Company Formation Dubai
In recent years, Dubai has become an attractive Business hub in the region attracting nearly all multinational brands & companies big and small to its shores, mainly owing to its strategic location and a visionary leadership of its rulers.
The systematic infrastructural development, business friendly environment a very liberal but well implemented rules and regulations, highly efficient transportation systems connecting the Gulf to other parts of the world, state of the art banking facilities and reliable port functions are a few of the factors that has helped achieve such enormous success.
Offshore Company Formation in Dubai
In addition, importantly, the business incorporation process of a company in Dubai is undoubtedly hassle- free.
There is no income tax, capital gains tax, and inheritance tax in the UAE. Corporation tax is applied only to banks and companies in the oil industry.
Additionally, Dubai has the advantage of excellent business exposure to global markets. Representatives of most international business entities visit Dubai at least once a year. The various business exhibitions and conferences that are held in Dubai every year is a significant platform to present an organization and its products and services to a dynamic market place.
Licensing in Dubai
Most business activities in Dubai are covered under three categories of licenses.
- Commercial license for all trading companies
- Professional licenses covering professionals, services, craftsmen and artisans.
- Industrial license for establishing industrial or manufacturing companies
The licenses are issued by the Dubai Economic Department. However, some categories of business require special approval from the concerned government ministries to form a company. For example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.
For businesses related to oil and gas industry, procedures that are more detailed are required.
In general, all companies formed in Dubai must have registered in Dubai Chamber of Commerce and Industry.
Ownership Rules
It is mandatory that all business establishment formed in Dubai must have a UAE national as sponsor. However, there are exceptions under the following conditions
- Where the law requires 100% local ownership;
- In the Free Trade Zones where 100% foreign ownership is permitted;
- In activities open to 100% AGCC ownership;
- Where wholly owned AGCC companies enter into partnership with UAE nationals;
- In respect of foreign companies registering branches or a representative office in Dubai
- In professional or artisan companies where 100% foreign ownership is permitted
Legal Structure of Business
In UAE, Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the Commercial Companies Law - and its by-laws govern the operations of foreign business. In broad terms, the provisions of these regulations are as follows:
The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organization, which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. The seven categories of business organization defined by the Law are
- General partnership company
- Partnership-en-commendam
- Joint venture company
- Public shareholding company
- Private shareholding company
- Limited liability company
- Share partnership company
Limited Liability Company (LLC)
This is the most common type of companies formed in UAE. An LLC can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. The minimum equity partnership by the UAE national is 51 percent. In LLC there is no minimum share capital stipulated and can hence be decided by the shareholders and can be contributed in cash or in kind. Though the foreign owner ship does not exceed 49%, profit share can be prescribed in ratio other than share capital. The management responsibility of an LLC can be vested on the foreign partner, national or a third party. The shares of a Limited Liability Company cannot open for sale to the public.
LLC formation Procedures
Global Business Services manages the company formation process right from the business title selection to the registration of the LLC in Dubai Chamber of Commerce and Industry, which is the final procedure of LLC formation.
The following are the steps involved in the formation of an LLC.
- Selection of company name
- Approval of company name from licensing department of the economic department
- Drawing up of company’s Memorandum of Association
- Attestation of Memorandum Of Association by a Notary of Dubai Courts
- Getting approval from the economic department for entry into the commercial register
- Once approval is granted, the company will be entered in the commercial register and have its Memorandum of Association published in the Ministry of Economy and Commerce's Bulletin. The license will then be issued by the Economic Department.
- Registration of the LLC company in Dubai Chamber of Commerce and Industry
Branches and Representative Offices in the UAE
A company in this category is formed to act as the branch or representative of a foreign company. The commercial company law stipulates that such companies must have a 100% foreign ownership. However, a local agent must be appointed. Only a UAE national or company’s 100% owned by UAE national can be a service agent. The local service agent will not be involved in the activities of the foreign branch, but assist the company in acquiring visas, labor cards etc. the service agents are paid a lump sum and/or profits on turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature.
Company Formation Procedures
The procedure to form a branch or representative office of a foreign company in UAE is:
- Apply for a license from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company. Before issuing the license, the Ministry will:
» forward the application to the Economic Department to obtain the approval of the local government;
» forward the application specifying the activity that the office or branch will be authorized to undertake in the UAE, to the Federal Foreign Companies Committee for approval; - Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial license specifying the activity to be practiced by the foreign company;
- The branch or office should be entered in the Economic Department's commercial register, and the required license will be issued;
- The branch or office should also be entered in the foreign companies register of the Ministry of Economy and Commerce;
- Finally, the branch or office should be registered with the local Chamber of Commerce and Industry.
Sole Proprietorship in the UAE
A sole proprietorship is a professional business entity whereby an individual trades for his own account pursuant to a trade license issued in his own name. Foreigners may form sole proprietorship, if they live in UAE. This kind of license is issued to certain services like medical practitioners, engineers and lawyers. All foreign proprietors must appoint a UAE national as his service agent
