The UAE offers a highly developed and investor-friendly business environment, with a legal framework designed to support local and international trade, investment and company growth. Foreign investors entering the UAE market must understand that the country operates through more than one legal and regulatory framework.
Businesses may operate on the UAE mainland, in commercial free zones, or within financial free zones such as the DIFC and ADGM. The applicable corporate, licensing, contractual and dispute-resolution framework will depend on the chosen jurisdiction and the nature of the proposed activity.
Onshore Corporate Structures and the Companies Law Regime
Federal Decree-Law No. 32 of 2021 on Commercial Companies, as amended by Federal Decree-Law No. 20 of 2025, governs onshore companies in the UAE. This law is the legal foundation for the mainland entities, such as the limited liability companies (LLCs) and joint-stock companies. In recent years, the UAE has liberalised its foreign ownership regime, allowing foreign investors to own up to 100% of mainland companies in most sectors, subject to licensing requirements and regulatory approvals. This is a major change from the earlier requirement of majority-UAE-national ownership.
However, not all sectors are fully open to foreign ownership. Article 10 of the Companies Law addresses activities considered to have a strategic impact. It empowers the Cabinet to designate such sectors and impose specific licensing conditions, including requirements for UAE-national participation where appropriate. Cabinet Resolution No. 55 of 2021 identifies these strategic sectors, which include defence, banking, insurance, telecommunications, currency printing, pilgrimage services and fisheries.
Statutory Enhancements under Federal Decree-Law No. 20 of 2025
Federal Decree-Law No. 20 of 2025 expands the scope of the UAE Commercial Companies Law, Federal Decree-Law No. 32 of 2021. Article 3 confirms that the law applies to companies established in the UAE, as well as foreign companies conducting business or maintaining an administration centre, branch, or representative office in the country.
The amendment also covers branches and representative offices of free zone and financial free zone companies operating outside those zones within the UAE. This brings the mainland operations of qualifying free zone and financial free zone branches or representative offices within the scope of the Companies Law, while remaining subject to the applicable licensing, registration and regulatory requirements.
Federal Decree-Law No. 20 of 2025 provides greater flexibility for ownership transfers and investor exit arrangements. Under Article 14(4)(a), LLCs and private joint-stock companies may include provisions in their constitutional documents allowing one or more partners or shareholders, upon agreed conditions, to require the remaining owners to sell their shares or interests to a third party. They may also allow a partner or shareholder to participate in another owner’s sale on the same terms agreed with the purchaser.
The amendments also allow LLCs to classify shares into different categories carrying different rights, privileges or restrictions, including voting, profit distribution, redemption and liquidation rights, subject to registration requirements. These measures support more tailored investment structures and future exit planning.
Societies with limited liability must respect the rules of governance of the Law of Commercial Companies. Article 103 provides for the allocation of 5% of net profits per year to a statutory reserve until the latter reaches 50% of capital, after which allocation is to be discontinued. Article 93 states that a meeting of the general assembly shall be convened with at least 21 days’ notice. Article 85, in the event of the expiry of the term of the board of managers without replacement, it may continue for a period of six months, and if it is not reconstituted, the competent authority may appoint a manager or board for a period not exceeding one year. Articles 88 and 89 provide for a supervisory board for companies with more than 15 partners to supervise the records and report before the meeting.
Commercial Transactions and Contractual Enforcement
The Commercial Transactions Law is codified by Federal Decree-Law No. 50 of 2022 Concerning the Commercial Transactions Law, abrogating the old code of 1993. This statute defines the commercial capacity of merchants, the obligations of merchants and the legal status of modern transactions.
Federal Decree-Law No. 50 of 2022 regulates commercial activities in the UAE. Article 5 covers inherently commercial acts, including trade, banking, commercial papers, transport, auctions and virtual assets. Article 6 covers activities treated as commercial when practised professionally, including brokerage, agency, supply, real estate trading, tourism, industry and digital services. Article 517 permits bills of exchange to be signed or thumb-printed with two witnesses.
The Civil Transactions Law and Contractual Enforcement
Commercial transactions in the UAE are governed by Federal Decree-Law No. 25 of 2025 on Civil Transactions, which sets out the rules relating to contractual obligations, including the formation, performance, breach and termination of contracts.
For cross-border contracts, Article 19 permits the parties to expressly select the law governing their contractual obligations in both form and substance. Where no law is agreed, the law of the parties’ common domicile applies. If the parties have different domiciles, the law of the State in which the principal contractual obligation is performed will generally apply, unless the circumstances indicate that another law was intended. Contracts relating to real estate are governed by the law of the place where the real estate is located.
Article 28 provides that where foreign law applies, only its internal substantive provisions are applied, excluding its private international law rules. However, UAE law will apply where the relevant private international law rules refer the matter back to UAE law. Under Article 29, a foreign-law provision will not be applied where it conflicts with the UAE public order or public morals.
Article 429 provides that a right is not extinguished merely by the passage of time. However, an action against a person who denies that right will generally not be heard after 15 years without an acceptable excuse, unless another period is prescribed by law.
