A foreign investor setting up in the UAE works under Federal Decree-Law No. 32 of 2021 on Commercial Companies, which Federal Decree-Law No. 20 of 2025 amended in several places. This guide explains how the law treats company forms, foreign ownership, licensing and free zones, from the English text published on the UAE Legislation portal and the Arabic text of the 2025 amendment published by the Ministry of Economy and Tourism. We assist clients with the UAE from our office in Kuwait, in cooperation with our partners in the UAE. Related guides are linked at the end of this article.
What a company is
Under Article 8, a company is a contract in which two or more persons each undertake to take part in an economic project that aims at profit, by contributing a share of money or work and dividing the profit or loss. The economic project covers any commercial, financial, industrial, agricultural or real estate activity or other economic activity. As exceptions, the law allows a company to be set up or owned by a single person under its provisions, and, under the 2025 amendment (Article 8(3)(b), added by Federal Decree-Law No. 20 of 2025, issued on 1 October 2025; it is not in the 2021 text), allows a non-profit company whose net profits are reinvested in its purposes without distributions to partners or shareholders, with a Cabinet resolution regulating such companies.
The five company forms
Article 9(1) lists the forms a company must take:
- general partnership company;
- limited partnership company;
- limited liability company;
- public joint stock company;
- private joint stock company.
A company that does not take one of these forms is null and void, and the persons who contracted in its name are personally and jointly liable for the obligations arising from that contracting (Article 9(2)). Every company established in the State, including in free zones and financial free zones, has the nationality of the State (Article 9(3)). The 2025 amendment also lets a company (Article 275(4), as amended), under the legislation in force and the implementing regulations, convert to another legal form outside the five, including cooperatives, while keeping its legal personality, and it adds a new Article 15 bis on moving a company's registration from one competent authority to another.
Foreign ownership and activities with strategic impact
The Decree-Law does not itself set a nationality requirement for ownership. Article 10 sets up the mechanism for activities with strategic impact. The Cabinet forms a committee with representatives of the competent authorities, which proposes the activities with a strategic impact and the controls for licensing companies that engage in them. The Cabinet then issues a resolution defining those activities and controls. Subject to that, the competent authority may fix a ratio for UAE nationals in the capital or boards of the companies within its remit, and approves incorporation applications and fees under the Cabinet's controls. Check the current Cabinet resolution and the authority's practice for your activity, since the list and ratios are set outside the Decree-Law.
The Decree-Law also states that only public joint stock companies may conduct banking and insurance business, unless the laws regulating those activities or resolutions under them provide otherwise (Article 11(3)).
Licensing
Article 11(1) requires a company to obtain all approvals and licenses needed for its activities in the State before it starts business. A company that follows Islamic Sharia rules must obtain approval of its internal Sharia supervisory committee after incorporation and before it starts its activities (Article 11(2)). The company's name must not conflict with public order, must be followed by its legal form, and may not match or closely resemble a name already registered (Article 12). Every company needs a registered address in the State, and its contracts and documents must show its name, legal form, registration number and address (Article 13). The memorandum of association and any amendment must be written in Arabic and attested by the competent authority, and without that it is null and void. If a foreign-language version exists, the Arabic version prevails (Article 14).
Free zones
Article 5(1) provides that the Decree-Law does not apply to companies established in the free zones of the State on matters that the laws or regulations of the zone specifically address. Under Article 5(2), if the legislation of a free zone or financial free zone lets its companies work outside the zone and inside the State, they may set up branches or representative offices in the State, and those are subject to the Decree-Law. Article 5(3) leaves other legislation's requirements in place. So a free zone company that wants to trade onshore through a branch needs both the zone's permission and a mainland license for the branch.
Choosing a route
A free zone suits a business whose customers or operations sit in the zone or abroad. A mainland company suits a business that sells in the local market. A free zone company can reach the mainland through a branch only if its zone's rules allow it. Compare the activity, the market and the licenses before you decide, and confirm any foreign ownership limit for your activity with the competent authority.
Name and registered address (Articles 12 and 13)
A company needs a trade name that does not conflict with the public order of the State, followed by its legal form. The name cannot be one already registered in the State or one confusingly similar to it (Article 12(1)). A company can change its name by a special resolution of the General Assembly or the like, if the Competent Authority and the Registrar approve. A name change does not affect the company's rights, obligations or legal proceedings (Article 12(2)). Every company must have a registered address in the State for notices and communications (Article 13(1)).
The memorandum of association (Articles 14 to 16)
The memorandum of association and any amendment must be drafted in Arabic and attested by the Competent Authority. Otherwise they are null and void. If the memorandum also exists in a foreign language, the Arabic version prevails in the State (Article 14(1)). The partners can rely on this nullity against each other, but not against third parties (Article 14(2)). If a court declares a company null at a partner's request, the nullity takes effect only from the date the judgment becomes final (Article 14(3)).
Partners in a limited liability company, or shareholders in a private joint stock company, may include in the memorandum or articles a clause that lets one or more of them oblige the others to sell their stakes or shares to a third party once pre-agreed conditions are met (Article 14(4)). Read that Article in full when you draft drag-along terms.
The memorandum and any amendment take effect once registered in the commercial register with the Competent Authority. Without registration, they have no legal effect against third parties (Article 15(1) and (2)). Companies must notify the Competent Authority and the Registrar in writing within fifteen business days of any change to registered details, including name, address, share capital, number of partners or legal form (Article 15(3)). Managers or directors are jointly liable for the damage that comes from failing to register the memorandum or an amendment (Article 15(4)).
