Doing Business in the UAE

Company Registration in UAE / Dubai

The UAE business environment can be very lucrative and even predictable if care is taken to understand the influences working on an individual market at any one time. Keeping an ear to the ground and maintaining a steady physical presence is invaluable.

Visiting business people are advised to consult the many sources of commercial intelligence, including embassy lists, the chambers of commerce, official gazettes and tender lists. UAE national businessmen are the best source of information, and the ideal man in a business development role will usually be the one with excellent contacts in the local business community. Given the right high-level contacts it is possible to hear of projects ahead of the rest and long before tender documents can be officially purchased. The UAE is one of the most open and freely competitive markets in the world and although the authorities want to do business on the basis of quality and value for money, much still depends on this inside knowledge.

Personalities play a significant role in contract award. The knowledge, accessibility and reputation of one’s local associate is often a vital factor in determining the outcome of fierce bidding between large numbers of international companies.

Business is Distinctive

Business in the UAE is complicated by the distinct character of each emirate. The commercial aspirations of Dubai Emirate mean that in most quarters there is a definite will to conduct business at a Western-style pace. This does not mean that traditional courtesies are waived. Business visitors will find that in Abu Dhabi, where there are fewer commercial pressures, the pace is more measured and the atmosphere more traditional. In the smaller emirates, except Sharjah, the pace of business is altogether more traditional. Sharjah, with its rapidly growing industrial sector, to a great extent follows the Dubai mode. So lessons learned in one emirate are not necessarily applicable in another.

The application of uniform federal standards and regulations, which started in the 1980s, has increased in speed in the first half of the 1990s. But discrepancies and procedural differences still persist.

Dubai’s Economic Department is a New Departure

The Dubai government set up an Economic Department in 1992 with the express purpose of facilitating and encouraging the development of trade and industry in the emirate. It functions as a one-stop shop for business registration. If it receives correctly completed documents and approvals from the respective authorities in time, then a business licence is issued within a few days.

In order to speed up the procedure, representatives from the Chamber of Commerce & Industry, Dubai Municipality, Civil Defence and a notary public all provide their services at the Economic Department. In addition, staff at the Economic Department liaise with the federal Economy & Commerce Ministry and follow up applications themselves.

However, there are categories of business that require approval from other authorities: manufacturing institutions are subject to approval by the Finance & Industry Ministry and financial institutions from the Central Bank. The Economic Department was working on a plan for future co-ordination with these authorities to further facilitate the registration process as the practical guide was being published.

In addition, the Economic Department is in charge of strategic economic planning for the emirate of Dubai, the organisation of industry and trade, the execution of statutes relating to commercial and industrial activities, developing the natural resources of the emirate and diversifying its sources of income.

To achieve this, it is in charge of preparing and maintaining the commercial register, protecting industrial and commercial property rights, organising commercial agents and mediators, commercial advertising, and decisions on the establishment or expansion of factories.

It is also responsible for the promotion of the emirate’s industrial products and the investment of national and foreign capital in commercial industrial projects. It can recommend government participation in development projects and represents government interests in national companies. Finally, it co-ordinates with federal government departments in the implementation of federal laws related to commerce and industry.

Business Law is evolving

In the UAE, business activity is regulated by individual emirates as well as by the federal government. In practice, the detail of business registration is the responsibility of each emirate, while the laws that govern that activity come from the federal authorities.

Since 1993, there have been a number of legal reforms aimed at creating a framework able to accommodate the country’s commercial aspirations. Most notable is the commercial code which came into effect at the end of 1993 and covers a wide range of banking and commercial activities. Also significant are new laws on copyright, patents and trademarks which came into force in 1993. They are:

Commercial transactions law. The commercial transactions law (federal law number 18 of 1993) covers banking and commercial transactions on a scale unprecedented in prior legislation. It contains provisions on who may lawfully conduct business in the UAE; subject to certain exemptions for GCC nationals or companies operating in free zones. No one other than UAE nationals may do so unless in conjunction with UAE partners in line with the requirements of the commercial companies law which stipulates a minimum 51 per cent local ownership.

The commercial code also introduces a new legal basis for mortgages over a wide range of assets, both tangible and intangible and contains detailed provisions concerning bankruptcy and receivership.

Banking transactions are fairly comprehensively covered including current accounts, bank loans and guarantees, the discounting of commercial paper, trust receipts, deposits of securities and detailed rules on cheques, bills of exchange and promissory notes. In addition, the commercial code permits lenders to receive interest on commercial loans subject to certain limitations, a clarification welcomed by banks.

