In 2025, the UAE market continues to actively attract investors and entrepreneurs from around the world. However, with the rise of transparency and compliance requirements, the risks associated with structuring partnerships and investments have significantly increased.

Mistakes at the start — such as lack of proper legal protection or incorrect structuring of deals — can lead not only to blocked corporate accounts, bank refusals to provide services, or fines from regulators, but also to loss of equity stakes, business control, or even the business itself.

Partnership Formats in the UAE

Partnership structures in the UAE are regulated under the Civil and Commercial Codes, as well as the specific rules of the jurisdiction where the company is registered — either Mainland or Free Zone. The choice of partnership format directly affects control, liability distribution, profit sharing, taxation, and the level of legal protection available to partners.

1. A Local Partner (Emirati Sponsor) model historically required that a UAE national hold at least 51% ownership of a mainland company. Although this requirement was lifted in 2021 for most professional activities (such as consulting, IT, and media), it still applies in sectors like trading, oil and gas, construction, and logistics. Risks remain: without a properly executed agreement, a nominal partner could claim rights to the business during a conflict, and official records (such as commercial licenses) define legal ownership. Therefore, it is essential to sign an internal Side Agreement or Shareholders Agreement (SHA) and notarize key agreements to protect the real ownership structure.

2. Shareholder Partnerships suit companies where multiple individuals or entities invest and receive equity shares. All partners become shareholders, their relationships are governed by the company's constitutional documents and a Shareholders Agreement (SHA), profits are distributed according to ownership, and preferred shares (e.g., non-voting but with fixed returns) may be issued.
However, the ability to issue preferred shares depends on the jurisdiction: in Mainland UAE, under the Federal Decree-Law No. 32 of 2021, preferred shares are allowed only with special authorization and clear reference in the company’s articles.
In free zones like DMCC or DAFZA, preferred shares are permitted but require separate registrar approvals. In zones operating under traditional civil law without specific adaptations, preferred shares may be restricted or prohibited altogether.

3. A Joint Venture Agreement (JVA) allows two or more parties to cooperate on a specific project without transferring equity in the core business. Joint ventures can be structured as standalone entities (SPVs) or contractual arrangements. They are ideal for joint R&D projects, construction, technology initiatives, or entering a new market through local distribution or franchising partners.
However, it is crucial to clearly define the parties’ contributions, responsibilities, expected outcomes, and exit mechanisms.

4. A Silent Partner is an investor who provides capital but does not participate in business management. This model is common for small businesses and startups. Without proper legal documentation, a silent partner has no legal protection and may struggle to prove ownership rights in case of disputes. Therefore, partnership agreements must clearly specify investment terms, repayment mechanisms, and profit-sharing arrangements.

5. Franchise and Agency Agreements are alternative forms of market entry, involving the licensing of a brand, product, or service. Franchises require registration with local authorities, while agency agreements — especially in trading sectors — are subject to strict laws protecting local agents, making it difficult to terminate such agreements without mutual consent.

When structuring investments in the UAE, it is crucial to remember that investment is not merely a transfer of funds — it is the legal formalization of rights. A responsible approach is essential.

1. Before entering any deal, comprehensive due diligence is critical. This includes verifying corporate documents, licenses, financial statements, pending litigations, debts, sanctions exposure, and — most importantly — tax obligations. Engaging experienced specialists for a full audit is strongly advised, as discrepancies between reported and actual figures can be significant.

2. It is important to define the type of investment. The three most common models are: direct Equity Investment, Convertible Notes (loans convertible into shares), and, less commonly, SAFE (Simple Agreement for Future Equity), used mainly for startups within DIFC and ADGM.

3. The registration procedure depends on the jurisdiction. On the Mainland, changes are processed through the Department of Economic Development (DED). In free zones, changes must be registered with the zone authorities, such as DMCC, DIFC, ADGM, DWTC. Each zone has its own timelines and document requirements, but in all cases, corporate documents and shareholder registers must be properly updated.

Taxation and reporting are critical components of partnerships and investments. Since 2023, the UAE has introduced a corporate tax of 9% on profits exceeding AED 375,000. Dividends from local companies are exempt under certain conditions. Capital gains may also be taxed if exemptions are not met, whereas Free Zone Qualified Persons can benefit from tax relief under specific criteria.

Intra-group transactions must comply with transfer pricing rules, applying the arm's length principle. Proper documentation (Master File and Local File) is mandatory if the taxpayer’s annual revenue exceeds AED 50 million or if transactions with a related party exceed AED 10 million.

Businesses must also comply with mandatory accounting under IFRS standards, annual financial reporting, and disclosure of Ultimate Beneficial Owner (UBO) information, ensuring timely updates.

Common mistakes include ignoring the need for a Shareholders Agreement (SHA), using nominee structures without sufficient legal protection, insufficient investor due diligence (especially under AML standards), and disregarding tax implications. Fines for late tax filings start at AED 500 per month.

Recommendations include signing legally sound SHA, JVA, CLA, and Nominee Agreements; conducting full due diligence on both companies and investors; working only with licensed tax consultants and auditors; ensuring compliance with Pillar Two and BEPS 2.0 standards; and maintaining full transparency through proper UBO disclosures.

Properly structured partnerships and investments are not only a guarantee of business protection in the UAE but also a gateway to access global markets.

In 2025, the UAE remains one of the most attractive jurisdictions for international business, with low taxes, strong legal protections, and world-class infrastructure for investments.
However, successful operations now demand careful compliance with new transparency, taxation, and corporate governance standards.

If you are looking to professionally structure your business in the UAE or safely attract investments, the team at Garant Business Consultancy is ready to become your trusted partner.