UAE has now firmly established itself as the prime business destination in the MENA region. Dubai being one the major cosmopolitan cities and business centres of the world, has attracted virtually all international brands and organisations to its shores. And this is not without obvious reasons.
Situated at the centre of the globe, the country is at close proximity to more than a billion people in the Middle East, North Africa and the Subcontinent. With the country’s tax-free booming economy, solid infrastructure, access to multi-national human resources and flexible rules and regulations for businesses, setting up a business here is reaping rich dividends for organisations.
In order to set up a business in the UAE, fifty-one per cent (51%) participation by UAE nationals is the general requirement, except:
- where the law requires 100% local ownership;
- where the business is registered in one of the various free zones;
- in business activities open to 100% AGCC ownership;
- where wholly-owned AGCC companies enter into partnership with UAE nationals;
- where a foreign company wants to register branches or a representative office in Dubai;
- in professional or artisan companies where 100% foreign ownership is permitted.
The basic requirement for all business activity in the UAE is one of the following three categories of licenses:
- Commercial licenses covering all kinds of trading activity;
- Professional licenses covering professions, services, craftsmen and artisans;
- Industrial licenses for establishing industrial or manufacturing activity.
Categories of business establishments in UAE
The UAE federal law defines seven categories of businesses that can be established in the country, these are:
- General partnerships: may be established only between UAE nationals, who are jointly or unlimitedly, to the extent of their personal assets, responsible for the company’s liabilities.
- Limited partnerships: Here at least one partner is liable for the partnership’s obligations to the full extent of their assets, along with at least one inactive partner liable for the partnership’s obligations limited to this partner’s capital contributions. Such a company is managed by one active partner and a silent partner who does not participate in day-to-day management.
- Joint ventures: In this entity the profits and losses in one or more businesses conducted by one of the partners are shared between the partners as prescribed in the agreement, but the local equity’s participation must be at least 51%. There is no need to license the joint venture or publish the agreement. The local partner bears all liability unless the agreement is publicised.
- Public shareholding company: Any company whose capital comprises of publicly subscribed negotiable shares of equal value or any company in which a UAE public body holds any share capital falls under this category. The minimum capital requirement for a public shareholding company is AED 10 million and it must have at least 10 founding members.
- Private shareholding company: In this entity a minimum of three founding members must fully subscribe to a minimum capital of AED 2 million. While the company can be established between three or more UAE Nationals or GCC Nationals, nationals of other countries can establish a private shareholding company with at least one UAE National. The entity cannot be offered for public subscription but may be converted into public joint stock companies under certain conditions.
Banking, insurance, or financial companies are required by law to be run as public shareholding companies. Foreign banks, insurance and financial companies looking to establish a presence in Dubai can do so by opening a branch or representative office. Shareholding establishment is suitable primarily for large projects or operations, since the minimum capital required is Dh. 10 million (US$ 2.725 million) for a public company, and Dh. 2 million (US$ 0.545 million) for a private shareholding company. Here the chairman and a majority of 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): A minimum of two and a maximum of fifty partners can form a LLC. Each partner’s liability is limited to the extent of his/her share participation in the capital of the company.LLC setup is simple and preferred by foreign nationals setting up a business in one of the UAE’s free zones. There is no longer a minimum capital requirement of AED 300,000 to set up a LLC, speak to our experts for more information.
- Partnership limited by shares: This partnership comprises of general partners who are jointly liable to the extent of their personal assets and participating partners who are liable to the extent of their share participation. General partners must be UAE nationals, and the minimum capital requirement for such a partnership is AED 500,000.
Expo Consults has decades of experience in assisting organisations and entrepreneurs start a business in Dubai and globally can guide you through the process from start to finish. We do all the research and take care of all the legal requirements and paperwork for your business and even introduce you to suppliers and vendors in the region. Talk to us for more information.