A company may move its registration between registering authorities by a special resolution of the General Assembly or with the approval of the absolute majority of the partners, and may also move between a free zone and the Competent Authority, subject to the conditions in Article 15 bis. It keeps its legal personality (Article 15 bis).
A third party may prove the memorandum by any means, and may invoke the existence or invalidity of the company against the partners. If a company is declared invalid at the request of a third party, it is treated as void from the start for that third party, and those who contracted with him in the company's name are jointly liable. The company's debtors cannot use invalidity to avoid paying their debts to it (Article 16).
Capital and contributions (Articles 17 to 20)
Capital consists of cash contributions and in-kind contributions with an appraised value. A partner's contribution may be work only if the partner is jointly liable, and it may never be reputation or influence (Article 17(1) and (2)). The Ministry and the Competent Authority set the standards for valuing in-kind contributions and approving evaluators, except for public joint stock companies (Article 17(3)). A partner who fails to pay a cash contribution, or whose contributed debts remain unpaid, is liable to the company, and also for any difference between the value recorded in the partners register and what he actually contributed (Article 19; Article 18 sets the related rules on how each type of contribution is treated). A partner's personal creditor cannot take the debtor's contribution to capital. He can collect his claim from the debtor's profit share, and on liquidation from the debtor's share. If the contribution is shares, the creditor can ask the court to sell them (Article 20).
Legal personality and who can bind the company (Articles 21 to 25)
A company gets legal personality from the date of registration in the commercial register. During incorporation it has personality only as far as needed to incorporate, and is bound by the founders' acts for that purpose if incorporation is completed (Article 21(1) and (2)). In liquidation it keeps personality for the liquidation, and "Under Liquidation" is added to its name (Article 21(3)). Subsidiaries of a holding company have separate legal personality and separate financial liability (Article 21(4)).
The person authorized to manage the company must protect its rights and act with the care of a prudent person (Article 22). The company is bound by acts of its authorized manager in the ordinary course of management (Article 23). A clause in the memorandum or articles that relieves a current or former officer of personal liability is void, subject to the Decree-Law (Article 24). A company cannot deny liability to a client on the ground that the manager was not duly appointed, if the manager's acts fall within the usual limits for similar positions. This protects only clients acting in good faith, meaning those who did not know and could not have known of the defect (Article 25).
Records, accounts and the fiscal year (Articles 26 to 28)
Every company keeps accounting records at its headquarters for at least five years after the end of the fiscal year (Article 26). Joint stock companies and limited liability companies must have one or more auditors who audit the accounts every year. Companies prepare annual accounts, apply international accounting standards, and must give a partner or shareholder who asks in writing a free copy of the last audited accounts and auditor's report within ten days (Article 27). The articles of association set the fiscal year, and the first fiscal year is between six and eighteen months (Article 28).
Questions to settle before you register
- Is the activity on the strategic-impact list, so that special approvals apply? Cabinet Resolution No. 55 of 2021 (in force from June 1, 2021) lists seven such activities: security, defense and military activities; banks, exchange houses, finance companies and insurance activities; currency printing; telecommunications; Hajj and Umrah services; Quran memorization centers; and services related to fisheries. Each falls under a regulator (the Ministries of Defense and Interior, the Central Bank, the telecom regulator, the General Authority of Islamic Affairs and Endowments). For fisheries services, the Resolution sets UAE nationals' share at 100%. Under Article 3, the competent authority sends the application to the regulator within 5 working days, and the regulator decides within 14 working days of receiving it or of its completion. Check for later changes to the list.
- Mainland or free zone, and if a free zone, what do that zone's own rules say?
- Which of the five forms fits your liability needs?
- Is the memorandum in Arabic and ready for attestation?
- Who is the registered manager, and what are his powers?
- Which auditor and fiscal year will you use?
Practical steps
- Choose the activity, the legal form and the location.
- Check the Cabinet's strategic-impact activities and the authority's ownership rules for your activity.
- Reserve the trade name, and get initial approval.
- Prepare the memorandum of association in Arabic and have it attested.
- Obtain the license and registration, plus any sector approval.
- Complete tax registration, bank accounts and residence permits.
Read also: UAE Agency and Distribution Contracts: Law 3 of 2022 Guide | Entering Qatar: Foreign Ownership and Free Zones Guide | Company Formation in the UAE for Foreign Investors
Frequently asked questions
Can a foreigner own a UAE company outright?
The Decree-Law has no general nationality requirement, but Article 10 lets the Cabinet define activities with strategic impact and their licensing controls, and lets the competent authority set a ratio for UAE nationals in the companies within its remit. Confirm the position for your activity.
What is the difference between a mainland and a free zone company?
A free zone company follows its zone's rules on matters they cover (Article 5(1)). To work in the State outside the zone, it may open a branch or representative office that is subject to the Decree-Law, if the zone's legislation allows it (Article 5(2)).
What legal forms are available?
Five forms under Article 9: general partnership, limited partnership, limited liability, public joint stock and private joint stock.
Do I need approvals before I start?
Yes. Article 11 requires all approvals and licenses for the activity before business starts.
How do you help companies with the UAE?
From our office in Kuwait, in cooperation with our partners in the UAE, we map your entry and review incorporation, licenses and contracts.