensive governance frameworks: defined board structures, detailed compliance documentation, and stringent annual filing timelines (source).

7. Share Transfers and Exit Mechanisms

Ministerial Decision No. 50 of 2025 reduced lock-up periods for share transfers in private joint stock companies, promoting faster exits and deal flows in the private capital and M&A markets (source).

Sectoral Restrictions and Exemptions: Understanding the Boundaries of Foreign Ownership

While full liberalization of foreign ownership is historic, strategic sectors remain restricted. Prospective investors must review the current business activity lists from Dubai and Abu Dhabi authorities before establishing or restructuring operations.

Sector	Foreign Ownership Restriction	Authority/Regulation
Defense, military, and security	Emirati ownership required	Cabinet Decision No. 55 of 2021
Banking, insurance, and finance	Emirati ownership required	Relevant Financial Legislation
Currency printing	Emirati ownership required	Cabinet Decision No. 55 of 2021
Telecommunications	Emirati ownership required	Cabinet Decision No. 55 of 2021
Hajj/Umrah & Qur’an memorization	Emirati ownership required	Cabinet Decision No. 55 of 2021
Fisheries-related services	Emirati ownership required	Cabinet Decision No. 55 of 2021
All Other Sectors	100% foreign ownership allowed	Federal Decree-Law No. 32 of 2021

Practical Compliance Actions for 2025 and Beyond: Action Items for Every UAE Company

• File and Maintain Comprehensive UBO Declarations: Timely disclosure and maintenance of ultimate beneficial ownership information is non-negotiable (source).
• Annual Audit and Tax Filings: Submit annual audit reports and corporate tax returns, with documented transfer pricing and related-party transactions.
• Review Activity Lists: Verify full foreign ownership eligibility via the latest government-issued activity lists before registration or restructuring (source).
• Monitor Strategic Sectors: Stay updated on new Cabinet Decisions and Emirate-level guidelines as sector-specific restrictions may evolve (source).

Minimum Setup and Capital Requirements: Flexibility with Strategic Stringency

The law imposes no fixed minimum capital for LLCs and PJSCs unless mandated by sector-specific regulations. Regulated industries—such as finance or insurance—still adhere to higher thresholds set by their own authorities (source).

Corporate Transparency, ESG, and Internal Controls: Tomorrow’s Standard Today

Reforms emphasize Environmental, Social, and Governance (ESG) reporting and ethical corporate practices. Enterprises are expected to integrate ESG disclosures into annual reports and internal controls, aligning with global regulatory environments and boosting reputational standing.

The Summary of Legal Status: Singular Authority for UAE Companies

Federal Decree-Law No. 32 of 2021 on Commercial Companies remains the fully enforced legal framework as of November 2025 (source).

Cross-Verification and Official Guidance: The Ongoing Duty to Stay Informed

Given the UAE’s “living law” approach, businesses should directly verify nuances and thresholds with the UAE Ministry of Economy and consult UAE-qualified counsel for entity structuring, sector compliance, and complex transactions.

FAQs

• Which law governs UAE commercial companies?Federal Decree-Law No. 32 of 2021 on Commercial Companies is the primary legislation as of November 2025, consolidating all corporate provisions and validated by subsequent decisions.
• Can foreigners own 100% of mainland companies?Yes, most sectors now allow full foreign ownership, except strategic industries like defense, banking, and telecom, which require Emirati ownership under Cabinet Decision No. 55 of 2021.
• What are the new disclosure requirements?All companies must register and update Ultimate Beneficial Owner (UBO) information with the competent authorities to comply with AML and FATF standards.
• What is the corporate tax rate?The UAE applies a 9% federal corporate tax on profits exceeding AED 375,000, with exemptions for qualified free zone entities and upstream oil or gas activities.
• Are there new governance and ESG rules?Yes, enhanced audit, reporting, and governance standards aligned with OECD best practices are mandatory, with an increased focus on ESG disclosures.