UAE Commercial Companies Law: The Complete Guide to Federal Decree-Law No. 32 of 2021 with 2025 Updates and Practical Impact

UAE Commercial Companies Law: The Complete Guide to the Federal Decree-Law No. 32 of 2021 – 2025 Updates and Practical Impacts

Estimated reading time: 12 minutes

Key Takeaways

• Federal Decree-Law No. 32 of 2021 modernizes and unifies the UAE’s corporate framework.
• Most mainland businesses now allow 100% foreign ownership, abolishing the 51% local sponsor rule.
• “Strategic sectors” such as defense, banking, and telecom remain restricted.
• New corporate vehicles—SPACs and SPVs—are now formally recognized.
• LLC reforms include reduced reserve requirements, streamlined governance, and enhanced UBO reporting.
• The law is a living model with ongoing Cabinet and Ministerial updates—continuous compliance is critical.

Introduction: The New Era of UAE Commercial Companies Law

The legal framework for businesses in the UAE underwent its most comprehensive overhaul in decades with the enactment of Federal Decree-Law No. 32 of 2021 on Commercial Companies, Effective 2 January 2022; ongoing updates continue via Cabinet and Ministerial decisions.. This modern statute replaces older regulations, abolishing entrenched restrictions on foreign ownership and governance.

Insights from reputable sources such as ProConsult Advocates & Legal Consultants confirm that all provisions of the Federal Law No. 2 of 2015 are now The 2015 law are now repealed; However legacy implementing decisions remain in force where not inconsistent with the new Commercial Companies Law, pending replacement. The UAE has officially entered an era of agility, innovation, and alignment with international best practices.

100% Foreign Ownership: The End of Old Restrictions

Abolishing the Local Sponsor Requirement

Historically, foreign investors could hold only up to 49% of shares in a UAE mainland company, with the remaining 51% held by a UAE national or entity. Under the new law, the mandatory 51% Emirati shareholder requirement has been abolished for most onshore activities, allowing 100% foreign ownership in almost all mainland commercial ventures. In fact the historic 51% Emirati shareholder rule has been abolished for most mainland activities; restrictions remain only for ‘activities with a strategic impact’ listed in Cabinet Resolution No. 55 of 2021.

Empowering Global Investment

This reform positions the UAE among the world’s most open jurisdictions for foreign direct investment, removing a long-standing barrier cited by multinationals and private equity firms.

Navigating the New Opportunities

Action Point: Entrepreneurs must consult the latest activity lists and official guidance from their chosen Emirate to ensure lawful structuring. For a practical walkthrough on formation under the new regime, see Company Formation in the UAE.

Strategic Sectors: What Remains Restricted?

Certain sectors remain subject to Emirati ownership or participation requirements and regulated by TDRA ((Telecommunications and Digital Government Regulatory Authority) under Cabinet Decision No. 55 of 2021 and related ministerial directives:

• Defense and military
• Banking and finance
• Insurance
• Telecommunications
• Currency printing
• Certain religious and fisheries-related services

Action Point: Always verify your business activities against the latest “Permitted and Restricted Activities” lists published by the relevant Department of Economy.

Innovative Corporate Structures: SPACs and SPVs

SPACs: Modern Capital Markets Vehicles

The law formally recognizes Special Purpose Acquisition Companies (SPACs), enabling streamlined mergers, acquisitions, and IPO readiness in alignment with leading global markets.

SPVs: Risk Segregation and Asset Transfers

Special Purpose Vehicles (SPVs) are now expressly codified for securitizations, asset transfers, and structured finance—boosting confidence among institutional investors and advisors. SCA Decision No. 1/RM/2022 (SPACs) and SCA Decision No. 25/RM/2024 (SPVs) provide the operative rulebooks.

Transformative Changes to LLCs

• Statutory Reserves: Reduced from 10% to 5% of net profits until reaching 50% of share capital (source).
• Board Continuity: If a new Board of Managers is not appointed, the previous board may continue for up to six months (source).
• General Assemblies: Notice periods now 21 days; a second meeting may proceed regardless of quorum.
• UBO Reporting: Mandatory Ultimate Beneficial Owner disclosure, aligning with FATF guidelines (source). UBO/Real Beneficiary reporting is governed by Cabinet Resolution No. 109/2023; administrative penalties are set by Cabinet Decision No. 132/2023—update registers and filings accordingly and maintain accurate documentary compliance to avoid penalties.

Compliance, Corporate Governance, and Taxation

The law adopts international best practices for audits, compliance, and annual filings across onshore and most free-zone entities. Key resources include company re-domiciliation and corporate governance compliance.

Integration with the UAE’s corporate tax regime requires up-to-date tax documentation and filings (Corporate Tax Guide). Corporate Tax is governed by Federal Decree-Law No. 47 of 2022, as amended by No. 60 of 2023 and No. 40 of 2024; Domestic Minimum Top-up Tax (15%) for in-scope Multinational Enterprises applies to financial years starting on/after 1 Jan 2025 (Cabinet Decision 142/2024).

Action Point: Review and, if needed, amend articles of association, board charters, and share transfer protocols to reflect new flexibilities.

Family Businesses and Succession Planning

The new laws provide for seamless succession planning, enhanced family office structures, and simplified intra-group mergers and asset transfers—empowering legacy groups to modernize without unnecessary regulatory risk (source). In fact Succession planning and governance for family-owned companies are addressed in Federal Decree-Law No. 37 of 2022 (Family Businesses) (in force since 2023).

Living Law: Continuous Updates and Mandatory Compliance

Federal Decree-Law No. 32 of 2021 operates as a living law, with frequent Cabinet Resolutions and Ministerial Decisions updating permissible activities, reporting templates, and compliance deadlines. All pre-2022 statutes are now obsolete.

Action Point: Establish quarterly legal audits and assign compliance teams to monitor new resolutions.

Practical Steps: Ensuring Your Business is Fully Compliant

• Verify Activities & Ownership: Cross-reference with the latest lists from the Department of Economy and Tourism (Dubai) and Department of Economic Development (Abu Dhabi).
• Maintain UBO & Tax Registers: Ensure timely UBO disclosures and up-to-date corporate tax filings.
• Amend Internal Documents: Update articles of association, board charters, and share transfer provisions.
• Schedule Reviews: Conduct bi-annual “corporate health checks” across governance and compliance.
• Seek Specialist Advice: For strategic sectors, cross-border M&A, SPAC/SPV structuring, or family office setups, consult expert law firms such as corporate law firms in Dubai.

Conclusion: Embracing Opportunity—The Road Ahead

The UAE Commercial Companies Law, embodied in Federal Decree-Law No. 32 of 2021 and its ongoing updates, positions the UAE as a global hub for innovation, transparency, and investor-friendly regulation. Success requires not just compliance, but proactive strategy and continuous vigilance. For full legislative text and the latest guidance, consult UAEAhead and the UAE Ministry of Economy.

FAQ

• Q: Can foreigners now own 100% of a UAE mainland company?
  A: Yes—except in designated strategic sectors, foreign investors may hold 100% of shares in most mainland activities.
• Q: What qualifies as a strategic sector?
  A: Sectors such as defense, banking, insurance, telecommunications, currency printing, and certain religious or fisheries services remain restricted.
• Q: How often is the law updated?
  A: Federal Decree-Law No. 32 of 2021 is a “living law” with frequent Cabinet and Ministerial resolutions—businesses should monitor updates quarterly.