COMPANY FORMATION

Our company formation services involve the setting up of local companies in the United Arab Emirates and onshore free zone companies in one of the many free zone jurisdictions established in the United Arab Emirates.

 

With a large number of options available, it is essential to work with a company formation specialist who is familiar with the various free zone options in order to propose the right jurisdiction in which to set up.

 

Wide Choice of Free Zone Jurisdictions

 

Setting up a business in one of the world-class free zones of the United Arab Emirates has been a popular choice for foreigners looking for an efficient jurisdiction with attractive benefits, such as the following:

 

Ready Made Facilities

 

Since the free zones utilize some of the most advanced facilities and efficient services, any operation here becomes extremely cost effective. These facilities include air-conditioned warehouses, the Middle East’s largest cold stores, and an ultramodern container freight station.

 

These are backed up by experienced staff, computer monitoring and control systems, computerized inventory control, modern narrow-aisle racking and cargo handling equipment, supported by extensive services which include promotional repacking, co-packing and shrink wrapping.

 

Superb Communications

 

The communications available are second to none. Modern telephone, internet, and mobile network services are on hand with direct dialing to over 154 countries. Major international courier firms are well represented and provide services at competitive rates.

 

Excellent Support Services

 

Dubai Ports, comprising the large container terminals, such as Port Rashid and Jebel Ali Port, provide efficient cargo handling facilities enabling Dubai to rank as the 16th busiest container port in the world, patronized by over 100 shipping lines. Dubai International Airport is capable of handling 250,000 tons of cargo per year. Clearance procedure at both sea and airport is well organized and delays in obtaining cargo, often experienced in other countries, are non-existent in Dubai.

 

100% Foreign Ownership

 

The difficulties encountered by foreign individuals and companies in view of the restrictions stipulating operating as a local company have been solved by the creation of the various free zones, which have allowed for 100% foreign ownership by foreign nationals.

 

100% Repatriation of Capital and Profits

 

There are no restrictions on the repatriation of capital and profits in the UAE’s free zones.

 

No Corporate Taxes

 

Companies and individuals operating in the free zones are exempt from personal and corporate taxes. There is no income tax and units operating within the free zones are also exempt from import and export duties. However, corporate taxation may be introduced in the future as we have seen with the recent implementation of VAT in 2018.

 

A sample of the available free zones located throughout the United Arab Emirates include the following compilation of options (not an exhaustive list):

 

  • Jebel Ali Free Zone;
  • Dubai International Financial Centre;
  • Dubai Multi Commodities Centre;
  • Dubai Airport Free Zone;
  • Dubai Creative Clusters Authority;
  • International Humanitarian City;
  • Abu Dhabi Global Market;
  • Abu Dhabi Media Zone Authority;
  • Masdar Free Zone;
  • Khalifa Industrial Zone Abu-Dhabi;
  • Abu-Dhabi Airport Free Zone;
  • Fujairah Free Zone;
  • Sharjah International Airport Free Zone;
  • Hamriyah Free Zone;
  • Ras Al Khaimah Free Trade Zone; and
  • Ajman Free Zone.

 

Local Company Set Up

 

As a long established professional services firm, we are not limited to setting up only free zone companies, but can also set up any one of the local company structures, from a Sole Establishment to a Limited Liability Company.

 

The following are some of the considerations that should be analyzed in selecting the legal form of the new local company:

 

  • Compliance with the legislation regulating civil and commercial dealings and observing their provisions and rules, as there are certain types of trading companies which are not allowed to practice specific types of activity. For instance, limited liability companies are not allowed to engage in the business of insurance and money exchange. Also, there are certain activities that may not be practiced except in certain legal forms: for example, firms specializing in legal consultancy and accounting services cannot function except through certain specific legal forms;

 

  • Consideration should be given to the amount of the invested capital which should be employed in performing the business activity, which depends either on the personal capacity of the investor to provide the required capital, or his ability to legally raise funds from varying sources of finance. For projects whose execution necessitates the provision of significant funds, it is advisable to consider the option of a Public Shareholding Company in order to ensure availability of the required capital;

 

  • Scope of the firm’s activities and whether it is planning to carry on its activities on the local, regional or international level; and

 

  • The nationality of the investor, as an Emirati investor may practice most types of business activity as a sole proprietor or through any of the legal forms of companies through entering into partnership with others.

 

The various legal forms offered for local companies are presented below and are in accordance with the United Arab Emirates Federal Company Laws.

 

Individual

 

The law permits the establishment of a sole proprietorship for United Arab Emirates nationals and nationals of the Gulf Co-operation Council (“GCC”).   Since the procedure and conditions may differ in each case, the following is a list of conditions governing each individual application for the establishment of a sole proprietorship:

 

  • In the event that the investor is a United Arab Emirates national individual who wishes to engage in a business activity may apply to the Department of Economic Development in order to obtain the requisite license for carrying on such an activity; and

 

  • In the case where the investor is a citizen of one of the Gulf Co-operation Council countries, the beneficiary of such a license in the United Arab Emirates UAE should actually be conducting the activity for which he is licensed in compliance with the provisions of article 10 of the executive regulations of the Federal Law no. 2 of 1979.

 

Pursuant to the Federal Law No. 2 of 1989 which allows citizens of the Gulf Co-operation Council countries to engage in retail or wholesale trade in the country, the first article of this law states that it is permissible for the nationals of the Gulf Co-operation Council countries, whether they be laymen or juridical persons, to practice retail and wholesale trade in the United Arab Emirates according to the rules and regulations stipulated by Cabinet Resolution.