Companies Law, Federal law number 8 of 1984, came into effect in its amended form in January 1989 and has been applicable to all companies formed since that date. In particular, the companies law requires all companies to be at least 51 per cent owned by UAE nationals and to take one of the seven forms specified by the law.

Companies formed prior to 1989 did have the benefit of a number of grace periods to give them time to comply with the provisions of the law. The last grace period expired at the beginning of 1994 and has not been renewed. The companies law is now unequivocally applied to all local companies irrespective of when they were formed. A number of substantial amendments to the companies law were under consideration as the practical guide was being published, although it is not clear when they will be introduced, if at all. Foreign investors who are unsure of how the companies law now affects their interests should seek advice from their local legal advisors.

The professional companies law. This was due to come into effect at the end of 1994. Professional companies – companies where the knowledge of the partners is the main asset (for example, lawyers, engineers, accountants, hairdressers) – are not covered by the commercial companies law. The new law provides that UAE nationals must own at least 25 per cent of professional companies. The law will be applicable immediately to all new professional companies formed after it has come into effect. Professional companies already in existence will have a grace period of five years to adjust.

National Ownership is Required

Under the companies law, at least 51 percent ownership by UAE nationals is required for all UAE establishments, except where the law requires 100 per cent local ownership as in the case of, for example, commercial agencies. The companies law is not applicable to Free Zone Entities or branches established in the free zones generally. As mentioned, it is not applicable to professional companies, which, in due course, will need to be 25 per cent owned by UAE nationals.

 

The Categories of Company

The law sets out the requirements for shareholders, directors, minimum capital levels and incorporation procedures. Mergers, conversions of licenses and the dissolution of companies are also covered. The seven categories of business organisation permitted are:

  • General partnership. General partnership companies are limited to UAE nationals.
  • Simple partnership
  • Joint venture
  • Public joint stock company. Companies engaging in banking, insurance and financial activities should be run as joint stock companies. But foreign banks, insurance and finance companies can set up branches or representative offices. For joint stock companies, the minimum capital requirement is $2.725 million. The chairman and the majority of board directors must be UAE nationals and there is less flexibility regarding profit distribution than with a limited liability company.
  • Private joint stock company. The minimum capital is $545,000 for a private company.
  • Limited liability company. In limited liability companies, the profit and loss distribution is negotiable. A limited liability company is for between two and fifty people and the liability of shareholders is limited to their shares in the company’s capital. In Dubai the minimum capital requirement is $82,000. In Abu Dhabi and all other emirates the minimum capital requirement is $41,000.
  • Share commandite company.

The Dubai government does not presently encourage the establishment of simple partnership and share commandite companies. Otherwise, all entities formed under the companies law must be at least 51 per cent owned by UAE nationals.

 Jebel Ali Free Zone

Jebel Ali Free Zone has special legal status allowing companies established there to be offshore, or outside the UAE for legal purposes. Incentives include 100 percent foreign ownership, no corporate taxes for 15 years renewable for an additional 15 years, 100 percent repatriation of capital and profits, no personal income tax, no currency restrictions, no recruitment or administration problems, abundant energy, excellent facilities at Dubai Ports Authority’s two modern terminals, no import or export duties payable within the zone, first class communications and an attractive working environment.

Four different types of licence are available

Special Licence. Special licenses are issued to companies established outside the UAE. Ownership may be 100 percent foreign and a license from the Dubai Economic Department is not required. A company with a special licence may undertake any activity permitted in the zone, but may only operate in the zone or outside the UAE. However, business can be conducted in the UAE through agents and distributors.

General Licence. General Licences are issued to companies already holding a valid licence from the Dubai Economic Department permitting them to do business within the UAE. In the Free Zone, holders of a general license must comply with federal and municipal requirements relating to their operations in the rest of the UAE.

National Industrial Licence. A National Industrial Licence is for manufacturing companies registered inside or outside the UAE. The company must be at least 51 per cent UAE or GCC-owned. At least 25 per cent UAE ownership is required for a certificate of origin issued by the Ministry of Economy & Commerce, as well as the requirement for the UAE value-added input to be at least 40 per cent of the total value of the relevant products. The holder of a National Industrial Licence who manufactures goods which are eligible for a UAE certificate of origin therefore qualifies for customs duty exemption if its products are exported to other parts of the UAE or to other GCC countries.

