Running a company in the UAE involves more than getting a trade licence and renewing it every year. Your ownership structure, manager powers, shareholder decisions, accounting records and even the wording of your Memorandum of Association can all be affected by the UAE Commercial Companies Law.
The main federal legislation is Federal Decree-Law No. 32 of 2021 on Commercial Companies. It took effect on 2 January 2022 and has since been amended, including through Federal Decree-Law No. 20 of 2025. Those latest changes deal with areas such as multiple ownership classes, shareholder exit rights and transfers of company registration.
If you own, manage or plan to invest in a UAE company, these are the rules you should know.
What Is the UAE Commercial Companies Law?
The UAE Commercial Companies Law sets federal rules for establishing, managing, restructuring and closing commercial companies. It covers legal forms, ownership, capital, management, shareholder decisions, accounts, audits, mergers, conversions and liquidation.
The law applies to companies established in the UAE and foreign companies conducting business in the country. The current text also covers branches or representative offices of free zone and financial free zone companies when they operate outside their zone boundaries. Certain companies are exempt under specific legal provisions.
Free zone businesses also have to follow the rules of their own authority. If you are deciding where to establish a company, Nexture's mainland vs free zone business setup guide explains the practical differences.
In a 30-minute call we map your situation against jurisdiction, activity and cost — no commitment required.
Company Forms Recognised Under UAE Company Law
The law recognises five main commercial company forms:
Legal form | Common use |
Limited Liability Company (LLC) | Trading, services, consulting and privately owned businesses |
General Partnership | Businesses where partners accept wider personal liability |
Limited Partnership | Businesses with general and limited partners |
Public Joint Stock Company (PJSC) | Larger companies that may offer shares publicly |
Private Joint Stock Company (PrJSC) | Privately owned companies using a joint stock structure |
For many SMEs, the LLC is the most familiar option. Under Article 71, an LLC can generally have between 2 and 50 partners. One natural or legal person may also incorporate and own an LLC alone. For more on this structure, read Nexture's guide to setting up a Limited Liability Company in Dubai.
Foreign Investors Can Fully Own Most Mainland Companies
The old assumption that every mainland company needs a UAE national holding 51% is no longer correct. Foreign investors can own 100% of companies in most economic sectors. However, some activities classed as having strategic impact remain subject to special rules. The relevant regulator can determine foreign ownership percentages, UAE national participation, board requirements and other licensing conditions.
The government's list of strategic-impact activities includes areas such as security and defence, banking, exchange houses, financing, insurance, telecommunications, Hajj and Umrah services and certain fisheries activities.
So check your exact licensed activity before deciding on an ownership structure. A general rule that works for a consulting company may not work for a regulated financial business.
Your MOA Needs to Reflect the Real Ownership Arrangement
A Memorandum of Association is one of the core legal documents of a UAE company. It should accurately reflect who owns the business, how it is managed and the rights agreed between its partners.
Under Article 15, an MOA and amendments become effective after registration in the commercial register. A company must also notify the competent authority and registrar within 15 business days when registered details such as its name, address, capital, shareholder numbers or legal form change.
That means changing an ownership arrangement privately and forgetting the official company records can create problems later.
Nexture's detailed UAE Memorandum of Association guide covers the main clauses and registration steps.
The 2025 amendments also make the MOA more useful for shareholder planning. LLCs and private joint stock companies can include agreed provisions dealing with compulsory sales, participation in a sale and arrangements for shares held by a deceased partner or shareholder.
LLC Managers Carry Legal Responsibilities
An LLC manager can be a shareholder or an outside person.
Unless the MOA or appointment contract restricts the manager's authority, the manager generally has broad power to manage the company and bind it through actions carried out within that authority.
That power carries responsibility. A manager can be liable to the company, its partners and third parties for fraudulent conduct. Liability may also arise through improper use of powers, breaches of applicable law, violations of the MOA or appointment contract and gross errors.
For a growing business, written approval limits are useful. If a manager can borrow money, sign large contracts or dispose of important assets, define those powers clearly and keep the registered documents consistent with the arrangement.
Accounting Records and Annual Audits Cannot Be Ignored
Every company must maintain accounting records that provide a clear picture of its transactions and financial position. The records generally have to be kept for at least five years after the end of the relevant financial year.
LLCs must appoint one or more auditors each year through the General Assembly. An LLC must also allocate 5% of its annual net profit to a statutory reserve. Partners may stop allocating once the reserve reaches 50% of the company's capital.
The annual General Assembly must be held at least once during the four months following the end of the company's financial year. Among other matters, it deals with the financial statements, auditor, dividends and management.
