Different Legal Entities Offered to the Businesses in the UAE

by Zaara 20, Nov 2020

Different Legal Entities Offered to the Businesses in the UAE

The United Arab Emirates keeps buzzing in the news with its latest milestone, now ranking it among the most desired locations to work, invest, and live and with timely strategized economic diversification projects, increasing FDI inflows, an internationally accredited business-friendly company set up laws, and accelerated GDP. As a business capital copious with investment opportunities and world-class facilities, UAE fosters distinct business activities within its specific jurisdictions. Since every company needs a unique structure to incorporate, the UAE facilitates different legal forms to help companies establish, grow, and prosper.`

The different types of corporate entities offered to the UAE businesses are listed below.

Sole Proprietorship

A sole proprietorship is an entity owned 100% by an individual and has control over all its processes and holds 100% shares to any profits. Only the UAE and certain GCC nationals are granted permission to form a Sole Proprietorship in the UAE. Certain foreign Nationals in selected fields can form Sole Proprietorship concerns if they exist in the UAE, and such a company would be devoted to as a Professional Firm. Mostly these kinds of firms engage in auditing services, medical services, managerial and economic consultancies, engineering fields and technical services, the legal profession, computer services, and other artisan activities.

Limited Liability Company (LLC)

A Limited Liability Company is the most preferred business entity in the UAE. It is a private company, and its shares are not offered to the public. The central fact that attracts the foreign businessman is that this gives maximum legal ownership (49%) to them for a trading license. The local sponsor or UAE nationals must have 51%, and the minimum capital needed shall be AED 300,000, which should be contributed in cash and paid-up fully on the establishment. To establish an LLC in the UAE, one needs a minimum of two, and a maximum of 50 persons can form a Limited Liability Company.

Public and Private Joint Stock Company

A Public Joint Stock Company needs a minimum of AED 1O, OOO, OOO as minimum share capital. It requires a minimum of 10 founders who will be accountable for the registration of the business. Shares of a Public Joint Stock Company should be accessible to the public, and subscription notices are to be published in any two local dailies. A Public Joint Stock Company in the UAE is to have between 3 to 15 directors and is elected for three-year terms. The majority of the board of directors, including the Chairman, should be UAE Nationals.

A Private Joint Stock Company must have AED 2,000,000 as minimum share capital and three founders minimum. All the guidelines applicable to a Public Joint Stock Company equally apply to a Private Joint Stock Company also excluding the fact that the shares of a Private Joint Stock Company cannot be offered to the public. Generally, such joint-stock companies are primarily suitable for large projects or operations like banking, insurance, or financial activities.

Joint Venture

Joint Venture is a contractual agreement between two or more people, companies, or associations with a common economic objective. A joint venture in the UAE can be limited and unlimited and can be local and international in scope. Several business structures can be used for joint venture businesses or projects in the UAE, such as a contract venture, a general partnership, a limited partnership, a joint-stock company, or a free zone company situated in Dubai’s free zones. Most importantly, the joint venture arrangement will depend on the agreement negotiated between the parties to the Venture.

Branch/Representative Office

A branch office can be wholly-owned by a foreign company. However, a UAE national should be appointed as a local partner. This local partner usually supports administrative matters such as obtaining visas, licenses, and dealing with local establishments and is paid a fixed fee and does not have a right to participate in any profits and not involved in the processes of the branch or representative office.
A representative office can only endorse its foreign parent company’s activities and cannot carry out the parent company’s activities. While a branch office may carry out activities alike to those of its parent company, certain activities are restricted to the UAE nationals only, such as importing goods. Representative offices can only act as administrative and marketing centers for their foreign parent company’s head office because they have limitations on the number of employees they can sponsor.

Free Zone Entities

There is an excellent range of Free Zones in the UAE, the majority of which are in the Emirate of Dubai. Foreign companies are allowed to open wholly-owned branches in each of these Free Zones, and such branches are exempted from the requirement to appoint a local service agent. Each of the Free Zones has its own set of laws, rules, guidelines, and requirements that do not fall within the realm of the Federal Companies Law and therefore do not require the involvement of a UAE national shareholder. However, a business set up in a Free Zone directly the Free Zone or globally. The establishment of a Free Zone branch or a corporate entity is dealt with by the relevant Free Zone Authority, and each Free Zone recommends its own minimum share capital requirements.

  • Free Zone Establishment (FZE)
  • Free Zone Company (FZC)
  • Branch of a foreign company

Civil Company

Civil company is where two or more persons agreed to be bound to carry out professional works and to be liable after that to third parties against payment of consideration. Professional activity means those that are being conveyed using intellectual abilities, acquired information, or professional skills. Civil Companies can be owned 100% by foreigners, subject to certain conditions, and only Local Service Agent should be appointed. HR consultancies, Legal consultancies, Management consultancies are some of the professional and artisan activities that can be conducted.

We at Commitbiz can help you set up any of these business entities in the UAE. Our experts are well-versed with the legalities and can make this process hassle-free. Contact us today for more information.