The Federal law states the different categories of business organisation that can be set up in UAE. It also lays down that a local equity of not less than 51% is necessary in a commercial company in UAE.
The number of shareholders, minimum capital requirement, incorporation procedures and number of directors is also elaborately explained.
The seven categories of business organization defined by the Law are:
- General partnership company
- Joint venture company
- Public shareholding company
- Private shareholding company
- Limited liability company (LLC)
- Share partnership company
LLC finds maximum favour among foreign investors. Besides, business establishment, Foreign Direct Investment (FDI) is also encouraged through the branches and representation offices of foreign companies and 100% foreign owned professional firms.
Limited Liability Company
What is a limited liability company?
A Limited Liability Company is formed with a minimum of 2 and a maximum of 50 persons. Founder members and owners’ liability is limited to the shares in the Company’s capital.This is the most preferred form of business in the UAE, especially for companies that have expatriate partners. This form of business gives the expatriate maximum legal ownership, i:e 49% and makes acquisition of trading license much easier.
Limited Liability Company conditions states that a UAE national holds 51% share in the company and the expatriate shareholder 49%.
Branch / Representative Offices of Foreign Commercial Companies
A branch and representative office of a foreign company are two different establishments. The formation and operation of these ancillary company structures is regulated by the The Commercial Companies Law in the UAE. The law states that for a foreign owned company to carry out all its functions in UAE, a local service agent must be appointed. This agent must be a UAE national or a 100% UAE owned company. The agent will provide assistance in obtaining visas, labour cards, etc. and are paid a lump-sum fee per anum.
The branch will be legally considered a part of the foreign company. It can conduct all legal businesses of its parent company, that is specified in its license.
A representative office functions differently. It’s function is limited to promoting parent company’s activities and gathering adequate information for the parent company regarding all the Middle Eastern projects that are to be executed by the Head Office.
Completely foreign owned sole proprietorships and civil companies are permitted to set up professional firm in UAE. A local service agent who is a UAE national should be appointed by the firm.
All businesses in UAE require one of the following licenses to carry out its operations.
- Commercial licenses covering all kinds of trading activity.
- Professional licenses covering professions, services, craftsmen and artisans.
- Industrial licenses for establishing industrial or manufacturing activity.
Most licenses are directly issued by the licensing authority – Department of Economic Development, Dubai.
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