Free Zone Entity Licence. Free Zone Entities (FZEs) have been allowed since 1992. A FZE is 100 per cent foreign-owned and is similar to a limited liability company. The main difference is that a FZE can have only one shareholder which is of interest to foreign companies wishing to have a wholly-owned subsidiary in the Free Zone, rather than simply a branch. The minimum capital requirement is $ 272,500 and liability is limited to the amount of paid up capital.

All licences are issued by the Jebel Ali Free Zone Authority (JAFZA) and are valid for the period the company holds a lease from JAFZA, but are renewable annually.

 Intellectual Property

Other recent legal developments of note relate to intellectual property. The key pieces of legislation are:

Patents. Regulations governing the registration of patents, industrial designs and models are covered by Federal Law number 44 of 1992 and came into effect in 1993.

Trademarks. These are covered by federal law 37 of 1992 which came into effect in February 1993.

Copyright and censorship. These are covered by federal copyright law 40 of 1992 and deal with the procedures for obtaining permission for the printing, publication, display, sale and registration of works in the UAE. These regulations have been enforced since September 1994 and pirated computer software and video cassettes are no longer easily available in the UAE.

Customs

Imports can only be undertaken by importers with the appropriate trade licence. In 1994, the federal government introduced a uniform 4 per cent customs duty across the seven emirates covering a wide range of imported goods. Previously, customs charges were one percent or nothing, depending on the emirate.

A list of 70 foodstuffs are exempt from tariffs, as are medicines, agricultural machinery, pesticides, fertilisers, periodicals, wood, unstrung pearls, unworked silver and gold, iron and steel for use in construction, and raw or partially worked materials for use by local manufacturers. Goods produced within the GCC are also exempt. There is no duty payable on goods destined for Jebel Ali Free Zone.

For a product to qualify as a national product and receive GCC customs exemption, at least 40 percent of the product’s final value added must be made locally. The factory must be licensed by the Ministry of Finance & Industry and there must be 100 per cent or minimum 51 per cent UAE national or GCC ownership of the producing plant.

An appeals desk has been established at the federal customs directorate to hear claims from importers for goods to be classified as duty free, chairman of the UAE customs council and director-general of Dubai customs Obaid Busit said in December 1994. Busit said that the UAE had successfully resisted pressure from other GCC states for a 5 percent minimum duty. The increase in tax on tobacco to 50 per cent is to be implemented later in 1995, he added. A federal law raising tobacco tax was passed on 2 November but only comes into effect when it is published in the official gazette (MEED 25:11:94). Computerisation of customs services to cut the time to process papers from 45 minutes at present is due to take place in January.

 Taxation in the UAE

There is no corporate tax in the UAE. The only exceptions are oil producing companies and branches of foreign banks.

It is highly unlikely that direct taxation will be introduced in the UAE in the near future. However, it is possible that one day Dubai emirate may introduce some form of direct taxation as its oil reserves dwindle.

 Exchange Controls

There are no exchange controls and the UAE dirham is freely convertible. The dirham is linked to the US dollar and the rate is $1=Dh 3.67.

 Agency Law

Foreign companies may sell goods to companies in the UAE by concluding transactions directly with importers and traders who are already established in the market. However, in the case of high volumes of business, a more permanent form of representation may be desired.

Companies wishing to sell to the UAE without establishing an office may prefer to appoint a commercial agent. This is covered by Federal Commercial Law 18 of 1981 as amended by Law 14 of 1988. The law states that the agent must be a UAE national or a company 100 per cent owned by UAE nationals. He must be registered in the Commercial Agency Registry kept by the Ministry of Economy & Commerce.

The procedure is as follows:

A commercial agency agreement is drawn up specifying the products and territories covered by the contract.

The agreement should be signed by both parties (principal and agent) and, if signed in Dubai, be legalised before a court notary. The agreement is then translated into Arabic by a sworn translator licensed to operate in the UAE.

If the agency agreement is signed outside the UAE:

It must be authenticated by a local notary public.

The local Ministry of Foreign Affairs must then certify and authenticate the signature and seal of the notary public;

The agency agreement must be certified by the UAE embassy or consulate.

When the documents arrive in the UAE, they should be taken to the Foreign Ministry so that the stamp of the UAE embassy or consulate may be authenticated, and translated into Arabic by a sworn translator.

The agency should be registered at the Federal Ministry of Economy & Commerce.

