UAE Amended Company Law Effective January 1, 2021: Content and Future Company Formation Strategy

Learn the latest information about UAE amended Company Law effective January 1, 2021, and future company formation strategy.

Key Amendments to the UAE Commercial Code: Overview of Federal Decree Law No. 26 of 2020 Amendments to Federal Law No. 2 of 2015 (Commercial Code Law)

On November 23, 2020, the UAE Government announced Federal Decree Law No. 26 of 2020 (“Decree Law”), which amends key provisions of Federal Law No. 2 of 2015 (the Commercial Code Law, commonly known as the Company Law).

A major change is the removal of the requirement for UAE nationals to hold 51% of mainland (non-Free Zone) enterprise capital. This amendment strengthens UAE's foreign investment attraction efforts. However, 100% foreign ownership is not yet permitted across all sectors and activities; further details are expected after June 1.

The following amendments to CCL are particularly noteworthy:

CCL Provisions:

Article 10 CCL: Required UAE nationals to own at least 51% of LLCs established on UAE mainland. Decree Law: Article 10 is deleted

Article 329 CCL: Required appointment of UAE nationals as Local Service Agents (LSA) for foreign branches. Decree Law: Article 329 is deleted; LSA appointment is no longer required.

Article 151 This article specifically addresses PSJ (Public Joint-Stock Companies, UAE-listed enterprises) but is referenced for UAE strategic purposes. CCL: Required PSJ board majorities to be UAE nationals; resolutions contrary to this were void. Decree Law: Removes the requirement for board majorities to be UAE nationals; appointments now follow Article 10.

Let us examine how company establishment on mainland and in Free Zones will change. This section focuses on LLC formation.

1. Mainland Advantages and Disadvantages

Common advantages include income tax and corporate tax exemptions and no local sponsor requirements.

Mainland Advantages:：

• Lower land, warehouse, and office rental costs compared to Free Zones with greater options.

• Enables domestic UAE business operations; cost advantages for GCC sales and inventory management.

Mainland Disadvantages:

• Customs duties required on imports; non-GCC exports/re-exports involve additional procedures.

• Company licensing and visa procedures less streamlined than Free Zones; more time-consuming.

• 100% foreign ownership availability varies by activity; confirmation with each emirate's Department of Economic Development required.

2. Free Zone Advantages and Disadvantages

Staying long-term in UAE requires visa and Emirates ID acquisition. As of 2021, visa types include tourist visas for visitors.

Free Zone Advantages:

• As a bonded zone, duty-free import/export operations permitted.

• Rapid establishment, convenient procedures, with a foreign-like environment.

• Advantageous for Middle East and Africa-wide business operations.

• Free repatriation of capital and profits.

• No restrictions on foreign worker employment.

• Long-term land leasing available.

Free Zone Disadvantages:

• Higher rental costs for land, office space, and showrooms.

• Domestic UAE import/sales prohibited (requires separate onshore importer).

• Higher costs for UAE/GCC-only export operations.

3. Foreign Branch and Representative Office Options

Which is more advantageous: foreign branch or representative office?

Free Zones recommended for quick, rapid establishment. Onshore branches or representative offices preferred for cost reduction.

Summary

We provide complete texts and summary materials of both the “Decree Law” and CCL translated into Arabic and English to clients who contact us. Based on these materials, we support company formation and assist with understanding shareholder requirement changes and LSA exemption procedures. If you are considering establishing a company in UAE, please contact us for guidance.

Biz Easy's company formation support, overseas expansion assistance, and business setup services provide comprehensive support for UAE business establishment. Company registration, licensing, activity confirmation, and document verification are among our core services. Please contact us for overview and pricing information.

About "Biz Easy DMCC"

”Biz Easy DMCC” - Making Your Business Boldly Simple We provide overseas expansion support, company formation services including business plan reviews for overseas locations, and robust post-establishment support, enabling clients to focus on core business operations with rapid and stable management. As your “bridge” and “front-line base” for Dubai expansion, our specialists are committed to supporting you with extensive business experience and professional expertise. We are a consulting company significantly contributing to Middle East and UAE expansion through human expertise and technology.

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