In 2025, the UAE Commercial Company Law continues to evolve, reflecting the country’s commitment to attracting foreign investment, supporting innovation, and strengthening business governance. Whether you’re a new entrepreneur, an established investor, or expanding an existing company in the UAE, understanding the latest commercial laws in the UAE is crucial to success.
This guide breaks down what business owners and foreign investors need to know in 2025, from ownership structures and licensing categories, to compliance obligations and regulatory updates. With clear changes to foreign ownership, corporate governance, and shareholding regulations, staying informed is key to long-term growth.
What Is the UAE Commercial Company Law?
The UAE Commercial Company Law (Federal Decree-Law No. 32 of 2021, as amended) is the main legal framework that governs company formation, operation, management, and compliance in the United Arab Emirates. It applies to most business entities established in the mainland and, to some extent, in free zones, except for companies in financial free zones like DIFC or ADGM.
In 2025, this law plays a central role in:
- Regulating foreign investment and ownership
- Defining legal forms of companies
- Outlining corporate responsibilities
- Ensuring transparency and shareholder protection
- Enforcing governance practices
Key Updates to UAE Commercial Company Law in 2025
Several changes and clarifications have come into effect in 2025 that every entrepreneur and corporation must know:
100% Foreign Ownership Confirmed for Most Activities
Perhaps the most significant development is the continued expansion of full foreign ownership rights in mainland UAE. Previously, a local Emirati sponsor holding 51% was mandatory for many business types. Now:
- 100% foreign ownership is allowed in a majority of commercial and industrial activities
- Strategic sectors (like oil, defense, telecom, etc.) may still require local participation or approvals
- Emirate-level authorities (e.g., Dubai Economy) maintain the final list of allowed activities
This shift has drastically improved ease of company setup in Dubai, Abu Dhabi, and other emirates.
Clarified Corporate Structures and Legal Entity Types
The law continues to support multiple forms of company structures:
- Limited Liability Company (LLC)
- Sole Proprietorship (with professional license)
- Private Joint Stock Company (PJSC)
- Public Joint Stock Company (PJSC)
- Civil Company
- Branch of a Foreign Company
LLCs remain the most popular due to flexibility in ownership, limited liability protection, and easier regulatory compliance.
Corporate Governance and Reporting Obligations
All companies, regardless of size, must implement certain governance standards. In 2025, these include:
- Mandatory record-keeping of shareholder meetings
- Audited financial statements for qualifying businesses
- Implementation of internal control systems
- Board structure disclosures for joint stock companies
Free zones like DMCC, IFZA, or RAKEZ have also aligned with these expectations to ensure compliance consistency across jurisdictions.
Beneficial Ownership and Anti-Money Laundering (AML)
To meet international standards, the UAE enforces strict rules around UBO (Ultimate Beneficial Ownership) and AML reporting.
- Businesses must declare real individuals who own or control 25% or more shares
- AML compliance officers are mandatory for licensed financial and service firms
- Non-compliance can result in fines, license suspension, or blacklisting
This move strengthens the UAE’s position as a trusted business jurisdiction.
Legal Forms of Companies Under UAE Law
The UAE offers several legal forms of companies to suit various business needs. Options include Limited Liability Companies (LLC), Sole Establishments, Civil Companies, and Joint Stock Companies. Each structure has specific rules for ownership, liability, and operations, making it essential to choose the right type based on your business goals.
Limited Liability Company (LLC)
The LLC structure offers flexibility and is open to both locals and expats. Key features:
- Requires 1–50 shareholders
- Minimum one UAE-resident manager
- No minimum capital required (as of 2025, unless regulated sector)
- Eligible for mainland licenses with 100% foreign ownership (in approved activities)
Sole Establishment (Professional License)
Ideal for freelancers, consultants, and professionals:
- Owned 100% by one person
- No partner required
- Cannot conduct commercial or trading activity
- Personal liability remains with the owner
Private and Public Joint Stock Companies
Used for large-scale operations or companies planning to go public:
- Minimum capital for PJSC is typically AED 30 million
- At least 5 founding shareholders
- Subject to additional regulatory reporting, governance, and public offering rules
Civil Company
Civil companies are suitable for professionals like:
- Lawyers
- Doctors
- Architects
- Engineers
They require professional licenses and can be 100% expat-owned in most cases.
Understanding Shareholder Rights and Agreements
To protect business interests, 2025 regulations emphasize clear shareholder agreements:
- Provisions for profit distribution, voting rights, and exit strategy
- Rights of minority shareholders
- Protocols for selling shares or bringing in investors
A well-structured agreement protects founders from internal disputes and legal risks.
