The United Arab Emirates has achieved remarkable development across a wide range of different industries to become one of the most attractive business centers in the world.
Being a tax-free environment, investors find a favorable choice of legal forms under which they are able to carry out their business activities and enjoy tax-free profit revenue with no-capital repatriation restrictions.
Economic scenario of UAE is very dynamic and healthy; easing of traffic supported by affordable metro, ultra modern stations and network, zero taxes and investor friendly governmental approach are some powerful economic reasons for new business set up in Dubai.
The Economic policy of Dubai is business friendly, respecting the individual freedom in ownership of means of production and providing facilities that boost entrepreneurship.
Legal Maxims Consultants assist our clients to set up business in UAE to save their effort, time and money without falling into deceptive hands.
Since 1984, UAE introduced a codified companies’ law which is applicable throughout the UAE. Federal Law No. 8 of 1984, as amended by Federal Law No. 15 of 2015 – the “Commercial Companies Law” – and its by-laws have been issued and in basic terms the provisions of the Law are as follows:
Unless you open your business within one of the free trade zones, where 100% foreign ownership is permitted, the Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organizations which can be established in the UAE. It categorizes and defines the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.
The seven categories of business organizations defined by the law are:
- Limited liability company
- General partnership company
- Joint venture company
- Public shareholding company
- Private shareholding company
- Share partnership company
Limited Liability Company
LLC is the most common incorporation for operating commercial activities such as trading and Services. (Insurance and banking activities mandatorily need to be carried out under a Public Joint Stock company formation).
An LLC can have between two and 50 shareholders and a UAE national sponsor should own at least 51 percent shares in the company at all times. In an LLC, the liability of the shareholders is restricted to the share capital of the company to be paid in full upon incorporation. The minimum capital required for incorporating an LLC is AED 150,000 in each of the Emirates except Dubai, where the minimum is set at AED 300,000. An LLC can have up to five Managing Directors appointed and selected from the shareholders or from other sources that can either be appointed in the Memorandum of Association or in a separate contract.
The time required to form a company will be approximately 1-2 weeks from the date of receipt of all the documents. Procedures and the breakdown of the cost can be given upon request.
The Majority of Companies with expatriate partners have opted for this Limited Liability Company due to the fact that it is the only option which grants maximum legal ownership i.e. 49% to the expatriates for a trading license. 51% participation by UAE nationals is the general requirement for the Limited Liability Companies. Therefore, the normal shareholding pattern for an LLC will be:
Local sponsor (Partner) – 51% and;
Foreign Shareholder (s) – 49%
Minimum capital required is AED 300,000 (US$ 82,000), and should be contributed in cash. Whilst foreign equity in the Company is not permitted to exceed 49%, profit and loss distribution can be agreed mutually.
Conditions for establishing an LLC
- The number of partners should not be less than two and not more than fifty
- The objectives of the company should not include conducting the business of insurance, banking or investment of money for others
- The capital should not be less than three hundred thousand Dirham’s (Dhs. 300,000) and it should be divided into equal shares whose value is not less than one thousand Dirham each. This share shall not be represented by negotiable instruments
- The shares of the UAE nationals should not be less than 51% of the capital of the company, taking into consideration the business activities reserved for nationals. Incorporation of such a firm shall be according to the following procedures
- Approving the name of the Company
- Preparation of the Memorandum of Association
- Authentication of the Memorandum of Association
- Approval of the Memorandum of Association
- Inscription in the Commercial Register at the Trade Licensing Department
- Publishing the Data of the Company
- Obtaining a Trade License.