Mastering Corporate Law in Dubai: Strategic Insights from a Leading Corporate Law Firm
Dubai’s corporate landscape demands a legal framework engineered with structural precision and strategic foresight. As one of the most prominent financial hubs in the Middle East, Dubai offers a complex ecosy
Dubai’s corporate landscape demands a legal framework engineered with structural precision and strategic foresight. As one of the most prominent financial hubs in the Middle East, Dubai offers a complex ecosy
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Most corporate advice written about Dubai before 2021 is now wrong in two respects, and both go to the heart of how a business is set up and what it costs to run. The requirement that a mainland limited liability company be 51% owned by UAE nationals was removed by Federal Decree-Law No. 26 of 2020, which took effect on 1 June 2021. Full foreign ownership is available across most mainland activities today, with a list of activities of strategic impact held back from it. And the UAE is no longer a no-tax jurisdiction: Federal Decree-Law No. 47 of 2022 introduced corporate tax for financial years starting on or after 1 June 2023.
Related: See our corporate law for expatriate founders service.
Anything a founder reads that still recommends a local partner for a mainland trading company, or promises tax-free profits, was written for a country that no longer exists. What follows is where the law actually stands and what it changes about structuring decisions.
Ownership: what the 2020 amendment did and did not do
The amendment abolished the general national-shareholding requirement for mainland companies. Licensing authorities publish the activities that remain restricted, and the position is activity-specific rather than sector-wide, so the question is answered by the licence application and not by a rule of thumb.
Two arrangements are frequently confused with the old rule and remain perfectly lawful. The first is the local service agent appointed by a foreign company's branch, which is a service relationship rather than a shareholding. The second is a genuine commercial joint venture with an Emirati partner, entered into because the partner brings something to the business. What has gone is the compulsory version. Companies still carrying nominee structures assembled for the old requirement should look at them again, because those documents were built around a rule that has gone and they carry risk of their own.
Related: Our corporate compliance practice reviews existing structures.
The company law itself
Mainland companies are governed by Federal Decree-Law No. 32 of 2021 on commercial companies, which came into force on 2 January 2022 and replaced Federal Law No. 2 of 2015. It sets the available corporate forms, the content of the memorandum of association, the shareholder majorities for reserved decisions, directors' duties and the rules on capital and share transfers. Commercial dealings between businesses sit under Federal Decree-Law No. 50 of 2022 on commercial transactions, which replaced the 1993 law.
The practical point for a Dubai business is that the memorandum registered with the licensing authority is the constitutional document. Shareholder arrangements recorded only in a side agreement are contractual between the parties and do not bind the registrar. Where governance is meant to be permanent, it belongs in the constitution.
Related: Read about building a corporate governance framework.
Mainland, free zone and offshore are three different things
The vocabulary causes more confusion than the law does.
- Mainland. Licensed by the emirate's economic department and governed by the federal company law, able to contract with government bodies and to trade onshore without a distributor.
- Free zone. Licensed and regulated by the zone authority under its own companies rules, with its own registrar. Most zones are administrative rather than legal jurisdictions; federal law and the federal courts still reach the underlying disputes.
- DIFC and ADGM. Common-law jurisdictions with their own companies legislation, their own courts and their own financial regulators, the DFSA and the FSRA respectively. This is a different legal system, not a different licence.
- Offshore. Vehicles registered in JAFZA or with the Ras Al Khaimah International Corporate Centre are holding and asset-owning companies. They are not tax shelters and they do not carry a UAE trading licence.
Tax and substance, accurately stated
Corporate tax applies at 0% on taxable income up to AED 375,000 and 9% above that threshold, for financial years starting on or after 1 June 2023. Value added tax is charged at 5% under Federal Decree-Law No. 8 of 2017, as amended by Federal Decree-Law No. 18 of 2022. Free zone companies are not automatically outside the corporate tax regime; the position depends on the entity and the income it earns, and it has to be worked through rather than assumed.
The Economic Substance Regulations, which absorbed a great deal of compliance attention, were cancelled for financial years ending after 31 December 2022 by Cabinet Decision No. 98 of 2024. Obligations remain for the financial years from 2019 to 2022, so a company with unfiled notifications or reports for that window still has something to close out, but there is no continuing annual substance filing to build into the calendar.
Related: Our corporate tax and VAT advisory covers registration and filing.
Where corporate problems actually surface
In practice the recurring issues are unglamorous. Shareholder deadlock in a two-member company with no casting vote and no exit mechanism. A memorandum that was never updated after the ownership rules changed. Unpaid invoices under a contract that names no forum, leaving the creditor to choose between the local courts and an arbitration clause it cannot rely on. Directors who signed personal guarantees without noticing. Group structures in which the entity holding the licence is not the entity that signed the contract.
Recovery becomes a discipline of its own once payment stops, and the strength of the original paperwork decides how quickly it moves. Work on corporate debt recovery is mostly spent on documents drafted years earlier.
How to approach a structuring decision
Start from the activity and the customer. If the customer is a government entity or an onshore business that needs a local supplier, the answer is usually mainland. If the business is in financial services, or wants English-law documents and a common-law court, DIFC or ADGM justifies the additional cost. If the aim is to hold shares or property rather than to trade, an offshore vehicle may be the cleanest holder. Then confirm the tax position, then draft the constitution, and only then choose the trade name.
Related: Guidance on choosing a law firm in the UAE.
Related Services: Explore our corporate lawyers and ADGM corporate advice services for practical legal support in this area.
Disclaimer: The information provided in this article is for general informational purposes only and does not constitute legal advice. Readers should seek professional legal advice tailored to their specific circumstances before making any decisions or taking any action based on the content of this article.
Nour Attorneys Team
