UAE as a gateway: What Indian businesses need to know before they invest

In this Leading Questions piece, Foutoun Hajjar explains how Indian entrepreneurs and listed companies must structure around their long-term objectives, choose the right jurisdiction and protections, and treat compliance as an ongoing discipline, to build a resilient and durable presence in the UAE.

Question: The UAE is increasingly attracting Indian investment. What are the most common structuring mistakes Indian businesses make when entering the UAE market, and how can they be avoided?

Answer: The single biggest mistake is treating UAE entry as a licensing-and-visa exercise rather than a structuring decision. Many Indian businesses default to the most familiar free-zone licence or a single mainland company, without fully mapping it against what they actually need — only to later find the entity falls short operationally, or sits awkwardly against their Indian holding structure.

Three recurring errors stand out: First, mismatching the activity to the jurisdiction, for example choosing a free zone for cost reasons when the business needs to trade onshore or bid for government work. Second, housing operations, intellectual property and group shareholdings in the same entity, which makes the business harder to finance, exit or protect. Third, ignoring the UAE corporate tax and economic-substance regimes on the assumption that "free zone equals zero tax", which is only true for qualifying income meeting strict conditions.

The fix is to design the structure backwards from the eventual objective, whether that is growth, an exit, a listing or succession, and to coordinate the UAE setup with Indian-side obligations (including overseas-investment and FEMA considerations) from day one.

Question: DIFC and ADGM are often discussed as preferred jurisdictions for contracts and holding structures. What does that actually mean in practice for an Indian promoter or investor, and when does it matter which one you choose?

Answer: Both the DIFC and ADGM are common-law jurisdictions sitting inside the UAE, each with its own laws, regulator and independent English-language courts, separate from the onshore civil-law system. For an Indian promoter, the practical benefit is predictability: shareholder agreements drafted to standards familiar from London or Singapore, judges versed in international commercial disputes, and frameworks designed to enforce what the parties actually agreed.

It matters which one you choose when the structure has weight to it, a real holding vehicle, a joint-venture company, financing, or family wealth, rather than a simple trading licence. DIFC is the older and larger centre and is well-suited to client-facing, financial and operational holding businesses. ADGM applies English common law directly and is widely regarded as the suitable jurisdiction for special-purpose vehicles, foundations and family-office and succession structures.

The right choice ultimately depends on the nature of the activity, the location of your banks and counterparties, cost considerations, and whether your priority is ADGM's flexibility for SPVs and foundations or DIFC's broader depth and ecosystem. Both jurisdictions continuously evolve, so the right answer should be tested against the current rules at the time you structure, not against last year's position.

Question: Joint ventures and partnerships between Indian and UAE or GCC parties are becoming more common. What protections should Indian parties be insisting on at the contracting stage that they typically overlook?

Answer: The protections most often left out are the ones that matter when the relationship sours, not when it is signed.

Indian parties frequently under-negotiate governing law and dispute resolution. We would generally caution against defaulting to onshore courts and would consider a common-law forum or arbitration with a clearly defined seat and institution, and crucially, a mechanism that is genuinely enforceable against the assets in question.

Beyond that, insist on the full minority-protection toolkit: reserved matters requiring your consent, board composition and quorum rules, pre-emption rights, transfer restrictions, and tag-along and drag-along provisions. A deadlock mechanism and a pre-agreed exit, often a put or call option with a defined valuation method, prevent the most expensive disputes. Intellectual property should be owned and licensed separately from the JV, never quietly absorbed into it.

Two warnings: Where a local element is still required for a particular activity, the relationship must be properly documented; and verbal understandings carry little weight; if it is not written and enforceable in your chosen forum, treat it as not agreed.

Question: Given recent developments across the region, what should businesses bear in mind when navigating this jurisdiction?

Answer: The clearest trend is that the UAE is steadily establishing itself as a fully regulated system. Corporate tax is now in force, and economic-substance, ultimate-beneficial-owner and anti-money-laundering expectations are real and rising. At the same time, the India–UAE economic relationship continues to deepen, which is broadening the opportunity for Indian businesses considerably.

Our advice is to structure for resilience rather than speed. Make sure the substance behind your entity is real, that you actually operate where you say you operate, and that your compliance is genuine and current rather than a box-ticking exercise at incorporation. Build flexibility into the structure so it can adapt as rules and circumstances change, and avoid concentrating everything in a single fragile vehicle.

Most importantly, treat advice as ongoing, not a one-time setup cost. The businesses that struggle are usually those that incorporated once, several years ago, and never revisited the structure as the regulatory and commercial landscape shifted around them. Periodic review is not optional.

Question: For an Indian entrepreneur or listed company looking to establish a strong commercial presence in the UAE, what would be the single most important consideration?

Answer: Plan the structure before you incorporate, not after.

A strong presence in the UAE is a long-term strategic decision, and it should be designed as one, aligned with your existing Indian structure and with where you genuinely intend to be in five or ten years. Decide first what you are building towards, whether that is regional expansion, a future exit, a listing or orderly succession, and let that objective drive the choice of jurisdiction, entity and ownership, the location of your IP and shareholdings, and your tax and compliance posture.

Integrated India-side and UAE-side advice at the outset is essential — decisions in one jurisdiction rarely stay confined to it. The cost of getting the structure right at the start is a fraction of the cost of unwinding the wrong one later. For any Indian business weighing a UAE move, that conversation is exactly where we would want to begin.

Foutoun Hajjar is the Managing Partner of M&CO Legal, Abu Dhabi Office.