UAE Commercial Companies Law: What Changed

The UAE Commercial Companies Law is Federal Decree-Law No. 32 of 2021, which came into force on 2 January 2022 and replaced Federal Law No. 2 of 2015. It governs companies incorporated on the mainland in any of the seven emirates, and it is the instrument that carried through the removal of the general requirement for majority Emirati ownership.

It does not govern the financial free zones. The DIFC and ADGM have their own companies legislation and their own registrars, and other free zones operate under their own authority rules. Reading the federal law and assuming it applies to a free zone entity is one of the more common mistakes in UAE corporate work.

Which company forms does the Commercial Companies Law allow?

The law sets out a closed list of forms. A mainland company has to be one of them:

• Limited liability company, the workhorse form for most trading and services businesses.
• Private joint stock company.
• Public joint stock company, the form required for a listing on a UAE exchange.
• General partnership.
• Simple limited partnership.

The law also recognises the sole proprietorship LLC, where a single natural or corporate person holds all the shares, and provides for branches and representative offices of foreign companies. A branch is not a separate legal person; it is the foreign parent operating here, and the parent carries the liability.

Choosing between an LLC and a private joint stock company usually comes down to capital raising and share transfer mechanics rather than tax. The LLC has share transfer pre-emption rights built in by statute. The joint stock forms are more regulated and are supervised in part by the Securities and Commodities Authority.

What changed on foreign ownership, and is 100 per cent ownership guaranteed?

The general rule that a mainland company had to be at least 51 per cent owned by UAE nationals was removed by Federal Decree-Law No. 26 of 2020, which amended the previous companies law, and the position was carried into the 2021 law. Each emirate’s licensing authority implemented the change through its own lists of permitted activities during 2021.

Full foreign ownership is the default now, but it is not universal. Three qualifications matter:

• Activities of strategic impact remain subject to ownership and board conditions. The list is set at Cabinet level and covers sectors tied to national security and the strategic economy.
• Each emirate’s Department of Economic Development or equivalent decides which activities it will license with full foreign ownership, and the lists are not identical across emirates. An activity permitted at 100 per cent in one emirate may not be in another.
• Some activities are reserved or restricted by sector specific legislation that sits outside the companies law, for instance in certain professional, insurance and commercial agency contexts.

The practical effect is that the answer is activity specific and emirate specific. Check the current activity list with the licensing authority in the emirate where the company will be registered rather than relying on a general statement that foreign ownership is open.

What governance does the law require of a mainland company?

The requirements scale with the form. An LLC must have a manager or managers, whose powers are set by the memorandum of association, and must hold a general assembly of shareholders at least annually. It must appoint an auditor and keep accounts prepared under international accounting standards.

Joint stock companies carry more. They have a board, rules on board composition and terms, restrictions on related party transactions and conflicts of interest, and disclosure obligations. Public joint stock companies are subject to the additional corporate governance regime administered by the Securities and Commodities Authority, including rules on independent directors and board committees.

Across all forms, the law imposes duties on managers and directors to act in the company’s interest and within their powers, with personal liability for breaches that cause loss. Managers who trade on while the company is insolvent face exposure under the insolvency legislation as well.

What rights do minority shareholders actually have?

More than they used to, but the protections are still mostly procedural. The law gives shareholders the right to attend and vote at the general assembly, to inspect certain company records, to receive dividends as declared, and to pre-emption over share transfers in an LLC unless the constitutional documents say otherwise.

There are statutory majorities for decisions that change the constitutional position, such as amending the memorandum, increasing or reducing capital, or changing the company’s form. A minority holder with more than a quarter of the capital can block some of these, which is why the 25 per cent plus one share position is negotiated so hard in UAE joint ventures.

Shareholders can bring a claim against managers or directors for loss caused by breach of duty, and can apply to court to annul general assembly resolutions taken in breach of the law or the constitutional documents. Those remedies exist, but they run through the onshore courts in Arabic and take time. Well drafted shareholders’ agreements remain the more reliable protection.

What did the 2025 amendments add?

Federal Decree-Law No. 20 of 2025 amended the Commercial Companies Law with effect from October 2025. It is the most significant update since the law was issued, and it was aimed squarely at making the mainland more usable for structured joint ventures and for companies moving in from free zones or abroad. The changes reported include:

• Express recognition of joint venture mechanics that the previous text did not clearly support, including drag along and tag along rights, compulsory transfer of shares on defined events, and treatment of shares on a shareholder’s death.
• Different classes of shares in limited liability companies, with differing voting and profit entitlements, which was previously a reason to use a free zone or offshore holding structure.
• A re-domiciliation mechanism allowing a company to move its registration between competent authorities without losing legal personality or continuity.
• Provision for non-profit companies onshore, and easier conversion between company forms.
• Confirmation that free zone incorporated companies carry UAE nationality, and provision for free zone companies to establish a presence onshore where the free zone’s own legislation permits it.

Several of these changes depend on implementing decisions and on how each licensing authority applies them, so the practical availability of a given feature may still be ahead of or behind the text. This is an area where the position is genuinely still settling, and current confirmation from the relevant authority is worth getting before structuring around it.

How do the free zones, DIFC and ADGM sit alongside this?

They sit outside it. The DIFC operates under its own Companies Law and Registrar of Companies, applying a common law framework with its own courts. ADGM applies companies regulations closely modelled on English law, again with its own registrar and courts. Other free zones, from JAFZA to the various media and technology zones, each have their own company regulations and licensing authorities.

What this means in practice is that a group operating across the UAE may hold entities under three or four different corporate regimes at once, with different filing calendars, different share transfer mechanics and different dispute forums. Free zone entities have historically been restricted in trading directly onshore, and the 2025 amendments move some way toward easing that, but the licensing requirements still have to be met.

Where do foreign investors get caught out?

The recurring problems are not with the statute. They are with assumptions:

• Assuming full foreign ownership applies to the intended activity without checking the emirate’s current list.
• Using a template memorandum of association that does not reflect what the shareholders’ agreement says, then discovering that the registered document governs.
• Overlooking commercial agency and distribution legislation, which sits outside the companies law and can restrict how products are brought to market.
• Structuring in a free zone for ownership reasons that no longer apply, and taking on trading restrictions unnecessarily.
• Missing that ultimate beneficial ownership, economic substance and corporate tax obligations run alongside company law and have their own deadlines.

This article is general information about UAE law as at September 2026 and is not legal advice. The position varies by emirate and by free zone and changes often, and the Commercial Companies Law has been amended since it was issued. Take advice on your own facts before incorporating, restructuring or transferring shares.

Legal Desire has published legal industry news and analysis since 2012. This article is part of our UAE desk, which tracks the laws, courts and regulators of the Emirates for lawyers and in-house teams.