Overview on A comprehensive guide to companies law in UAE

A comprehensive guide to companies law in UAE

The CCL is an important framework in the business environment of the UAE, inaugurated with the Federal Law No. 2 of 2015. It forms a robust framework on the constitution, management, and running of various types of business undertakings in the country. In the last decade, there have been numerous amendments to law, especially in the Federal Decree-Law No. 26 of 2020 and further reforms in 2021 and 2024, which further demonstrate the strategic importance the UAE accords to economic diversification and foreign investment. The latest changes in 2025 are more in this backdrop, ensuring the UAE to be a global business hub.

Key Features of the UAE Commercial Companies Law

The CCL regulates various domains of corporate governance, capital threshold, shareholder protection, and the liquidation process. This general overview covers their main features along with recent reforms:

I.        Corporate Structures in the CCL

The UAE law distinguishes between various classes of companies which can be registered in the territory. The current amendments have made it possible to open new gateways for the foreign investor in addition to properly defining the regulation of governance criteria for each.

i.     Limited Liability Company

LLCs are the most popular structure of business because they are the most flexible form of business operation and offer their shareholders limited liability protection.

ii.     Foreign Ownership

This was a difficult requirement for obtaining an LLC because historically, only an Emirati partner can hold 51% of its shares. Currently, since 2021, full 100% foreign ownership is allowed in many sectors

a.    Management

There can be at least one manager who may not necessarily be one of the owners of the company.

b.    Capital Requirements

There is no fixed minimum capital requirement for LLCs, but capital must be "sufficient" for the business's operations.

iii.   Joint-Stock Companies (Public and Private)

These structures are suitable for large-scale businesses and those intending to go public.

a.    Public Joint-Stock Company (PJSC)

Requires a minimum capital of AED 30 million and at least 10 shareholders. It can issue shares through an Initial Public Offering (IPO).

b.    Private Joint Stock Company (PrJSC)

The minimum capital is AED 2 million, and shares cannot be offered to the public.

iv.   Civil Companies and Sole Proprietorships

a.    Civil Companies

Usually owned by professionals like doctors, engineers, and accountants. It does not need a commercial license.

b.    Sole Proprietorship

This company can be owned by a single person, and the owner has unlimited liability regarding the debts of the business.

Branch of a Foreign Company

Foreign companies can also open a branch office in the UAE, under the same business activity as its parent company.

II.            New Amendments (2021–2025)

i.              100% Foreign Ownership

One of the biggest reforms was introduced in 2021, when the UAE government has allowed 100% foreign ownership in mainland companies for a larger set of activities. The amendment in 2025 expanded this list of sectors to include green technology, healthcare, renewable energy, and advanced manufacturing.

ii.             Corporate Governance Enhancements

Recent reforms have focused on strengthening corporate governance practices to ensure transparency and protect shareholders’ rights. Key governance provisions include:

a.    Companies must establish audit and nomination committees.

b.    Required for all joint-stock companies to discuss financial performance and major decisions.

c.    Enhanced rules prevent decisions that could harm minority shareholders.

iii.            Simplified Licensing Procedures

To attract more businesses, the administrative procedures for company registration have been simplified. This includes:

a.    Streamlined processes for registering businesses online.

b.    Faster approvals for licenses and regulatory compliance.

III.          Capital and Financial Requirements

i.              Limited Company : No fixed minimum capital, but must be "adequate" for business operations.

ii.            Public Joint-Stock Companies: AED 30 million minimum capital.

iii.           Private Joint-Stock Companies: AED 2 million minimum capital.

The revised requirements for capital verification under the 2024 amendments were more direct in order to prevent undercapitalization and, therefore, financial instability.

IV.          Corporate Tax and Financial Reporting

Since the implementation of UAE Corporate Tax in 2023, corporations are now also subject to extra financial reporting obligations. Key takeaways:

i.              Corporate Tax Rate: 9% on taxable income above AED 375,000.

ii.            Exemptions: Some free zones provide tax-free status, provided the corporation satisfies specific conditions.

iii.           Audited Financial Statements: Compulsory for most companies, promoting transparency and tax compliance.

V.            Foreign Direct Investment and Strategic Sectors

The UAE still attracts significant foreign direct investment (FDI) as recent reforms converge toward the country's vision for diversification of the economy. Strategic sectors are:

i.              Technology and Innovation

ii.            Renewable Energy

iii.           Healthcare and Pharmaceuticals

iv.           Advanced Manufacturing

These sectors benefit from incentives such as tax holidays, 100% repatriation of profits, and residency options for business owners and their families.

VI.           Dissolution and Liquidation

The CCL outlines clear procedures for company dissolution and liquidation:

i.              Voluntary Liquidation: Initiated by shareholders or partners when a business completes its purpose or becomes financially unviable.

ii.            Insolvency: Companies must follow specific procedures to settle debts, sell assets, and distribute remaining funds to shareholders.

iii.           Appointing Compulsory Liquidator: A registered liquidator shall be appointed.

Liquidation Reform 2025

Liquidation aims to make liquidation faster and more transparent, protect creditors, and shareholders' interest.

Conclusion

The UAE Commercial Companies Law continues to evolve and seize the adjustment of the business landscape as well as the objectives of the country. In this regard, recent amendments up to 2025 further repositioned the UAE as a global business hub by encouraging foreign investment, by simplifying corporate governance, and by opening opportunities in high-growth sectors. Whether you are a local entrepreneur or a foreign investor, understanding the nuances of the UAE Commercial Companies Law is crucial for ensuring compliance and long-term success. With a flexible regulatory environment and a focus on innovation, the UAE remains an attractive destination for businesses of all sizes. More on the latest developments and practical advice on setting up a business in the UAE may be obtained by consulting legal experts or official sources.