COMPANY INCORPORATION & BUSINESS SET-UP IN UAE
We assist our clients to determine the best possible legal structure for a new business.
LEGALLY PERMITTED BUSINESS STRUCTURES
There are five major categories of legally permitted business structures:
Establishments (Sole Proprietorships)
Commercial Companies
Commercial Agencies
Civil Entities
Free Zone Companies
Establishment (Sole Proprietorship)
An Establishment, or Sole Proprietorship, is a simple structure whereby an individual is issued a trade license in their own name, permitting them to trade or conduct business activity on their own account. The sole proprietor is held personally liable to the full extent for all assets and liabilities incurred by the business. Mainly, it is only UAE nationals and nationals of GCC countries (subject to certain conditions) who are permitted to form establishments in Dubai. However, in recent years, a practice has evolved whereby a UAE national obtains a license for an establishment and leases it to an expatriate(s) for an annual fee. These expatriates, then, take on all management functions of the business and retain all profits. This type of Arrangement, though common, is not recommended as it is fundamentally unlawful and problems may arise if the business relationship between the parties breaks down. Certain foreigners in selected fields may form sole proprietorships if they reside in the UAE.
This is also referred to as “Professional Firm”. These include professional consultants in:
Healthcare services,
Construction & engineering,
The legal profession,
Information technology & computer services,
A professional firm of foreign sole proprietor is required to appoint a local service agent. The local service agent must be a UAE national, but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licenses, visas, labor cards, etc.
Commercial Companies
According to the UAE Federal Law, a commercial company can be set up in the UAE on condition of a total local equity of not less than 51%. We assist clients in establishing the following subcategories of business organization in the UAE:
1. General Partnership Company
2. Joint Venture Company
3. Public Shareholding Company
4. Private Shareholding Company
5. Limited Liability Company
6. Branches and Representative Offices of Foreign Companies
General Partnership
An arrangement between two or more partners whereby each of the partners is jointly and individually accountable to the extent of all their assets for any liabilities the business may incur. General Partnership Companies are limited, however, to UAE nationals only.
Joint Venture Company
A contractual agreement between a foreign party and a local party licensed to engage in a desired activity (ies). The local equity participation in the joint venture must be at least 51%, but the profit and the loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner transacts with third parties under the name of the local partner who (unless the agreement is publicized) bears all liability.
In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects, or foreign companies wishing to establish operations in the UAE on a short-term basis.
Public & Private Shareholding Company
Stipulated as a legal entity for companies engaging in banking, insurance, or financial activities. Foreign banks, insurance and financial companies, however, can establish a presence in the UAE by opening a branch or representative office. Shareholding Companies are suitable primarily for large projects or operations. The chairman and majority of the directors must be UAE nationals and there is less flexibility of profit distribution than is permissible in the case of Limited Liability Companies.
Limited Liability Company (LLC)
The most appropriate method of establishing a business in the UAE for foreign investors interested in developing a long-term relationship in the local market. An LLC can be formed by a minimumal. While foreign equity in the company may not exceed 49%, profit and loss distribution can be of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital prescribed. Responsibility for the management of a Limited Liability Company can be vested in the foreign or national partners, or a third party.
Branches & Representative Offices of Foreign Companies
According to the Commercial Companies Law, branches and representative offices of foreign companies in the UAE may be 100% foreign owned, provided a local agent is appointed. Only UAE nationals, or companies 100% owned by UAE nationals, may be appointed as local agents (often referred to as sponsors). Local agents are not involved in the operations of the company but assist in obtaining visas, labor cards, etc. and are paid a lump sum and/or a percentage of profits or turnover.
For more information on costs and procedures of a company establishment in different Free
Zones please contact me on rupeshpr@hotmail.com / 00971-553660266
