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UAE Business Entities
Public Shareholding Company
A minimum of 55 percent of the shares of a public shareholding company must be offered to the general public. The minimum share capital for a public shareholding company is AED 10 million, of which a minimum of 25 percent must be settled on subscription. A shareholder’s liability is limited to the nominal value of his shares in the company’s capital. The PSC must have at least ten founders, unless a government entity is involved, in which case the number of founders may be lower. Shares are registered in a share register and cannot be issued at a price lower than nominal value; all shares have equal rights. The Board of Directors of this type of company must have a minimum of three and no more than twelve directors. The chairman, as well as a majority of the board, must be UAE nationals.
In the event, a public shareholding company loses half its capital, its board of directors is required to call a general meeting of shareholders to consider the continuation or dissolution of the company. If the board fails to call such meeting or if the meeting fails to reach a decision on the subject, any interested party may file a lawsuit seeking the dissolution of the company.
Private Shareholding Company
A private shareholding company must have a minimum of three shareholders. The minimum capital of a private shareholding company is AED 2 million. Shares may not be offered to the public. The private shareholding company’s incorporating documents must preclude public offering of shares.
A limited liability company can be formed by a minimum of two and a maximum of fifty persons. Shareholder liability is limited to the value of his shares. The minimum capital required to establish a limited liabiliy company in Dubai is AED 300,000. Management is handled by no more than five designated managers, who are not necessarily members of the company. Non-UAE nationals may own up to 49 percent of an LLC.
The Companies Law provides that an LLC may engage in any lawful activity except insurance, banking and investment of money for others.
General partnerships are formed by two or more UAE nationals who are jointly and severally liable for its debts. This type of UAE business entity is generally not available to non-nationals. Only the names of actual partners can be included in the company name, but the company may have a special trade name.
Interests of a partner can be transferred as stipulated in the partnership agreement or with the approval of all partners. The management may include one or more managers who are UAE nationals and who may or may not be partners in the company. The dissolution of a partnership may occur on the death, insanity, bankruptcy or withdrawal of one of the partners. The remaining partners, however, may unanimously decide to continue the partnership, provided that such decision is registered in the commercial register.
A limited partnership is composed of one or more general partners who are jointly and severally liable for all of its debts, and one or more limited partners who are liable for the limited partnerships debts only to the extent of his capital contribution. A limited partner may not participate in the management or have his name appear in the name of the partnership. All general partners must be UAE nationals.
Partnership Limited by Shares
A partnership limited by shares has both general partners with unlimited liability and partners whose liability is limited by their shares in the capital. General partners must be UAE nationals while participating partners may be non-nationals. The capital must be at least AED 500,000 and has to be divided into negotiable shares of equal value. Some formalities regarding the incorporation of a joint stock company are also applicable to a partnership limited by shares.
Free Zones Entities (FZEs)
If you do not intend to sell goods or services to the local market, but you do require office space and local staff, then a Free Zones Entities is the right choice for you. They also meet the growing need in international tax planning for substance, which you cannot get from your standard IBC.
Some advantages of setting up in a free zones in the UAE are:
- 100 percent foreign ownership is allowed
- Guarantee for 15-50 years against the future imposition of corporation tax.
- Duty free import of goods, provided the goods are not supplied to the local market.
- Straight forward procedures for setting up a company dealt with through the free zone authorities and not various government departments.
- No restrictions on hiring foreigners.
- Easy to open a bank account within UAE and abroad.
It is probably worth noting that goods can be supplied to the local market but only through a local commercial agency which has to be wholly owned by a UAE national and after paying the import duty.
International business companies (IBCs) – UAE offshore
UAE business entities, including Dubai through its Jebel Ali Free Zone, and Ras al Khaimah, through the RAKIA Free Zone and the RAK Free Trade Zone, offer an International Business Company (IBC) regime. These companies are ideal for any type of business that does not require a local office. This includes any passive investment activity eg holding shares in local or free zone companies, holding UAE real estate, or trading activities outside the UAE. IBCs are prohibited from renting office space and trading with parties inside the UAE, also they cannot apply for staff visas. RAK IBCs have the following attractive features:
- Company registrar is closed to public.
- No requirement to undergo audit process and submit financial statements.
- Low cost maintenance.
- Easy to open a bank account within UAE and abroad.