A sole UAE agent may be appointed in each emirate or defined area of the country. A commercial agent is entitled to territorial exclusivity enforceable by infringement commissions.

Although the term of the agreement may be limited to a specific period, it is not permissible for the principal to terminate the agreement without the agent’s approval, except for reasons considered valid by the commercial agencies committee of the Ministry of Economy & Commerce.

Failure to renew an agreement without justifiable reason may require compensation for the former agent.

Setting up a Business

There are various procedures for setting up corporate entities: Limited liability companies (Dubai). To do this, the following procedure should be followed:

Get the company’s commercial name 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.

Seek approval from the Economic Department and apply for entry in the Commercial Register.

Once approved, the company will be entered in the Commercial Register and have its memorandum of association published in the Bulletin of the Ministry of Economy & Commerce.

The company should then be registered with Dubai Chamber of Commerce & Industry.

Branches and representative offices of foreign companies (Dubai). To establish a branch or representative office in Dubai, a foreign company should:

Apply for a license from the Ministry of Economy & Commerce, submitting an agency agreement with a UAE national or 100 per cent UAE national owned company. Before issuing the license, the Ministry will:

forward the application to the Economic Department to obtain the approval of the Dubai government,

forward the application specifying the activity that the office or branch will be authorised to undertake in the UAE to the Federal Foreign Companies Committee for approval.

Once this has been done, the Ministry of Economy & Commerce will issue the required Ministerial license specifying the activity to be practised 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 & Commerce.

The branch or office should be registered with the Dubai Chamber of Commerce & Industry.

Branches and representative offices of foreign companies (Abu Dhabi). Individual expatriates and foreign companies wishing to do business in Abu Dhabi have to enter into agreement with a UAE national according to one of the following options:

An agreement with a non-participant sponsor (individual establishments and foreign firms).

An agreement with a national partner participating with 51 per cent or more of the capital (obligatory for all trading companies).

The procedure is as follows:

Sign agreement with UAE sponsor before the notary public.

Submit the mother company’s articles of association and a copy of the resolution by which the competent authority decided to open a branch in Abu Dhabi.

Provide certification from the country of origin that the company is not insolvent or bankrupt.

Obtain an official power of attorney in favour of the proposed representative in Abu Dhabi issued by the mother company in the country of origin.

Obtain a letter from the Abu Dhabi Israeli Boycott office certifying that the company in question is not blacklisted.

Ensure all documents required for 2-5 are duly attested in the company’s mother country.

All foreign documents must be translated into Arabic by a sworn translator.

A non-participant UAE sponsor does not have a share in the capital and is not liable for any loss or obligation towards others. He or she shall be entitled to 25 per cent of the annual net profit if the activity undertaken is trade. Commission on income from contracting companies is fixed according to the size of contracts.

Trade license (Abu Dhabi). The procedure is as follows:

Sign a sponsorship agreement with a UAE national. There is no minimum capital requirement in Abu Dhabi.

Secure approval for the selected business location from the municipality in order to obtain a provisional trade license. Licenses are issued in five categories, namely commercial, commercial (Local without import), vocational, professional and industrial.

Submit a copy of the partnership agreement authenticated by the notary public, a copy of the provisional trade license, the lease contract for the business premises, and a photograph of each partner to the Abu Dhabi Chamber of Commerce & Industry. There is an initial Dh 2,000 fee and a Dh 2,000 annual fee for each economic activity. Once approved, the Chamber will issue a certificate of approved membership.

The certificate of approved membership is taken to the municipality. The license fee depends on the amount of capital invested in the business. The final license broadly specifies the type of product to be imported. The trade license must be amended if the company wants to expand into other lines.

Special, general or national license from the Jebel Ali Free Zone Authority (JAFZA). All procedures can be completed within 30 days where no environmental issues are concerned. The process is as follows:

Applicant submits completed questionnaire (available from JAFZA).

JAFZA reviews questionnaire, then sends application form, electricity supply & planning documents, and E form (on environmental issues) if applicable.

JAFZA reviews documents and determines whether Environment Impact Statement (EIS) is required. If yes, a full report is requested by JAFZA.

The EIS is reviewed and, if applicable, the application is progressed. If not, the applicant is informed.

JAFZA accepts application and sends provisional approval letter. The presentation of company documents is requested. This includes notarised certificate of registration, articles of association, a list of board directors, a copy of board resolution setting up branch and appointing manager, a statement by company as to amount of capital set aside for company’s operation in the free zone, the branch manager’s photograph and a specimen signature.

