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Where to start a company in UAE?
The journey of the UAE from an oil-driven economy to a hub of international trade was marvelous. One of the main reasons behind it is the government-friendly policies towards the business sector and their progressive approach. Business in Dubai has flourished immensely and has become a leading commercial region in the universe. Their lifestyle, talent bank, and corporate structure have provided the base to the UAE to be a meeting point for the north and western world for giant corporate businesses. It is considered easy to start a company in Dubai particularly by entrepreneurs and startups. A most desirable feature of starting a business in Dubai UAE is slight intervention by officialdom compared to other countries and exceptional government support.
Company Formation process in Dubai
In UAE there are mainly three basic types of corporate structure offered by the government to form a business. Each of them is briefly discussed below:
In the UAE, we can start various types of companies depending on their corporate structure. Below are some famous corporate structures that are presented by the government of the UAE.
In the UAE, we can start various types of companies depending on their corporate structure. Below are some famous corporate structures that are presented by the government of the UAE.
1 Sole Proprietor Company
It is owned and operated by a single individual with unlimited liability. They can carry commercial and professional activities in the UAE after registration.
2 Civil Company
Civil company is particularly established to form a business partnership among lawyers, doctors, and accountants. It is a company hold and run by professional individuals. A UAE resident is also required to work as a local representative or service agent. If a foreign company is in the field of civil company, they can form a partnership.
3 Limited liability Company
The most common type of company formation in Dubai is Limited Liability Company. They make sales within the UAE region and may not operate under the complete ownership of foreign investors. UAE commercial companies law allow international investors to only have 49 percent of ownership right of the company and 51 percent share rights are held by a UAE national.
In accordance with Article (218) of the CCL, a Limited Liability Company can be formed by a minimum of 1 (as per Article 8 of the Federal Commercial Company Law of 2015) and a maximum of 50 shareholders whose liability is limited to their shares in the capital of the company. Recent amendments to Article (217) of the CCL that came into force in June 2009 removed the requirement for minimum share capital (previously AED 300,000 in Dubai and in other Emirates AED 150,000). It allows the founder of limited liability Company to freely determine any capital range for their company.
For business, all LLC are required to appoint a minimum of one and maximum of five managers. Memorandum of Association or management contracts guide the appointment of a manager for a fixed period of time and for an unlimited period. The manager has full power to manage the administrative activities of the LLC. A trade license and commercial registration certificate are also compulsory to practice business activities in UAE
4 General Partnership
Usually, there is a general partnership in which two or more partners agree to share business obligations and can act on behalf of others. General Partnership corporate structure is extended for UAE nationals only.
5 Joint Stock Company
A consortium in UAE is also called a joint venture. It is formed by two or more individuals; one member must be a UAE national to share profit and losses of a business.
6 Private Share Holding Company
A private shareholder company in Dubai is featured by the following characteristics:
• It is owned by a non-governmental organization
• Its stocks are held by a relatively fewer number of people who are not allowed to trade the stock publicly
Unlike a public shareholding company, a private shareholding company cannot invite the public for subscribing in its shares. It can be incorporated by a minimum of 3 people. The minimum capital to establish a private shareholder company in Dubai is AED 2 million.
Apart from the above-stated stipulations, all the terms of a public shareholding company apply to a private shareholding company as well. To form it, one needs to arrange for the preparation of a founders’ agreement, a prospectus or invitation for public subscription supported by an overall business plan, auditor certification, and a feasibility report.
7 Public Share Holding Company
A public shareholding company also referred to as a public joint-stock company (PJSC), is a company where the business capital is divided into equal shares, with each shareholder's liability limited by their respective number of shares. A PJSC in Dubai is required to have at least 10 founding members, and its management should be vested in a board of directors consisting of 3 to 15 persons whose term of office may not exceed 3 years. The founder members may only hold 35% of the share capital, with the remainder required to be offered to the public. To be the company chairman and directors of a public shareholding company, individuals must be of UAE nationality. The law stipulates that banking, insurance, or other financial companies should be run as public shareholding companies. Foreign banks, insurance, and financial companies, however, can set up in Dubai by establishing a branch or representative office.
The minimum capital required to set up a public shareholding company in Dubai is AED 10 million (about $2.7 million) with a nominal face value of AED 1 to 100. For a banking company, the minimum capital required is AED 40 million, and for insurance and investment companies, it is AED 25 million. For establishing a public shareholding company, the other prerequisites are a preparation of a founders’ agreement, a prospectus or invitation for public subscription supported by an overall business plan.
8 Branches/Representative Offices
Branch offices represent its parent company and have legal rights to do business under the name of the parent company. It is not permitted for branch offices to carry out import of products but only activities related to the parent company, a function reserved for local trade agents. In some cases, the Branch of a foreign company is required to obtain an additional license from the UAE Ministry of Economy.
Parent company activities are solely promoted and supported by their representative office as gathering information and soliciting orders and projects to be performed by the company’s head office.
To represent branch office there is a need to appoint a UAE resident individual as “service agentâ€.