table of contents
- legislative overview
- corporate structures for vasps
- governance requirements
- beneficial ownership transparency
- foreign ownership provisions
- free zone corporate structures
- compliance implications for tokenized asset firms
- cross-jurisdictional corporate planning
- enforcement and penalties
- practical guidance
legislative overview
Federal Decree-Law No. 32 of 2021 on Commercial Companies is the primary UAE legislation governing corporate entities, including virtual asset service providers operating in onshore UAE. The law replaced Federal Law No. 2 of 2015 and introduced significant reforms including expanded foreign ownership provisions, enhanced governance requirements, and modernized corporate structures that accommodate technology-driven business models.
For virtual asset service providers, the commercial companies law establishes the corporate governance foundation upon which regulatory licensing requirements are layered. A firm seeking a VASP license from the SCA under Cabinet Decision No. 111 must first establish a corporate entity compliant with Federal Decree-Law No. 32 or, if operating within a free zone, comply with the applicable free zone corporate regulations.
The law’s significance for the tokenization sector extends beyond basic corporate formation. Its provisions on beneficial ownership transparency directly support the UAE’s AML/CFT framework by ensuring that the ultimate owners of VASPs can be identified and verified. Its governance requirements establish baseline standards for board composition, management accountability, and internal controls that regulators build upon when assessing VASP licensing applications.
The interaction between corporate law and regulatory licensing creates a dual compliance obligation. VASPs must satisfy both the general corporate law requirements and the specific regulatory requirements imposed by their licensing authority — the SCA for onshore entities, VARA for Dubai entities, ADGM FSRA for ADGM entities, or DFSA for DIFC entities.
corporate structures for vasps
Federal Decree-Law No. 32 of 2021 provides several corporate structure options for VASPs operating in onshore UAE. The most common structures include Limited Liability Companies (LLCs), which offer flexibility in governance and ownership structure while limiting shareholder liability. Public Joint Stock Companies (PJSCs), which are required for entities seeking to list securities on UAE exchanges and may be relevant for tokenized securities platforms seeking exchange listing. Private Joint Stock Companies, which provide an intermediate structure between LLCs and PJSCs.
The choice of corporate structure affects regulatory positioning. The SCA may impose specific corporate structure requirements as a condition of VASP licensing, and different regulatory authorities have different preferences. ADGM and DIFC have their own corporate registration frameworks that operate independently of the federal commercial companies law, offering international company structures under common law principles.
The law permits foreign ownership of UAE companies up to 100% in specified sectors, removing the previous 49% foreign ownership cap that restricted international participation in the UAE market. This reform has been critical for the virtual asset sector, where many firms are international operations seeking to establish a UAE presence. The how-to guide for multi-authority licensing covers the practical implications.
governance requirements
Federal Decree-Law No. 32 establishes baseline governance requirements applicable to all commercial companies, including VASPs. Directors and officers must exercise their duties with care, skill, and diligence. The board of directors must include members with appropriate qualifications and experience. Internal controls must be established and maintained to ensure the accuracy of financial reporting and compliance with applicable laws. External auditing is required for specified categories of companies.
These governance requirements are supplemented by regulatory authority-specific governance standards. The SCA’s VASP licensing requirements impose additional governance obligations including fitness and propriety assessments for directors and senior managers, enhanced internal control requirements specific to virtual asset operations, compliance officer appointment and independence requirements, and technology governance and cybersecurity oversight obligations.
beneficial ownership transparency
The commercial companies law incorporates beneficial ownership transparency requirements aligned with the UAE’s FATF compliance obligations. Companies must maintain and disclose information about their ultimate beneficial owners, defined as individuals who own or control specified thresholds of shares or voting rights, or who otherwise exercise significant influence over the company’s affairs.
Beneficial ownership transparency requirements apply to VASPs regardless of their regulatory jurisdiction. The UAE FIU and regulatory authorities have access to beneficial ownership information for investigative and supervisory purposes. These requirements were a significant factor in the UAE’s removal from the FATF grey list in February 2024.
foreign ownership provisions
The 2021 reform of the commercial companies law removed the longstanding requirement for majority Emirati ownership of onshore UAE companies. VASPs can now be 100% foreign-owned when operating in onshore UAE, subject to specific sector restrictions that do not generally apply to virtual asset activities. This reform has significantly reduced barriers to entry for international virtual asset firms and has contributed to the growth of the UAE’s virtual asset ecosystem.
Within the free zones, foreign ownership has always been permitted at 100%. ADGM and DIFC entities benefit from their respective free zone corporate frameworks, while Dubai-based VASPs licensed by VARA may operate through onshore or free zone corporate structures depending on their specific business model.
free zone corporate structures
Each UAE free zone maintains its own corporate registration framework. ADGM entities are registered under the ADGM Companies Regulations 2020 and operate under ADGM’s common law framework. DIFC entities are registered under the DIFC Companies Law and operate under DIFC’s common law framework. Other Dubai free zones (such as DMCC and DWTC, where some VARA-licensed entities are based) have their own corporate registration requirements.
The choice between onshore and free zone corporate structures has significant implications for regulatory jurisdiction, tax treatment, foreign ownership flexibility, and dispute resolution mechanisms. The federal vs free zone comparison examines these dynamics in detail.
compliance implications for tokenized asset firms
Tokenized asset firms face specific compliance obligations under the commercial companies law. Token issuers must ensure that their corporate governance framework supports the fiduciary obligations inherent in managing investor assets. Custody providers must maintain corporate structures that facilitate the segregation of client assets from proprietary assets. Exchange operators must implement governance mechanisms that prevent conflicts of interest and ensure market integrity.
The cross-emirate regulatory arbitrage analysis examines how firms optimize their corporate structures across multiple UAE jurisdictions.
cross-jurisdictional corporate planning
Firms operating across multiple UAE jurisdictions typically establish separate corporate entities in each jurisdiction, each licensed by the relevant regulatory authority. This multi-entity structure introduces complexity in areas including intercompany arrangements and transfer pricing, consolidated governance and risk management, group-level capital allocation, and cross-entity AML/CFT compliance.
The multi-authority licensing strategy guide provides practical guidance on structuring multi-jurisdictional operations.
enforcement and penalties
Federal Decree-Law No. 32 establishes penalties for corporate law violations including fines, director disqualification, and company dissolution in severe cases. These penalties operate independently of regulatory enforcement by the SCA, VARA, ADGM FSRA, or DFSA — meaning that a VASP could face both corporate law penalties and regulatory enforcement actions for the same underlying conduct.
practical guidance
Firms establishing virtual asset operations in the UAE should engage corporate legal counsel with expertise in both the federal commercial companies law and the specific regulatory requirements of their target jurisdiction. The corporate formation process should be planned in coordination with the regulatory licensing application to ensure alignment between corporate structure and regulatory requirements.
For official guidance, consult the UAE Ministry of Economy for federal corporate law, and the relevant regulatory authority for jurisdiction-specific corporate requirements.