Corporate Governance in the UAE: What Business Owners and Entrepreneurs Need to Know

Corporate governance in the UAE has become a critical element for any business seeking stable growth and long-term success. Strong governance helps companies gain the trust of stakeholders, meet regulatory obligations, and foster sustainable development. Below, you’ll find an overview of the UAE’s legal framework, compliance requirements, and practical guidance on how to establish sound governance practices – whether you’re running a startup, an SME, a publicly listed corporation, or a family enterprise.

The UAE’s Legal Landscape for Corporate Governance

Commercial Companies Law

The primary legislation underpinning corporate governance in the UAE is Federal Decree-Law No. 32 of 2021 (replacing Federal Law No. 2 of 2015). This law regulates how companies are formed, managed, and dissolved, covering structures such as Limited Liability Companies (LLCs), Private Joint Stock Companies (PJSCs), and Public Joint Stock Companies (PJSCs listed on stock exchanges).

A major development in this law is allowing 100% foreign ownership in many sectors, enhancing the UAE’s attractiveness to international investors. In tandem, new provisions strengthen minority shareholder protections and clarify corporate governance requirements, emphasising transparency, accountability, and effective oversight.

Securities and Commodities Authority (SCA) Governance Code

Listed firms face additional obligations through the SCA’s Corporate Governance Code, introduced in Chairman Decision No. 3/RM of 2020 and subsequently updated. These rules cover board composition, committee mandates, disclosure practices, and gender diversity targets. Listed companies must have a majority of non-executive directors, with at least one-third independent and at least one female director on the board.

Free Zone Regulations

Companies in free zones like Dubai International Financial Centre (DIFC) or Abu Dhabi Global Market (ADGM) follow distinct regulations that generally align with international best practices. However, these zones may have their own requirements for board governance, reporting, and oversight, so businesses operating in these zones should ensure they understand the specific rules.

Family Business Law

Recognising the dominance of family firms in the local economy, the UAE enacted Federal Decree-Law No. 37 of 2022 on Family Businesses. It offers an optional governance framework, facilitating succession planning, dispute resolution, and establishing family charters. By registering under this law, family enterprises benefit from legal mechanisms that safeguard multi-generational continuity.

Core Compliance Requirements

Regardless of whether you run a startup or a large corporation, certain requirements apply across the board.

Maintaining Proper Records and Registers

• All companies must keep accurate registers of shareholders, directors, and Ultimate Beneficial Owners (UBOs) (as per Cabinet Decision No. 58 of 2020).
• Failing to update beneficial ownership information can result in financial penalties or suspension of operations.

Annual Financial Reporting and Audits

• Businesses are expected to prepare annual financial statements, often requiring an external auditor’s review.
• Mainland and free zone companies generally submit audited accounts as part of their licence renewal or annual return.
• Good financial discipline promotes trust among investors, lenders, and customers.

General Meetings and Decision-Making

• Most companies must hold an Annual General Meeting (AGM) to approve financial statements and other significant resolutions.
• Public joint stock companies must observe stricter rules (e.g., holding AGMs within a set timeframe, following quorum requirements, and submitting decisions to regulators).

Board Composition and Committees (for Listed Firms)

• Listed PJSCs must comply with the SCA’s Corporate Governance Code, which mandates committees such as an Audit Committee and a Nomination and Remuneration Committee.
• Independent directors are vital, ensuring impartial oversight.

Disclosure and Reporting

• Listed companies are obliged to publish quarterly and annual financial reports, plus corporate governance and sustainability (ESG) reports.
• Transparency also includes immediate disclosures of material information, like major contracts or leadership changes.

Internal Controls and Risk Management

• Directors must ensure adequate systems to identify and manage risks, prevent fraud, and comply with anti-money laundering and anti-bribery laws.
• Annual reviews of these controls are often expected, particularly for public entities.

Regulatory Filings and Approvals

• Keeping your trade licence up-to-date, registering corporate changes, and filing mandatory documents with regulators (e.g., SCA for listed firms) is essential to stay compliant.

Best Practices for Different Types of Companies

Startups and SMEs

Although startups and SMEs aren’t subjected to the same level of scrutiny as public companies, adopting sound governance from day one can help attract investment, maintain discipline, and smooth future expansion.

• Know the Rules: Familiarise yourself with key obligations, such as renewing your trade licence, maintaining a shareholder register, and filing UBO data.
• Clear Organisational Structure: Define roles and responsibilities early so everyone understands who’s in charge of which decisions.
• Advisory Boards: Even if a formal board of directors isn’t mandatory, consider an advisory board of mentors, industry experts, or investors to bring external insights.
• Financial Transparency: Prepare reliable financial statements and share them with stakeholders. Even small enterprises benefit from annual audits or at least consistent financial reviews.
• Ethical Culture and Compliance: Establish basic internal policies (anti-bribery, whistleblowing, conflict of interest rules) and lead by example. Demonstrating integrity builds trust with partners and clients.
• Forward Planning: As you grow, governance expectations will rise. By setting up strong systems from the outset, you’ll ease the transition to later funding rounds or mergers.

Public Joint Stock Companies (Listed)

Listed PJSCs are tightly regulated, reflecting their broader shareholder base and impact on capital markets.

