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UAE Company Formation

The basic requirement for all business activity in The UAE and Dubai are covered by one of the following three licenses. There are a number of different options (legal entities and licenses) available in the many Free Zones of the UAE. These vary from Free Zone to Free Zone:

• Commercial License, which covers a variety of trade activity
• Professional license, which covers professions, services, craftsmen and artisans
• Industrial License for establishing industrial or manufacturing activity

The forms of business organisation permitted by Dubai law are as follows:

• Limited Liability Company
• General Partnership
• Public Shareholding Company
• Partnership-en-Commandite
• Private Shareholding Company
• Share Partnership Company
• Partnerships

The forms of business organisation permitted by Dubai law are as follows:

Limited Liability Company

A limited liability is a company formed with anything between two and fifty persons whose liability is limited to their share in the business's capital. While foreign equity in the company may not exceed 49%, profit and loss distribution can be delegated.

The following steps are required:

• Choose a company name and have it approved by the Licensing Department of the Economic Department
• Draw up the company's Memorandum of Association and have it notarised by a Notary Public in the Dubai Courts
• Get approval from the Economic Department and apply for entry in the Commercial Register
• Once 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
• Wait for the licence to be issued by the Economic Department
• Then register with the Dubai Chamber of Commerce and Industry

100% ownership (e.g. for an LLC) is possible within the Free Zones.

Public and Private Shareholding Company

Businesses involved with in banking, insurance or finance should be run as public shareholding companies - by law. Although, foreign banks, insurance and financial firms can set up in Dubai by opening a branch or representative office.

Shareholdings are best suited to large ventures. For instance, the minimum capital needed to start is 10 million Dirham for a public company, 40 million for banks, 25 million for insurance and investment, and 2 million for a private shareholding companies. The director and a majority of directors must be UAE citizens and there is less dexterity of profit distribution than is allowed, for example, in a limited liability company.

A minimum of 55% of the shares of a Public Shareholding Company must be offered to the general public. However, this may soon be changed.

Joint Venture Company

A joint venture is a contract between a foreign party and a local party, allowing them work synergistically toward a common business goal. The local equity involvement must be at least 51%, but the profit and loss distribution can be delegated. There is no need to license the joint venture or publish the agreement.

Joint ventures are known for offering a suitable corporate structuresfor businesses that want to work together on particular projects.

General Partnership, Partnership-en-Commandite and Partnerships

As well as the government discouraging partnerships in general, they are only available to UAE nationals anyway.

Offshore Companies

By choosing to incorporate an offshore company, business owners and investors can set-up a business outside the jurisdiction of its operations. Offshore companies are traditionally, but not exclusively, incorporated for lower fees and taxes. Business owners must abide the regulations of the offshore jurisdiction, and must not trade within the jurisdiction.

The benefits are vast. As aforesaid, reduced tax and fees are often big factors when considering offshore incorporation. A company may also choose and offshore location to:

• Simplify set-up and maintenance - entrepreneurs may find bureaucracy and red tape less of an obstacle in offshore jurisdictions
  
• Assume anonymity - the names of owners and directors are not for public record, and references to the company may only be made in its registered agent
  
• Ensure legal protection - for instance, some jurisdictions favour corporate governance, meaning a company is only liable to offshore laws as opposed to those in its areas of operation
  
• Protect assets - business owners may opt to arrange their assets and transactions in such a way that protects them from liability
  

Characteristics of an offshore company:

• Memorandum and Articles of Association
  
• Certificate of Incorporation
  
• Registered Office/Agent
  
• Shareholders / Members
  
• Directors / Managers
  
• Company secretary
  
• Statutory Register
  
• Bookkeeping
  

Traditional locations for offshore incorporation are tax havens, such as the British Virgin Islands, Panama and Monaco. Other favoured areas include India, the Bahamas, Dubai, the Cayman Islands, Cyprus, Seychelles, Marshall islands, Delaware, Turks & Caicos Islands, Hong Kong, Jersey, Guernsey and the Isle of Man.

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