If company documents are in order, JAFZA accepts application and a lease profile is signed.

JAFZA sends a conditional approval letter and requests the applicant to sign the lease and the pay rent and license fee.

The lease and license is issued to the applicant. The license for land is issued only after a building completion certificate has been issued.

For a general license, the following documents are also required: a valid trade license from Dubai Economic Department, and a Dubai Chamber of Commerce & Industry membership certificate (if applicable).

Free zone entity (FZE). The procedure is as follows:

Applicant submits preliminary questionnaire.

JAFZA reviews the project. If approved, it forwards FZE Application and other documents.

JAFZA forwards official approval of the applicant’s incorporation as a FZE and requests documents to be completed. Issues letter to blank enabling applicant to open local bank account and to postal authority for registered addresses to be given.

Applicant signs lease profile, forwards it to JAFZA and pays capital sum required.

JAFZA issues certificate of formation, applicant signs lease.

JAFZA issues lease and license.

Costs

Special Licence: $954.

General License: $545.

National Industrial License: $1,360.

Registration of FZE: $2,717.

Processing of FZE license: $1,358.

The Chambers of Commerce in the UAE

The establishment of any business or industrial activity must pass through the Chamber of Commerce & Industry of the relevant emirate. The chambers represent the private sector and protect its interests.

Their role is to organise commercial and industrial affairs, collect relevant information and statistics, produce publications, and organise conferences and exhibitions within each emirate.

The chambers’ affairs and performance are supervised by a board of directors composed of 21 members appointed by the relevant government. Five board members are on the executive board and the other members form various sub-committees.

Abu Dhabi Chamber of Commerce and Industry

The Abu Dhabi Chamber of Commerce & Industry is situated in the Chamber Tower on the Corniche Road. The chamber was established in 1969 and has had a branch office in Al Ain since 1978.

Under Law 6 of 1976, all nationals and foreign persons, be they individuals, companies, or establishments practising commercial, industrial, financial or contractual activities within the emirate, whether they are branches or agencies, temporary or permanent, shall have to join the chamber.

Dubai Chamber of Commerce and Industry

The opening of a purpose-built building in the spring of 1995 is the highlight of the decade for the Dubai Chamber of Commerce & Industry. The magnificent new head office is opened to mark the 30th anniversary of the chamber’s foundation. The Dubai Chamber’s work falls under the following headings: foreign relations, registration and documentation, industrial affairs, administration and finance and legal affairs.

Sharjah Chamber of Commerce and Industry

This is situated in Al-Boorj Avenue. By late 1994, it had 9,902 professional members, 9,340 commercial members and 495 industrial members.

 

Useful Addresses

Federation of the UAE Chambers of Commerce & Industry
PO Box 3014, Abu Dhabi, UAE.
Tel: +9712 214144. Fax: +9712 339210.

 

Abu Dhabi Chamber of Commerce & Industry,
PO Box 662, Abu Dhabi.
Tel: +9712 214000. Fax: +9712 215867

 

Dubai Chamber of Commerce & Industry,
PO Box 1457, Dubai.
Tel: +9714 2280000. Fax: +9714 2211646.

 

Sharjah Chamber of Commerce & Industry,
PO Box 580.
Tel: +9716 5541444. Fax: +9716 5541119.

 

Fujairah Chamber of Commerce & Industry,
PO Box 738.
Tel: +9719 2222400. Fax: +9719 2221464.

 

Ras Al-Khaimah Chamber of Commerce & Industry,
PO Box 87.
Tel: +9717 333511. Fax: +9717 330233.

 

Ajman Chamber of Commerce & Industry,
PO Box 662.
Tel: +9716 7422177. Fax: +9716 7427591.

Umm Al-Qaiwain Chamber of Commerce & Industry,

PO Box 436.
Tel: +9716 7656915. Fax: +9716 7657056

 DUBAI

Doing business in UAE

Business can be done in UAE either within the various Free Zones in UAE or outside the Free Zone. Within Free Zones, 100% foreign ownership is possible whereas in non-Free Zone areas, 51% local ownership is mandatory. Any movement of goods from the Free Zone into non-Free Zone area is deemed to be imports into UAE and subject to customs duty. Imports into Free Zone are not subject to customs duty. Presently, excepting foreign bank branches and oil companies, there is no corporate income tax in UAE. Further, there is no personal income tax in UAE.

