The Strategic Guide to Corporate Governance Advisory in the UAE
A decision the company cannot evidence is, in practice, a decision that was never taken.
Governance in the UAE is what a licensing authority, a regulator or a shareholder can ask to see: the registered constitution, the registers, the notices, the minutes, the approvals. This guide separates the mainland framework under the 2021 companies law from the DIFC and ADGM regimes, where directors' duties are owed personally, and sets out the obligations a board must allocate by name.
Reviewed by Mohamed Noureldin, Founder, Managing Partner & Senior Legal Consultant
Corporate governance in the UAE is not an abstract idea about board culture. It is a set of filings, registers, meetings and approvals. A licensing authority, a regulator or a shareholder can ask to see any of them. Some companies treat it as a paperwork exercise finished at incorporation. They tend to find the gaps at the worst moment: during due diligence (a buyer's or investor's checks), a shareholder dispute, or a review of the corporate tax return.
The starting point is which law applies. Mainland companies are governed by Federal Decree-Law No. 32 of 2021 on commercial companies. It has been in force since 2 January 2022 and replaced Federal Law No. 2 of 2015. Companies incorporated in the DIFC and ADGM are governed instead by those centres' own companies legislation. That legislation is run by their own registrars and courts. Financial services firms there are also supervised by the DFSA and the FSRA.
Related: Our corporate governance review service audits constitutional documents, registers and board process.
The mainland framework
Under the 2021 companies law, the constitutional document is the working governance instrument. For an LLC that is the memorandum of association; for a joint stock company, the articles. It sets the quorum and majority for shareholder decisions. It sets the powers reserved to the general assembly. It covers how managers or directors are appointed and removed. It also covers how shares are transferred and pre-emption rights (existing shareholders' first claim on shares being sold). A shareholders' agreement may say something different from the registered constitution. If so, the authority will act on the registered document.
One structural change should be reflected in older documents. Federal Decree-Law No. 26 of 2020, effective 1 June 2021, removed the requirement for majority UAE-national ownership of mainland companies. Most mainland activities now allow 100% foreign ownership. This is subject to a strategic-impact list and each emirate's schedule of activities. Constitutions and side agreements built around nominee or sponsorship arrangements should be reviewed. Where the activity allows, they should be unwound in favour of direct ownership. A local service agent for the branch of a foreign company remains a separate and lawful arrangement.
Related: See our corporate tax compliance support and our corporate governance advisory practice.
Public joint stock companies carry a further layer: the governance rules issued by the Securities and Commodities Authority. These cover board composition and independence, board committees, related-party transactions and disclosure to the market. Private companies are not bound by that regime. But they often adopt parts of it, especially audit committee practice, when preparing for investment.
DIFC and ADGM
Both centres apply common-law companies legislation. In it, directors' duties are set out as statutory duties. Directors must act within their powers, promote the success of the company, and use reasonable care and skill. They must avoid conflicts and declare interests in proposed transactions. Both centres require the company to keep statutory registers. Both require it to file accounts and annual confirmations with the registrar. Where the company holds a financial services licence, the DFSA or FSRA rulebook adds more. It covers senior management responsibility, compliance and risk functions, and regulatory reporting.
The practical difference from the mainland is individual accountability. Those duties are owed personally. They are litigated personally in the DIFC and ADGM Courts. Board minutes recording what was considered, and why, are the main evidence a director has when a decision is later challenged.
Related: Explore our corporate governance solutions and board advisory support for companies in the UAE.
The obligations governance has to carry
Governance is now the delivery mechanism for several separate regimes. The board should be able to say who owns each one.
- Registers and beneficial ownership. Keep registers of shareholders, directors and ultimate beneficial owners, and notify the licensing authority of changes. Stale registers are the most common due diligence finding.
- Corporate tax. Federal Decree-Law No. 47 of 2022 applies for financial years starting on or after 1 June 2023. The rate is 0% on taxable income up to AED 375,000 and 9% above. Registration, record-keeping, transfer pricing documents for related-party dealings and the return itself each need a named owner.
- VAT. The standard rate is 5%. The board should know whether the group's registrations and filings are current.
- Economic substance. Cabinet Decision No. 98 of 2024 cancelled the regulations for financial years ending after 31 December 2022. Duties remain only for the financial years from 2019 to 2022. So historic filings and any open assessments still need to be closed out.
- Data protection. Federal Decree-Law No. 45 of 2021 applies onshore. The DIFC and ADGM have their own data protection regimes, commissioners and notification requirements.
Practical steps for UAE businesses
Start with a document audit. Confirm that the registered constitution, the shareholders' agreement, the trade licence activities and the actual business all match. Gaps between them are where shareholder disputes begin.
Fix the meeting discipline. Hold the general assembly the constitution requires. Send notices in the required form and within the required period. Keep signed minutes and written resolutions in one place. A decision that cannot be evidenced is, in practice, a decision that was not taken.
Define delegated authority in writing. A signed authority matrix states who can commit the company, up to what value, and with what counter-signature. It prevents unauthorised commitments. It also prevents the paralysis that follows when the only authorised signatory is away.
Handle conflicts openly. Related-party transactions should be identified and disclosed to the board. They should be approved without the interested party voting. And they should be documented on arm's-length terms (the terms unrelated parties would agree). That is also what the transfer pricing rules expect to see.
Finally, review every year against the law as it now stands, not against last year's file. The framework has changed a great deal. Constitutions drafted under the 2015 companies law, or around pre-2021 ownership rules, will not reflect it.
Related Services: Explore our corporate governance advisory and governance implementation services for practical legal support in this area.
Disclaimer: The information in this article is for general information only and is not legal advice. Before you make any decision or take any action based on it, seek professional legal advice suited to your own circumstances.
Nour Attorneys Team
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