Mainland vs Free Zone Business Under Commercial Law
Understanding the difference between mainland and free zone businesses is crucial under UAE Commercial Law. Mainland companies can trade across the UAE without restrictions, while free zone businesses enjoy full ownership but limited onshore access. Each offers distinct benefits depending on your target market, industry type, and operational needs.
Mainland Companies
Regulated by:
- Department of Economic Development (DED) in each emirate
- UAE Commercial Companies Law
Allows:
- Direct trade in UAE market
- B2B and B2C sales without restrictions
- 100% foreign ownership in most sectors
Free Zone Companies
Governed by:
- Each Free Zone Authority
- Separate business laws and licensing frameworks
Allow:
- Full foreign ownership
- No corporate tax (except under UAE’s federal rules)
- Limited ability to trade outside the Free Zone unless using a distributor or mainland branch
UAE Corporate Tax and VAT Compliance
In 2025, UAE corporate tax applies at 9% on profits exceeding AED 375,000, making compliance essential. VAT at 5% remains mandatory for businesses crossing the registration threshold. Companies must maintain accurate records, file timely returns, and ensure full compliance to avoid penalties and remain in good legal standing.
Corporate Tax (Effective 2023)
As of 2025:
- Corporate tax is levied at 9% on business profits exceeding AED 375,000
- Free zones enjoy tax exemptions only for qualifying income
- Businesses must register and file returns annually
Understanding the scope of taxable income, deductions, and exemptions is vital for compliance.
Value Added Tax (VAT)
- 5% VAT remains applicable on most goods and services
- Businesses with annual turnover over AED 375,000 must register
- Quarterly or monthly VAT filing required based on the threshold
- Penalties apply for late filing, non-payment, or non-registration
Business Licensing and Economic Substance Requirements
The UAE operates under a dual licensing model—with licenses issued by DEDs or Free Zones.
You must choose the appropriate:
- Business activity (e.g., trading, consulting, media, education)
- Jurisdiction (mainland vs free zone)
- License type (commercial, industrial, or professional)
Economic Substance Regulations (ESR)
Applicable to businesses engaged in:
- Banking
- Insurance
- Shipping
- Intellectual Property
Such companies must:
- Demonstrate real economic presence in the UAE
- Submit economic substance reports
Non-compliance results in hefty fines and deregistration.
Winding Up, Liquidation, and Exit Planning
In 2025, the liquidation process is streamlined. Whether closing a Free Zone or mainland company, you must:
- Appoint a licensed liquidator
- Notify relevant authorities (DED, MOE, MOJ)
- Publish a liquidation notice
- Settle debts, cancel visas, and clear taxes
- Submit final reports and license cancellation letters
A proper exit strategy is as important as your setup.
Best Practices for Business Owners in 2025
- Hire a licensed corporate lawyer to draft shareholder agreements
- Maintain accurate financial records and audits
- Conduct regular compliance health checks
- Keep up with government announcements through official portals
- Align your structure with your long-term goals, whether raising capital or expanding internationally
Conclusion
Understanding the UAE Commercial Company Law in 2025 is essential for every business owner or investor operating in the region. With evolving ownership laws, tax policies, and corporate structures, the UAE continues to offer a favorable environment for innovation and entrepreneurship.
For smooth entry, expert guidance, and full compliance, working with experienced professionals in Company formation in Dubai, UAE ensures you meet every legal requirement while focusing on your business success.
Frequently Asked Questions (FAQs)
Do I still need a local partner in 2025 to open a business in Dubai?
No. 100% foreign ownership is allowed for most business activities. However, certain strategic sectors may still require local participation.
What’s the best legal structure for a small business in the UAE?
An LLC is ideal for most small and mid-sized businesses due to its limited liability, flexibility, and wide activity range.
Is corporate tax applicable to Free Zone companies in 2025?
Yes, but only on non-qualifying income. Qualifying income remains exempt if the company meets Free Zone economic substance rules.
How do I register a company with the UAE Ministry of Economy?
Most businesses are not required to register with MOE unless they’re in regulated sectors (e.g., auditing, engineering, legal). Otherwise, registration is through DED or Free Zones.
What happens if I don’t comply with ESR or UBO regulations?
Non-compliance can result in fines, suspension of licenses, or blacklisting by UAE authorities. It’s critical to stay compliant to avoid legal issues.
