UAE Commercial Companies Law: Guide to Business Structures, LLCs & Corporate Governance (2026).

The UAE Commercial Companies Law — Federal Decree-Law No. 32 of 2021 on Commercial Companies, as amended — is the foundational legislation governing the formation, governance, and operation of all commercial companies established on the UAE mainland. Whether you are forming a Limited Liability Company (LLC), establishing a branch of a foreign company, or setting up a public joint stock company, the Commercial Companies Law defines the legal framework within which your business must operate.

This guide, prepared by GSDA Legal Consultants' corporate practice, provides a comprehensive analysis of the current legal framework, including the significant 2020 and 2021 amendments that opened the UAE mainland to 100% foreign ownership and the practical implications for corporate structuring, governance, and compliance.

Types of Business Structures

The Commercial Companies Law recognises seven forms of commercial company that may be established on the UAE mainland:

The Limited Liability Company (LLC) is by far the most common structure, accounting for approximately 85% of all mainland companies in the UAE. An LLC may have between 1 and 50 shareholders (natural persons or legal entities), has no minimum capital requirement (following the 2020 amendments, the previous AED 300,000 minimum was abolished for most activities), and provides limited liability to its shareholders — each shareholder's liability is limited to their share of the company's capital. An LLC is managed by one or more managers who may be shareholders or third parties, and decisions are taken by shareholders through general assembly meetings.

The Sole Proprietorship (Sole Establishment) is not a company form under the Commercial Companies Law but is regulated by the relevant Emirate's Department of Economic Development. A sole proprietorship has a single owner who bears unlimited liability for the business's debts.

The Civil Company is used for professional services firms (law firms, accounting firms, engineering consultancies) and requires that all partners hold the relevant professional qualifications. Partners in a civil company bear joint and several unlimited liability.

The Simple Limited Partnership consists of one or more general partners (with unlimited liability) and one or more limited partners (whose liability is limited to their contribution). This structure is rarely used in the UAE.

The Joint Stock Company — both Public (PJSC) and Private (PrJSC) — is the structure used for larger enterprises. A PJSC must have a minimum of 5 founders, a minimum capital of AED 30 million (for listing on the ADX or DFM) or AED 5 million (for unlisted PJSCs), and is subject to extensive governance requirements including a board of directors, external auditors, and annual general meetings. A PrJSC requires a minimum of 2 shareholders and a minimum capital of AED 5 million.

The Holding Company is a company whose primary purpose is owning shares in other companies, managing subsidiaries, and providing financing and administrative support to group entities.

100% Foreign Ownership: The Current Position

The most transformative change to the UAE's corporate landscape in recent years has been the progressive elimination of the local sponsor/partner requirement for foreign investors. Historically, every mainland LLC was required to have a UAE national shareholder holding at least 51% of the company's shares. This requirement — which created an entire industry of "sleeping partner" arrangements — was effectively abolished through Federal Decree-Law No. 26 of 2020 amending the Commercial Companies Law, and Cabinet Decision No. 55 of 2021 on the Determination of the List of Activities with a Strategic Impact.

Under the current framework, foreign investors may hold 100% of a mainland LLC in all sectors except those identified in the "Strategic Impact List," which includes security and defence activities, banking and finance (subject to Central Bank licensing), insurance (subject to Insurance Authority licensing), pilgrimage and umrah services, certain recruitment services for domestic workers, and other activities as designated by the Cabinet.

For the vast majority of commercial activities — including trading, manufacturing, consulting, real estate, construction, technology, and professional services — 100% foreign ownership is now permitted without the need for a UAE national partner. The practical impact has been significant: foreign investors can now structure their UAE operations with full corporate control, simplified governance, and direct access to their profits without the complications of a local sponsor arrangement.

However, the transition from a 51/49 structure to 100% foreign ownership requires careful legal planning. Existing companies with local sponsors must amend their memorandum and articles of association, the local partner must formally agree to the share transfer (which often involves negotiating the terms of exit, including payment for the partner's existing shares and any accrued profit entitlements), and the amended documents must be registered with the relevant DED and the Ministry of Economy.

LLC Formation Process

Forming an LLC on the UAE mainland involves the following steps:

Name Reservation: The company name must be reserved through the relevant Emirate's DED. The name must not be identical or confusingly similar to an existing registered company, must not contain offensive or religious terminology, and must include the suffix "LLC" or its Arabic equivalent.

Initial Approval: The DED issues an initial approval for the proposed business activities based on the company's intended commercial activities (classified under the International Standard Industrial Classification system as adopted by the UAE). Certain activities require additional approvals from regulatory authorities — for example, legal consultancy requires approval from the Ministry of Justice, food-related activities require approval from the relevant municipality, and healthcare activities require approval from the Department of Health or Dubai Health Authority.

Memorandum of Association (MOA): The company's MOA must be prepared and notarised before a UAE Notary Public. The MOA specifies the shareholders, their respective shares, the company's capital, the management structure, and the company's activities. The MOA must comply with the mandatory provisions of the Commercial Companies Law, and any provisions that conflict with the law are void.

Trade Licence Issuance: Upon submission of the notarised MOA, tenancy contract (Ejari in Dubai), and other required documents, the DED issues the trade licence. The licence must be renewed annually.

Additional Registrations: Following trade licence issuance, the company must register with the Federal Tax Authority (for corporate tax and VAT, if applicable), the Ministry of Human Resources and Emiratisation (MOHRE) for employment purposes, and the relevant social security authority if employing UAE nationals.

Corporate Governance Requirements

The Commercial Companies Law imposes governance requirements that vary by company type. For LLCs, the key governance obligations include:

The company must hold at least one annual general assembly meeting of shareholders. The general assembly approves the annual financial statements, appoints the auditor, and decides on the distribution of profits.

Companies with a capital exceeding AED 10 million or revenue exceeding AED 50 million must appoint an external auditor registered with the Ministry of Economy. The auditor must prepare an annual audit report in accordance with International Standards on Auditing.

The company must maintain proper accounting records and financial statements in accordance with International Financial Reporting Standards (IFRS). Records must be maintained for a minimum of five years from the end of the financial year to which they relate.

Managers of an LLC owe fiduciary duties to the company, including the duty to act in good faith, avoid conflicts of interest, and exercise reasonable skill and care. Managers who breach these duties may be personally liable for losses suffered by the company or its shareholders.

Recent Amendments and Trends

The 2021 consolidation of the Commercial Companies Law introduced several practical improvements, including streamlined procedures for company mergers and acquisitions, a clearer framework for corporate restructuring and de-mergers, enhanced minority shareholder protections (including the right to request a company investigation if shareholders holding 20% or more of the capital suspect mismanagement), and the introduction of treasury shares — allowing companies to buy back their own shares, subject to conditions.

The Ministry of Economy has also been actively modernising the company registration process, including the introduction of the "Basher" unified business registration platform and the increasing acceptance of electronic memoranda of association executed through the Ministry's digital services.

GSDA Legal Consultants advises international investors, regional family offices, and multinational corporations on all aspects of UAE corporate law, including company formation, corporate restructuring, shareholder agreements, governance advisory, and cross-border group structuring. Our Dubai and Paris offices work together on transactions involving both the UAE and French corporate frameworks. Contact us for a corporate structuring consultation.