The UAE continues to assert its position as one of the world’s most business-friendly jurisdictions, and one of the most transformative developments in recent years is the overhaul of its corporate legislation. With the introduction of Federal Decree-Law No. 32 of 2021 on Commercial Companies (The Commercial Company Law), effective since 2 January 2022, the UAE has modernised and streamlined its company law to align with international best practices. These changes, combined with ongoing economic diversification efforts, have major implications for entrepreneurs, SMEs, and multinational corporations alike.
At Virtuzone, we specialise in helping businesses navigate this new legal landscape – whether you’re establishing a new company, restructuring an existing one, or exploring your options in the UAE mainland or free zones.
What is the UAE Commercial Companies Law?
Federal Decree-Law No. 32 of 2021 (the “New CCL”) replaces the previous Companies Law of 2015 and governs the incorporation, governance, and operation of most commercial entities operating in the UAE (excluding those established in financial free zones such as DIFC and ADGM). The law was introduced as part of the UAE’s “Projects of the 50” – a legislative push to make the country more competitive, agile, and investor-friendly.
The New CCL brings sweeping changes across various areas including foreign ownership, corporate governance, new company structures, shareholder rights, and company setup procedures.
100% Foreign Ownership on the Mainland
One of the most game-changing reforms introduced by the New CCL is the removal of the requirement for a UAE national to hold 51% ownership in mainland companies. Foreign investors can now enjoy 100% foreign ownership across most business activities, subject to certain strategic sectors where UAE shareholding may still be required.
This has levelled the playing field between free zones and the mainland. As of 2023, over 1,100 business activities in Abu Dhabi and more than 1,000 in Dubai are eligible for full foreign ownership, covering areas such as trading, manufacturing, and services.
Virtuzone Insight: We’ve helped hundreds of clients restructure existing partnerships to take advantage of the new foreign ownership rules, enabling them to retain full control over their businesses.
New Corporate Structures: SPACs, SPVs, and Single-Owner Companies
To increase flexibility and capital-raising options, the UAE now formally recognises:
- SPACs (Special Purpose Acquisition Companies) – Useful for startups or investors looking to merge or acquire existing companies through IPOs.
- SPVs (Special Purpose Vehicles) – Widely used in asset management and securitisation.
- Single-owner companies – An LLC or Private Joint Stock Company (PrJSC) can now be owned by a single shareholder, offering limited liability without needing partners.
These additions make the UAE more attractive to venture capital, private equity, and entrepreneurs looking to simplify ownership structures.
Strengthened Corporate Governance
The law introduces more robust governance requirements, especially for Limited Liability Companies (LLCs) and Public Joint Stock Companies (PJSCs):
- Boards are no longer required to include UAE nationals, opening the door to global expertise.
- Shareholder meeting rules have been relaxed (e.g. second meeting valid regardless of quorum).
- Proxy voting is now permitted.
- Statutory reserve requirements have been reduced from 10% to 5%, freeing up more capital for reinvestment.
For PJSCs, rules around board independence, financial transparency, and investor protection have also been aligned with international standards.
Types of Legal Entities
Under the New CCL, the primary company types available in the mainland are:
- Limited Liability Company (LLC): The most common business form, suitable for SMEs and professional service firms. Can be owned by 1 to 50 shareholders.
- Private Joint Stock Company (PrJSC): Suited to larger private businesses planning to raise capital without listing shares publicly.
- Public Joint Stock Company (PJSC): For companies seeking public investment via stock exchanges. Now allows flexible IPO structures with no mandated founder equity retention.
- Branch of a Foreign Company: Not a separate legal entity, but can operate onshore.
Virtuzone Tip: Our consultants can help you select the ideal legal form based on your funding plans, shareholder composition, and industry.
Mainland vs Free Zone Companies
| Feature | Mainland Company | Free Zone Company |
|---|---|---|
| Ownership | 100% foreign ownership (for most activities) | 100% foreign ownership |
| Scope | Can operate anywhere in the UAE | Restricted to within the zone/export unless using a local agent |
| Governing Law | UAE Commercial Companies Law | Free zone authority regulations |
| Licensing | Department of Economic Development (DED) | Specific free zone authority (e.g. DMCC, DAFZA) |
| Tax | Subject to UAE corporate tax (9%) | Often tax-exempt on qualifying income (subject to ESR & CT laws) |
Choosing between mainland and free zone setup depends on your operational needs. Free zones offer simplicity and tax advantages, but mainland licences provide greater market access.
Incorporation Made Easier
The UAE has streamlined the business setup process under the New CCL. Steps generally include:
- Reserve trade name and obtain initial approvals.
- Draft a compliant Memorandum of Association (MOA).
- Lease office space and submit incorporation documents.
- Pay licence fees and register with the Chamber of Commerce.
- Register for VAT, corporate tax (if applicable), and Ultimate Beneficial Owner (UBO) records.
With no minimum capital required for most LLCs and reduced bureaucratic hurdles, the setup timeline can be as short as 5 to 7 working days.
Virtuzone Service: We manage the entire company formation process for you, including document drafting, translations, and liaison with government departments.
Compliance and Ongoing Obligations
Once established, businesses must comply with:
- Annual financial audits (mandatory for LLCs and PJSCs)
- General assembly meetings and shareholder resolutions
- Economic Substance Regulations (ESR)
- UBO reporting and updates
- Labour and visa regulations (for hiring staff)
- Corporate tax registration and returns (from 2023 onwards)
Failure to comply may result in fines, licence suspension, or even forced dissolution. This makes ongoing corporate governance and accounting support critical for every business.
Strategic Sectors: Exceptions to Foreign Ownership
While the general rule is full foreign ownership, the UAE Cabinet may designate certain activities as “strategic” requiring local participation. These include:
- Oil & gas
- Defence and military
- Banking and finance
- Utilities and water resources
Each emirate maintains a list of strategic activities and any applicable conditions. Before proceeding, it is advisable to consult with an expert on your specific business activity.
Challenges and Considerations
The New CCL opens many doors, but businesses should be aware of:
- Increased compliance obligations (audits, governance, ESR, UBO, etc.)
- Sector-specific restrictions that may still apply in certain industries
- Transition issues for older companies needing to update MOAs to comply with the new law
- Navigating corporate tax in light of the 2023 introduction of a 9% federal rate on profits over USD 102,000 (AED 375,000)
Why It Matters
The UAE’s reformed Companies Law has one overarching goal: to position the country as a global hub for business and investment. With transparent rules, liberal ownership structures, and modernised governance, the UAE is now a far more attractive jurisdiction for:
- Global companies looking to open regional offices
- Tech and high-growth startups seeking flexible capital structures
- SMEs and family businesses planning IPOs or restructuring
- Entrepreneurs seeking full control over their business
At Virtuzone, we stay at the forefront of regulatory changes to help our clients benefit from them.
Reach Out To Virtuzone Today!
The UAE Commercial Companies Law, as revised under Federal Decree-Law No. 32 of 2021, has redefined how businesses can be owned, structured, and scaled in the Emirates. It is one of the most liberal and progressive pieces of corporate legislation in the MENA region.
If you are considering starting or expanding a business in the UAE, now is the time to act. From 100% foreign ownership to flexible company structures and access to capital markets, the UAE has never been more welcoming to business.
Need help? At Virtuzone, we don’t just form companies – we build partnerships. Our experts are here to help you choose the right jurisdiction, navigate compliance, and grow confidently within the UAE’s regulatory framework.
