For decades, the standard rule for foreign investors setting up a company on the UAE mainland was clear and non-negotiable: you needed a UAE national partner who held at least 51% of the shares. That partner — often referred to as a local sponsor — had majority ownership on paper, even if the commercial arrangement between the parties told a different story.
That changed in June 2021 when Federal Decree-Law No. 32 of 2021 on Commercial Companies came into force. The reform removed the mandatory UAE national shareholding requirement for the majority of commercial activities — allowing foreign investors to own 100% of their mainland company for the first time.
It was one of the most significant regulatory changes in UAE commercial history. But like most significant reforms, the details matter considerably.
What the Law Actually Says
The 2021 Commercial Companies Law allows 100% foreign ownership for companies engaged in activities that are not listed on a restricted or strategic activities list. For the vast majority of commercial, trading, service and professional activities, full foreign ownership is now permitted on the UAE mainland.
The law applies across all seven emirates and covers Limited Liability Companies (LLCs), which are the most common structure for mainland businesses. It does not require any application or special approval for most activities — it is the default position under the new law.
What Has Not Changed
The reform is significant, but it is not universal. Several categories of activity remain subject to UAE national ownership requirements.
Strategic sectors — including oil and gas exploration, utilities, certain defence-related activities, and some transportation activities — continue to require UAE national participation at varying percentage thresholds. These are defined by ministerial decision and are subject to revision.
Professional licences in some emirates — certain regulated professions, particularly in Abu Dhabi and some other emirates, continue to require a UAE national service agent arrangement even if not a shareholding partner. This is different from an ownership requirement but still involves a UAE national in a formal role.
Banking and financial services — remain regulated separately under Central Bank and other financial regulatory frameworks, which have their own ownership and licensing requirements independent of the Commercial Companies Law.
Free zones — were always 100% foreign ownership permitted and this has not changed. The 2021 reform specifically addresses the mainland, bringing it broadly into line with the free zone position on ownership.
The Local Sponsor Arrangement — What Happens Now
For businesses that had existing mainland companies structured with a 51% UAE national shareholder under the old rules, the 2021 reform creates an option — not an obligation — to restructure to full foreign ownership.
Many existing arrangements involved side agreements between the foreign investor and the local sponsor that effectively neutralised the majority shareholding — giving the foreign investor full economic and operational control in practice, while the local sponsor held shares on paper. These arrangements were common, widely understood, and in many cases functioned without issue.
With 100% foreign ownership now available, some businesses have restructured. Others have maintained their existing arrangements where the relationship with the local partner is genuinely valuable — for relationships, government connections, or commercial reasons that go beyond the shareholding structure.
There is no legal requirement to restructure. The decision should be based on the practical value of the existing arrangement, not on an assumption that the old structure is now invalid or problematic.
Practical Implications for New Market Entrants
For businesses considering UAE mainland entry for the first time, the 2021 reform simplifies the decision considerably. The question is no longer whether you can own 100% — in most cases you can — but which structure (mainland, free zone or offshore) best serves your commercial objectives.
The removal of the local sponsor requirement also changes the cost calculation. Previously, local sponsor fees — whether fixed annual amounts or percentage-based arrangements — were a permanent operational cost for mainland businesses. For businesses where that cost was significant, the mainland option now becomes more financially attractive relative to free zones.
What This Means in Practice — and What to Check
Before proceeding on the basis that your specific activity qualifies for 100% foreign ownership, three checks are worth making:
First, confirm your activity is not on the strategic or restricted list. This changes periodically and the relevant list is maintained by the Ministry of Economy and the relevant emirate's DED.
Second, check whether any sector-specific regulation applies to your activity — financial services, healthcare, education and certain professional activities have their own frameworks that may include ownership or licensing requirements independent of the Commercial Companies Law.
Third, consider whether the mainland is the right structure for your business at all. Full foreign ownership on the mainland is now available for most activities, but that does not automatically make it the best choice. Free zones continue to offer genuine advantages for certain business models.
The 2021 reform removed one of the most significant structural barriers for foreign investors in the UAE. Understanding precisely how it applies to your specific situation — rather than relying on the general principle — is where the practical work begins.