Contractual disputes must also be assessed alongside Federal Decree-Law No. 35 of 2022 on Evidence in Civil and Commercial Transactions, which recognises electronic evidence in civil and commercial proceedings. The legal effect of electronic documents, signatures and trust services is further addressed under the Federal Decree-Law No. 46 of 2021 on UAE Electronic Transactions and Trust Services Law.
The Regulated Commercial Agency Framework
Commercial agencies in the UAE are governed by Federal Law No. 3 of 2022. In general, agency activity is limited to UAE nationals or qualified UAE-owned entities. But Article 2(2) provides that the Cabinet may, on ministerial recommendation, authorise foreign companies to undertake such activities in respect of products they own in circumstances where no agency is registered, and the statutory conditions are satisfied. Approval is at the discretion of the regulatory authorities.
Article 9 outlines the methods by which a commercial agency may be terminated, including by expiry, contract termination, mutual agreement or court judgment. Article 10 states that notice of early termination or non-renewal is required. At expiry, agreed agency assets can be transferred at fair value, and temporary imports can be permitted by the Ministry during the dispute.
Article 16 requires an agent or its legal representative to request deletion of the agency registration within 60 days if the agency expires without renewal or if statutory conditions are no longer satisfied. The Ministry may also remove the registration after notifying the concerned parties. Under Article 24, disputes must first be submitted to the Commercial Agencies Committee, which must issue a decision within 120 days. If it fails to do so, either party may refer the matter to court within the following 60 days.
If the Committee makes a decision, it must be challenged within 60 days of notification, or it becomes enforceable. Article 26 preserves the parties’ right to arbitration. If either party resorts to arbitration within 60 days of notification of the Committee’s decision, that decision has no effect.
Compliance and Corporate Taxation
Foreign investment structures should be aware of Federal Decree-Law No. 47 of 2022, which imposes a 9% corporate tax on income above AED 375,000. Free zone entities are not inherently exempt. A Free Zone Person can get 0% tax on Qualifying Income under Article 18 if the entity has a sufficient presence in the UAE, meets substance requirements, adheres to transfer pricing rules and fulfils prescribed conditions. Businesses have to have sufficient resources to perform the core activities in the zone. A free zone licence alone does not guarantee tax benefits, and investors should evaluate their eligibility carefully. To maintain the benefit of the preferential treatment, a Qualifying Free Zone Person must not elect for the general Corporate Tax as specified in Article 19. The election is effective in the current or the next tax period.
Article 34 requires transactions with Associated Parties to be at arm’s length, with terms that would be agreed between independent parties using recognised transfer-pricing methods.
Article 55 provides that the Federal Tax Authority can require the filing of transfer-pricing disclosures with the tax return. A master file and local file must be maintained and submitted, together with supporting information on dealings with Associated Parties and Connected Persons, within 30 days of request, where prescribed conditions are satisfied.
Dispute Resolution in Onshore and Financial Free Zone Jurisdictions
In the case of commercial disputes, the State’s judicial architecture is divided into litigation, mediation and arbitration.
Onshore Civil and Commercial Litigation
Onshore civil and commercial litigation is governed by Federal Decree-Law No. 42 of 2022, as amended by Federal Decree-Law No. 22 of 2025, effective 1 January 2026.
Article 32 permits the Chairman of the Federal Judicial Council or relevant local authority to establish specialised circuits for inheritance and estate disputes, including related civil, real estate and commercial claims. These circuits may use the Case Management Office, a Preparation Judge, and local or international experts, and may also be formed upon party request or agreement.
According to Article 164, an appeal shall be filed by memorandum with the Case Management Office and registered immediately, stating the judgment, grounds and relief sought. Under Article 175, cassation appeals may be filed for claims in excess of AED 500,000 or claims of unknown value on specific legal grounds, except for execution rulings.
The Federal Arbitration Framework
The UAE arbitration law is Federal Law No. 6 of 2018 (as amended by Federal Decree-Law No. 15 of 2023). The law promotes modern and flexible dispute resolution by recognising written arbitration agreements made by electronic communications and allowing proceedings to be conducted in person or online.
It also confirms that an arbitration clause may remain valid even if the main contract is challenged or terminated. Awards may be signed electronically or by arbitrators located outside the agreed seat, while still being treated as issued at that seat. These provisions make arbitration a practical option for cross-border investors seeking confidentiality, procedural flexibility and enforceable dispute-resolution arrangements.
Once an arbitral award is recognised by the court, it becomes binding and enforceable under UAE law. The merits of these are not to be gainsaid. The grounds for the objections are restricted to the specific nullity grounds in Article 53, such as invalid agreements, lack of notice or procedural irregularities, but may also include non-arbitrability or public policy. Nullity actions are to be filed within 30 days, and decisions on enforcement are to be issued within 60 days.
Conclusion
The UAE provides foreign investors with a flexible and increasingly sophisticated commercial environment to operate in, with options available across mainland, free zone and financial free zone jurisdictions. But picking the right structure is about more than ownership rights or licensing costs. Investors need to assess the proposed activity, regulatory approvals, contractual arrangements, tax treatment, governance requirements and dispute-resolution strategy at the outset.
A well-planned structure can support market access, operational flexibility and long-term growth, while reducing the risk of regulatory or commercial disputes. Early legal, tax and compliance planning remains essential for businesses seeking to establish, expand or invest in the UAE with confidence.