 

It is conditional for an investor, according to this law, to be a natural person resident in the United Arab Emirates and be carrying on the relevant activity personally. He should also possess a license to practice this activity in his country of origin. However, he may not open branches within the country.

 

In case the investor is a person wishing to conduct retail or wholesale trade according to this law, the investor must form a company, which the share owned by the UAE nationals may not be less than 50% of the capital. As for the ratio of legal shares concerning any activities for which no executive decisions have been issued in the country, the provisions for Article 22 of the Federal Law No.8 for 1984 (now superseded by the Federal Law No. 2 of 2015) concerning commercial companies stated that “observing the commercial activities confined to nationals and prescribed by this law, each company to be established in the country should have one or more nationals whose share is not less than 51% of the capital.”

 

Trusts

 

Historically, the UAE did not recognize trusts until the development of the Dubai International Financial Centre (“DIFC”) in 2005, which created a common-law system that is exempt from the UAE’s civil and commercial laws. The DIFC Trust Law Number 11 of 2005 was created in 2005 and is considered to be a modern trust law, enabling a trust to be created that provides for the vesting of beneficial ownership rights in several types of assets.

 

General Partnership, Limited Partnership, and Joint Venture 

 

Federal Law no. 8 of 1984 concerning partnerships, amended by Law no. 13 of 1988 sets out the rules regulating the establishment of partnerships. The law makes it conditional that the companies are wholly owned by United Arab Emirates nationals, or that United Arab Emirates nationals own at least 51% of its share capital, whilst the remaining 49% may be owned by foreigners.

 

The law stipulates that partnerships established in the United Arab Emirates must conform to one of the following legal entities: General Partnership, Limited Partnership, or a Joint Venture.

 

General Partnership

 

This is a firm, which consists of two or more partners who are jointly and severally responsible for all the firms’ liabilities. This type of firm is confined to United Arab Emirates nationals or to persons given the same treatment as nationals.

 

Limited Partnership

 

This is a firm consisting of one or more joint partners who will be liable for all liabilities of the firm and another or several other partners who will not be responsible for the liabilities of the firm except to the value of their share in the capital. According to the law, all joint partners in such type of firms should be nationals of the United Arab Emirates.

 

Joint Venture

 

This is a partnership made between two or more partners to share in the profits and losses of a business operated by one (or more) of the partners in his own name. The firm would confine itself to the relationship between the partners and would not extend to third parties. Such a firm is not inscribed in the Commercial Register, and its incorporation deed is neither published nor declared.

 

A Joint Venture is in fact a clandestine company confined to the relationship between the partners for the execution of specific projects in the name of one partner (example: the owner of the license, while the other partner undertakes the management of the company). Ordinarily no special license will be issued in the name of the company, but the license belonging to the original partner will be sufficient for the execution of a given project with the collaboration of the other partner who will participate in the running of the company.

 

Although the name of the company may not be entered in the Commercial Register and not be declared to the public, yet it operates as per bona fide agreements which are legally binding on the concerned partners and may be attested before the Notary Public.

 

Limited Liability Company

 

A limited liability company is one of the most popular legal forms for new local company formations and should consist of no less than two and no more than fifty shareholders.

 

Such a company may not engage in the business of insurance, banking, or investment of funds on behalf of others. There is no stipulated minimum capital requirement; however, the capital base should be divided into equal shares, the value of each of which should not amount to less than one thousand United Arab Emirates Dirhams (“AED”). These shares may not be represented by negotiable instruments.

 

If a corporate body is to be a partner in a Limited Liability Company under incorporation, the capital of the Limited Liability Company must amount to double the capital of the company aiming to be a partner. If non-nationals hold shares in such a company, the UAE national should be awarded shares amounting to not less than 51% of the capital (taking into consideration those business activities which are confined to UAE nationals).

 

Public Shareholding Company

 

This is a company with a capital divided into equal negotiable shares. In such companies a shareholder’s liability is limited by the number of shares which he holds. It is condition that the capital must be sufficient for carrying out the objects of the company; however, it must not amount to less than AED ten million. As such, a company that issues negotiable shares will be subject to the appropriate control procedure required in this regard.

 

Incorporation of a public shareholding company involves a long and complicated procedure as detailed in the law. For instance, the shareholders must prepare a memorandum and articles of association and the minimum number of shareholders must be ten. Only after approval for incorporation has been granted by the Department of Economic Development may subscription to the shares begin. Subscribers may then be invited to a General Meeting, which shall elect members of the Board of Directors and declare the incorporation of the company. Following this, the founders shall submit an application to the to declare formally the incorporation of the company in addition to other procedures.

 

 

Private Shareholding Company

 

This is a company incorporated by a group numbering no less than three persons. Such a company may not invite the public to subscribe in its shares with the founding shareholders subscribing in full to the paid-up capital, which should not amount to less than AED one million. Typically, all of the provisions which apply to public shareholding companies will also apply to private shareholding companies, and the incorporation of such a company will be in accordance with the same procedure and conditions except for the provision for public subscription in the company shares.

 

With You Every Step of the Way

 

Regardless of the free zone or local jurisdiction chosen in which to set up your new business in the United Arab Emirates, you can be sure that we will guide you throughout the process, from A to Z and provide frequent communications to keep you updated along the way. This allows for a smooth and efficient company set up process as we manage the required administrative processes.

 

Please refer to the Contact Us page for more information to obtain the latest information related to the entities and options presented above.

 

As the relevant laws and regulations are constantly updated, the information provided above may not be fully updated and is intended to be used only for illustrative purposes and is by no means a substitute for professional assistance from experienced professionals in the United Arab Emirates prior to commencing any company formation.