• Board Composition and Diversity: A majority of non-executive directors must be independent, with at least one female director. This diverse mix improves decision-making and reflects the UAE’s drive to enhance inclusivity.
• Robust Committees: Audit Committees are vital for monitoring financial reporting and risk, while Nomination and Remuneration Committees oversee board appointments and pay structures.
• Shareholder Rights: Companies should offer equal treatment to all shareholders, provide timely notices for AGMs, and ensure fair voting procedures.
• Comprehensive Disclosure: Beyond submitting quarterly and annual accounts, firms are now required to issue ESG reports covering environmental impact, social initiatives, and governance practices.
• Internal Controls: An internal audit function or compliance officer is standard to detect and mitigate wrongdoing or regulatory breaches. The board remains ultimately responsible for overseeing these controls.
• Accountability and Liability: Directors can face personal liability for corporate failings, including insolvency mismanagement. D&O insurance and ongoing training help directors understand and manage these risks.

Family Businesses

Family enterprises underpin much of the UAE’s economy but often grapple with overlapping family and business issues.

• Succession Planning: Clear rules for passing leadership to the next generation are crucial to avoid conflict. The new Family Business Law supports structured transfers, share restrictions, and dispute resolution.
• Formal Governance Bodies: Setting up a Family Council to address family-related matters, plus a properly constituted Board of Directors for commercial decisions, helps separate emotion from strategy.
• Family Charters: A written family charter or constitution can define ownership and leadership arrangements, tackle conflicts of interest, and clarify dividend policies.
• Independent Advisors: Bringing in non-family directors or management professionals can strengthen operations and offer neutral perspectives.
• Transparent Financial Policies: Formal auditing and regular reporting assure all family shareholders that finances are being handled responsibly.
• Merit-Based Hiring: If relatives work in the business, ensure they meet clear employment criteria. This helps maintain professionalism and reduces potential resentment among other staff.

Recent Regulatory Trends and Developments

1. Revised Companies Law (2021)

Allowing 100% foreign ownership in most sectors has attracted global investors, but it also tightens minority shareholder protections and corporate governance obligations. Businesses must align with this law to remain compliant and capitalise on the new ownership freedoms.

2. Updates to SCA Governance Code

The SCA’s 2020 and 2024 amendments strengthen independence criteria for directors, reinforce female board representation, and mandate sustainability reporting. Listed companies must remain alert to these changes, as non-compliance triggers regulatory penalties.

3. ESG and Sustainability

Regulators are pushing for better disclosure around environmental and social impact. Both the Abu Dhabi Securities Exchange (ADX) and Dubai Financial Market (DFM) have ESG guidelines. Public companies should integrate sustainability into their strategy and governance frameworks.

4. Enhanced Director Accountability

The UAE’s Bankruptcy Law (and subsequent rulings) highlight the personal liability directors face in cases of reckless trading or mismanagement. To fulfil their fiduciary duties, boards should thoroughly document decisions and monitor financial health.

5. Family Business Law

Introduced in 2022, this voluntary framework invites family firms to register as family businesses, simplifying share transfers and offering legal backing for family charters. It helps align informal traditions with formal structures, ensuring smoother transitions across generations.

6. Technological Adoption

Businesses are embracing virtual AGMs, e-voting, and board portal software to streamline governance processes, a shift accelerated by the pandemic and ongoing digital transformation efforts.

Practical Tips for Effective Governance

Implementing governance can seem daunting, but there are steps every UAE-based entrepreneur can take:

1. Raise Awareness
   • Brief your directors, managers, and shareholders on key obligations and legal updates.
   • Consider short training sessions to outline their duties and risks under current laws.
2. Develop a Code of Conduct
   • Lay out guidelines on conflicts of interest, ethical standards, and whistleblowing.
   • Reinforce these values through regular communication and leadership by example.
3. Draft Clear Policies and Agreements
   • Use your Memorandum of Association (MoA) or Shareholders’ Agreement to detail governance processes, such as voting thresholds and reserved matters.
   • In family firms, consider a family constitution to tackle ownership, succession, and dispute resolution.
4. Establish an Effective Board
   • Recruit directors or advisors with relevant expertise, ensuring independence and diversity where possible.
   • Clearly differentiate roles between the chairman (if applicable) and CEO/management.
5. Conduct Regular Meetings
   • Hold board and shareholder meetings at least annually (or quarterly for more active oversight).
   • Keep minutes to evidence sound decision-making and compliance with legal requirements.
6. Maintain Strong Financial Controls
   • Engage external auditors for an independent review of your finances.
   • Set clear approval limits, require two signatories for significant transactions, and store financial records securely.
7. Stay on Top of Filings
   • Track licence renewals, annual returns, and UBO updates to avoid penalties.
   • If you’re a listed company, ensure timely submission of financial statements and announcements.
8. Review and Improve
   • Conduct periodic governance “health checks” to verify whether your policies and board structure still match your company’s size and strategy.
   • Remain attentive to regulatory changes, especially from the SCA, Ministry of Economy, or free zone authorities.

Stay Up To Date With The Evolving Corporate Governance Environment

Corporate governance in the UAE is evolving, reflecting the country’s vision to create a transparent and well-regulated business environment that attracts investors and supports sustainable growth. By embracing the legal frameworks set out in the Commercial Companies Law, SCA rules, and family business provisions, businesses can protect shareholder interests, boost performance, and reduce regulatory risks.

Whether you’re starting or running a large corporation, adopting robust governance pays dividends. It builds credibility with customers and investors, ensures robust internal controls, and keeps you prepared for any strategic shifts or ownership changes. The UAE’s regulators have made it clear that transparency, accountability, and respect for stakeholders are no longer optional.

If you’re looking to thrive in this landscape, consider governance a foundation rather than an afterthought. Prioritise training and awareness, formalise your structures, and document policies that suit your enterprise size. Over time, you’ll see how a well-governed business isn’t only about ticking boxes – it’s a recipe for resilience, innovation, and enduring success.