Introduction

As we enter the second month of 2025, the United Arab Emirates (UAE) continues to solidify its position as a global hub for business and investment. Recent legislative changes have further enhanced the country’s appeal to foreign investors and entrepreneurs. This updated guide, prepared by Khairallah Advocates & Legal Consultants, provides a comprehensive overview of the process of establishing a company in the UAE, reflecting the latest laws and regulations as of 2025.

Recent Legislative Changes

1. Corporate Governance Reforms

The UAE has implemented significant corporate governance reforms aimed at enhancing transparency, accountability, and sustainability:

• Board Diversity: As per the Ministry of Economy’s new mandate, all private joint-stock companies must appoint at least one woman to their boards of directors. This builds upon the 2021 mandate for publicly listed companies and aligns with the UAE Gender Balance Council’s target of 30% female representation in leadership positions by the end of 2025.

• Securities and Commodities Authority (SCA) Guidelines: The 2024 update to the Governance Codes of Public Companies emphasizes gender diversity, sustainability, and board accountability.

2. Federal Corporate Tax Law

Introduced in 2023, the UAE now imposes a 9% federal corporate tax. This new tax regime has mandated increased financial disclosures for businesses, fostering greater transparency in the corporate sector.

3. Companies Law Amendments

Federal Decree-Law No. 32 of 2021 on Commercial Companies (CCL 2021) has brought about several key changes:

• Removal of foreign ownership restrictions in most economic sectors
• Flexibility in share capital requirements for certain company types
• Introduction of Special Purpose Acquisition Companies (SPACs)
• Enhanced provisions for mergers and acquisitions

Choosing the Right Business Structure

The UAE offers various business structures, each with its own advantages and considerations:

1. Limited Liability Company (LLC)

Key Features:

• Can now be 100% foreign-owned in most sectors
• Minimum of 1 and maximum of 50 shareholders
• No minimum capital requirement (unless specified by certain activities)

Regulatory Framework:

• Federal Decree-Law No. 32 of 2021 on Commercial Companies
• Local emirate-specific regulations

2. Free Zone Company

Key Features:

• 100% foreign ownership
• Tax exemptions and customs duty benefits
• Simplified incorporation process

Regulatory Framework:

• Specific regulations of each free zone
• UAE Federal laws where applicable

3. Offshore Company

Key Features:

• High level of privacy and confidentiality
• Tax-neutral environment
• Cannot conduct business within the UAE

Regulatory Framework:

• Offshore regulations of the respective free zone (e.g., JAFZA, RAK ICC)

Compliance and Legal Consideration

1. Economic Substance Regulations (ESR)

While the requirement to ensure economic substance within the UAE was abolished in 2024, companies may still need to maintain a certain level of presence to benefit from tax advantages, particularly in Free Zones.

2. Ultimate Beneficial Ownership (UBO)

Companies must maintain and submit a register of ultimate beneficial owners to the relevant authorities within 60 days of registration.

4. Corporate Tax Compliance

With the introduction of corporate tax, companies must ensure proper bookkeeping and timely filing of tax returns.

Navigating the Legal Landscape: Tips from Khairallah Advocates & Legal Consultants

1. Stay Informed: Keep abreast of legal and regulatory changes that may affect your business. The UAE’s legal landscape is dynamic, with frequent updates to align with global best practices.

2. Seek Professional Advice: Engage with reputable legal and business setup consultants familiar with UAE laws and procedures. The complexity of recent reforms makes professional guidance invaluable.

3. Prioritize Compliance: Establish robust internal compliance mechanisms to adhere to new corporate governance standards, tax regulations, and disclosure requirements.

4. Leverage New Opportunities: Explore the possibilities offered by recent reforms, such as 100% foreign ownership in mainland companies or the introduction of SPACs for public listings.

5. Plan for Sustainability: Integrate Environmental, Social, and Governance (ESG) considerations into your business strategy, aligning with the UAE’s increasing focus on sustainable development.

Conclusion

The UAE’s commitment to creating a world-class business environment is evident in its continuous legal and regulatory reforms. While these changes present new opportunities for businesses, they also introduce complexities that require careful navigation. At Khairallah Advocates & Legal Consultants, we specialize in guiding businesses through the intricacies of company formation and ongoing compliance in the UAE.

For personalized advice on establishing and operating your business in the UAE, contact Khairallah Advocates & Legal Consultants. Our team of expert lawyers is equipped to provide the guidance and representation you need to thrive in this dynamic market.

Having said that, Contact Khairallah Advocates & Legal Consultants and benefit from our free 30-min legal consultation.

*Disclaimer: our blogs, law updates and FAQ’s are freely distributed for educational purposes and to showcase recent updates and regulations in the UAE’s framework.

If you have any questions and need assistance, contact us at our number or book an appointment online.