These duties exist separately from UAE tax compliance. For the tax side, Nexture's UAE Corporate Tax Guide explains registration, records and filing requirements.
Serious Losses Require Formal Shareholder Action
Business owners should monitor accumulated losses against the company's registered capital. If an LLC's losses reach 50% of its capital, its managers must put the question of dissolution before the partners at a General Assembly.
If losses reach 75% of capital, partners holding at least 25% of the capital may call for dissolution.
This does not mean an LLC automatically shuts down once it records a large loss. It means the financial position has reached a point where owners and managers need to formally address it. Depending on the circumstances, the company may consider restructuring, fresh capital or other corrective action.
We’ll model the requirements and send back a single-page breakdown within 24 hours.
What Changed Under the 2025 Commercial Companies Law Amendments?
Federal Decree-Law No. 20 of 2025 amended 15 articles and added a provision dealing with transfers in the commercial register. The Ministry of Economy and Tourism published a detailed briefing on the 2025 Commercial Companies Law amendments in January 2026.
Multiple Ownership Classes for LLCs
LLC stakes can now be divided into different classes.
Those classes may carry different nominal values, voting rights, redemption terms, profit distribution rights, liquidation priorities or other privileges and restrictions. The applicable class and its rights must be recorded in the company's MOA and commercial register. Further rules can be set through Cabinet decisions. This can give founders and investors more options when structuring investment deals.
Drag-Along and Tag-Along Rights
LLCs and private joint stock companies can provide for shareholder sale arrangements in their constitutional documents. For example, agreed terms may allow majority owners to require other shareholders to participate in a company sale under specified conditions. Minority investors can also be given the right to join an existing sale on the same terms.
These clauses still need careful drafting. The commercial outcome you want should match the wording registered with the company.
Transfer of Company Registration
A particularly useful change is the ability, subject to conditions and authority approvals, to move a company's commercial registration between competent authorities while preserving its legal personality.
The Ministry says this can include movement between emirates, free zones and financial free zones without automatically having to dissolve the original company. Contracts and obligations can continue with the same legal entity.
Non-Profit Companies
The updated law also permits the establishment of a non-profit company whose net profits are reinvested to achieve its stated purposes instead of being distributed to partners or shareholders. The detailed purposes, company forms and rules are to be regulated by Cabinet resolution.
UAE Commercial Companies Law Compliance Checklist
If you already own a UAE company, review these points regularly:
Make sure your licensed activities match what the company actually does.
Update the MOA when ownership, capital, management powers or shareholder rights change.
Register required amendments with the competent authority.
Confirm who has authority to sign major contracts and financial commitments.
Maintain proper accounting records for at least five years.
Complete the annual audit where required.
Hold and document General Assembly and shareholder decisions properly.
Monitor accumulated losses against registered capital.
Check whether your activity is strategically important or separately regulated.
Review tax, beneficial ownership, AML and industry-specific requirements separately.
The Commercial Companies Law is a major part of UAE corporate compliance, but it is not the only law your business may need to follow.
Conclusion
The UAE Commercial Companies Law gives owners more options than the corporate framework of a few years ago. Foreign ownership is widely available, one-person LLCs are permitted and the latest amendments provide greater choice when arranging ownership rights, investment exits and company transfers. The formal requirements still matter.
Keep your MOA current. Define manager powers clearly. Register changes when required. Maintain reliable financial records and deal with shareholder decisions through the proper company procedures.
If you are forming a new company or changing an existing structure, it is worth checking the current requirements with the relevant licensing and regulatory authorities before signing agreements.
Frequently Asked Questions
What is the main UAE Commercial Companies Law?
The main federal legislation is Federal Decree-Law No. 32 of 2021 on Commercial Companies, as amended. Federal Decree-Law No. 20 of 2025 introduced further changes to several provisions.
Can a foreigner own 100% of a UAE mainland LLC?
Yes. Full foreign ownership is allowed for most mainland activities. Strategic-impact and separately regulated activities can have additional ownership or licensing conditions.
Does every UAE LLC need an auditor?
The Commercial Companies Law requires an LLC to have one or more auditors appointed annually by its General Assembly.
How many partners can an LLC have in the UAE?
An LLC generally has between 2 and 50 partners. A single natural or legal person can also establish and own a one-person LLC.
Can a UAE company move from a free zone to the mainland without liquidation?
The amended law provides a mechanism for transferring company registration between eligible jurisdictions while retaining the company's legal personality. The transfer is subject to registry compatibility and approval from the relevant authorities.
