Labor Law

Corporate law in the United Arab Emirates (UAE) governs the management, funding, and authority of businesses within the country. There is a fundamental corporate code for each emirate. Professional, commercial, industrial, and tourism-related business licenses are the several categories that are issued in the United Arab Emirates (UAE). Professional licenses cover services provided by professionals, artisans, and craftspeople; commercial licenses cover all trading and business operations carried out with a view to profit; and industrial licenses cover all industrial and manufacturing activities. Everything associated with hospitality and tourism is covered under the tourism license. Depending on the company or enterprise’s commercial activity, a certain license may be required.

Commercial law usually referred to as business law or corporation law is the body of legislation that governs the rights, relationships, and behavior of individuals and businesses engaging in trade, sales, merchandising, and other forms of commerce. Due to the fact that it addresses both private and public legal issues, it is frequently regarded as a subset of civil law.

On January 2, 2022, the New Companies Law went into force. The modifications it established must be complied with by all businesses within a year. During this transitional phase, all businesses should evaluate the New Companies Law’s effects, revise their bylaws, and make sure they are fully compliant by 2 January 2023.


Ten of the New Companies Law’s major revisions are listed below:

Special Purpose Acquisition Corporations (SPACs):

The use of SPACs as means of raising capital through a public listing for the purpose of acquisitions or strategic mergers has gained favor in recent years, especially in the USA.

A legal foundation for SPACs has now been established in the UAE. A public joint stock company (“PJSC”) that the Securities and Commodities Authority (“SCA”) has authorized for the express purpose of purchasing or merging companies is what is meant by this under the New Companies Law. The New Companies Law recognizes SPACs, but they are also exempt from the law’s provisions and are governed by unique regulations that the SCA published earlier this year.

Special-purpose vehicles (SPVs):

Onshore special purpose vehicles are now officially recognized under the New Companies Law. For credit operations, borrowing, securitization, bond issuance, and the transfer of risks related to insurance, reinsurance, and derivatives operations, SPVs are businesses created with the intention of separating the obligations and assets associated with a specific financing operation from the obligations and assets of the person who incorporated it.

Similar to SPACs, SPVs are recognized by the New Companies Law but will be governed by unique regulations that will be published by the SCA. It is envisaged that the creation of SPACs and SPVs will encourage transactions in the corporate and financing sectors by providing for more flexibility in structuring and bringing the UAE in line with the structures available to investors and financiers in other developed legal jurisdictions.

Foreign Investment:

Federal Law No. 26 of 2020, which was enacted in 2020, brought about the most important modification to the Old Companies Law. The requirement for a minimum 51% UAE shareholding in onshore firms was eliminated by this, with the exception of a few “Activities of Strategic Effect.”

The New Companies Law reiterates the concepts presented in 2020; it does not, however, add anything new, but it codifies and affirms these modifications as a fundamental tenet of the New Companies Law. For both new and current foreign investors, this is a positive development.

LLCs - Lower Statutory Reserve Contributions:

The percentage of net income that a limited liability company (“LLC”) is required to set aside each year for the purposes of its statutory reserve has been decreased from 10% to 5%. When the statutory reserve equals half of the company’s share capital, the shareholders may choose to discontinue funding it.

LLCs - Renewing Managers after Appointment Term Expiration:

One or more managers are responsible for running an LLC. According to the New Companies Law, the current board of managers must continue to administer the firm for up to six months after the term of appointment of the managers expires if the board of managers has not been reformed. New managers must be appointed by the shareholders on or before the end of the six-month period; if they are not, managers may be appointed by the appropriate responsible entity with jurisdiction over the firm.

Quorum Requirements for Convened Shareholder Meetings Relaxed for LLCs:

In cases where a quorum was not present at the initial shareholder meeting, a new meeting of the shareholders must be called within five and 15 days. In spite of the number of shareholders present, the meeting will now be regarded as quorate. This rule is now binding and will take effect regardless of any conflicting language in the LLC’s memorandum of association.

Founders' Subscription Caps for PJSCs:

In accordance with the Old Companies Law, the minimum (30%) and maximum (70%) percentages of shares that founders might subscribe for through an IPO were capped. Subject to any conditions imposed by the SCA, founders may now subscribe for shares in the percentages indicated in the prospectus.

Extended Public Subscription Periods for PJSCs:

Previously, a public offering’s share subscription period was limited to 10 working days. As long as the duration does not exceed 30 working days, the New Companies Law now permits subscriptions to remain open for a time that will be indicated in the offering prospectus. An application to prolong the public subscription can be filed to the SCA if all of the shares are not subscribed for within the allotted time. The founders may subscribe for any shares that remain unsubscribed at the end of the subscription term.

PJSCs - Issuing Shares at a Discount:

In cases when the market value is less than the nominal value, PJSCs may now issue shares at a discount to the nominal value. This is contingent upon receiving SCA permission, the corporation creating a special reserve in an amount equivalent to the discount, and the company paying the gap out of future profits before paying out dividends.

Caps on the nominal value of shares have been removed for PJSCs:

Previous limitations that the nominal value of shares in a PJSC must be between AED 1 and AED 100 were eliminated by the New Companies Law.