The United Arab Emirates (UAE) has actively positioned itself as a global hub for foreign investment by enacting progressive reforms and offering a favourable regulatory environment. Its policies and legal framework are designed to attract international investors while maintaining national interests in certain strategic sectors.

A Multi-Jurisdictional Landscape

The UAE comprises multiple jurisdictions where companies can be incorporated—each emirate operates its own licensing authority, in addition to over 40 free zones. Investors can choose to establish entities either in mainland (onshore) UAE or in free zones, depending on their business model.

Historically, foreign ownership in mainland companies was restricted to a maximum of 49%, requiring a UAE national to hold the remaining 51%. However, with the enactment of Federal Decree-Law No. 32 of 2021 on Commercial Companies (“New Companies Law”), effective from January 2022, these restrictions were largely lifted. Today, subject to limited exceptions, foreign investors can own 100% of mainland companies.

Strategic Impact Activities

Despite the liberalization of ownership rules, some sectors are still protected due to their strategic importance. Cabinet Resolution No. 55 of 2021 outlines specific activities deemed critical to national interests, which remain subject to foreign ownership limits. These include:

• Defence and military-related services
• Banking, finance, and insurance
• Currency printing
• Telecommunications
• Hajj and Umrah services
• Quran memorisation centres
• Fisheries-related services

Each strategic sector is overseen by a designated authority (e.g., the Ministry of Defence for military activities), which determines foreign ownership thresholds and issues sector-specific regulations.

Free Zones: A Long-standing Gateway

Free zones have always permitted 100% foreign ownership and offer advantages such as streamlined regulations, tax holidays, and sector-focused ecosystems. These zones continue to be popular among international investors, especially in industries such as media, finance, and logistics.

Foreign Exchange and Government Procurement

The UAE imposes no foreign exchange controls, both within and outside free zones. However, it is not a signatory to the WTO’s Agreement on Government Procurement. As a result, public procurement tends to favour local businesses unless international agreements dictate otherwise.

Key Laws Governing Foreign Investment

The UAE does not have a single, unified investment law. Instead, foreign direct investment (FDI) is governed by a collection of federal laws and regulations, including:

• Commercial Companies Law (2021): regulates corporate formation and governance in mainland UAE.
• Strategic Impact Activities Resolution (2021): defines sectors with foreign ownership restrictions.
• Commercial Agency Law (2022): governs agency relationships and allows only UAE nationals or entities fully owned by them to act as agents.
• Competition Law (2023): oversees mergers and acquisitions that could affect market dominance.
• Government Tender Regulations (2019): outlines rules for federal procurement, excluding military and sensitive sectors.
• Property Laws: restrict foreign ownership of real estate to designated zones within each emirate.
• Bankruptcy Law (2023): provides mechanisms for financial restructuring and creditor protection.
• Corporate Tax Law (2022): governs taxation on corporate income, subject to certain thresholds and exemptions.

Scope and Sectoral Scrutiny

The Commercial Companies Law is the primary legislation for onshore business activity. Foreign investors can also establish branch offices, which no longer require the appointment of a UAE national agent—except in specific regulated sectors like oil and gas.

Mergers or acquisitions involving dominant market positions are regulated under the Competition Law and require approval from the Ministry of Economy. Additional approvals may apply for deals involving sectors such as banking (CBUAE) or telecommunications (TDRA).

The Commercial Agency Law reserves agency rights for UAE nationals or fully UAE-owned companies. It introduces more flexibility for foreign principals by relaxing rules on termination and exclusivity, a departure from the rigid provisions of the previous law.

The Property Laws prevent foreign ownership of land or buildings outside of designated areas, which vary by emirate. In Dubai, for example, foreign ownership is permitted in freehold zones approved by the government.

Bankruptcy and Financial Restructuring

The UAE’s Bankruptcy Law introduces preventive settlement and restructuring options for financially distressed businesses. This allows a debtor to reorganize under court supervision without entering formal bankruptcy, thereby preserving operations and creditor relationships.

Key features include:

• Access to court-backed preventive settlement or restructuring for viable businesses in financial distress.
• Creditors must be owed at least AED 1 million (or AED 10 million for regulated financial institutions) to initiate bankruptcy proceedings.
• Restrictions on asset disposal and corporate restructuring during the legal process.

Conclusion

The UAE continues to evolve its legal and regulatory framework to balance openness to foreign investment with the protection of strategic sectors. The country’s free zones, liberal ownership policies, and clear legal reforms make it an attractive destination for global investors, while specific oversight remains in place to safeguard national interests.