In non-Free Zone area, a limited liability company (LLC) can be established with 51% local ownership and 49% foreign ownership. In Dubai, a minimum paid up capital of AED 300,000 (One US$=AED 3.67) is required. For obtaining trade licence physical office is a must.

Business can be established in a Free Zone with 100% foreign ownership. Physical presence is a must. Following options are possible

  First option is to set up a branch of an existing overseas foreign Company
  Second option is to set up a Free Zone Establishment (“FZE”) in which the
   sole shareholder is an individual or corporate  
  Third option is to set up a Free Zone Company (“FZC”) in which there are two
   or more shareholders who could be individuals or corporate  

Please note the minimum capital varies from Free Zone to Free Zone

Another option is to set up an offshore company within JAFZA. This can be 100% foreign owned, does not require physical presence and no visa is issued. Such offshore company cannot do business either in UAE or with residents in UAE. It can own properties in Dubai in designated areas where foreign ownership is permitted

 

FORMATION OF LIMITED LIABILITY COMPANY

IN DUBAI, U.A.E.

 

FORMING A LLC IN DUBAI, U.A.E
Part I – LIST OF REQUIREMENTS
The list of requirements for forming a LLC are given below with relevant explanatory notes:
1 Application for initial Approval of the following items :
 
The business activities of the proposed company,
 The activities should be as per the activity code book issued by the department of economic development. Only a certain class of specific activities can be undertaken under a specific trade licence.  
   
The proposed partners of the company have to be approved.
 Specifically this application will not be processed unless the UAE national partner’s other licences are renewed as on the date of this application .  
 This application has to be signed by the UAE national partner and all the 49% partners.  
 This application has to be signed by the UAE national partner and all the 49% partners.  
   
   
2 No objection letter from the UAE national partner’s employer (if he is employed
  in any government department).
 
The business activities of the proposed company,
 Application of Trade name.  
   
   
  The proposed names should be given from either the names of the partners or
  the name should have a Arabic meaning. Please give at least 5 names in order of preference in ENGLISH and ARABIC.
   
3 If the name is foreign and has no arabic meaning the Economic Department will
  charge a annual fees of AED 2000/-. This will be a part of the annual licence fees and is thus a recurring expense.
   
4 Copy of Partners passport and Nationality Certificate ( khulasat al kaid ) of UAE
  national partner. The page containing UAE national’s file number on the passport is important.
   
  The passport copies and the nationality certificates should bear a clear photograph of the person. If the photo is not clear they will not accept any documents.
   
  If the expat partner/director is on a visit or transit visa, copy of passport showing date of entry in UAE required. Also copy of his visit or transit visa required.
   
5 Application to Commercial Register (2 copies). This has to be signed by the
 
   
6 Tenancy Contract for the office or the map of the place if it is owned by the UAE
  national partner.
   
7 Tenancy Residence contract for the Resident Partners and Resident Managing
  Director. If this is not available at the time of formation of the company , the Department of Economic Development will charge a lumpsum AED 1,000/- as part of the licence fees and in lieu of the 5% tax on the director’s residence.
   
8 Memorandum of Association of Limited Liability Company under formation duly
  attested with Notary Public, Dubai (to be signed in the presence of Notary Officer in Dubai Courts or The Department of Economic Development, Dubai by all the partners).
   
9 Original Bank Certificate of AED 300,000/- (minimum) for the capital deposited in
  the bank. For all new companies it is compulsory to deposit monies in the bank for the amount of capital. Partners will be required to sign the relevant papers in the bank.
   
  Minimum Capital requirement depends on the Nature of Business. eg. For Contracting Companies the minimum Capital requirement is AED 1,000,000/-.
   
OTHERS
10 Certificate from Auditors for capital contribution confirming the capital ratio of the
 
   
11 Certificate from Director indicating capital contribution by partners duly certified
  by auditors.
   
12 Letter to the Department of Economic Development from auditors confirming
  their appointment as auditors of the company
   
13 Auditors Professional Licence copy and copy of membership certificate issued
  by Ministry of Economy.
   
The following additional documents are required when a foreign company is a 49% partner :
Certificate of Incorporation.
Memorandum and Articles of Association
Resolution  passed  by  the  foreign company  appointing the  director  and
  approving the incorporation of the limited liability company in U.A.E
Power of Attorney.
Passport copies of the Legal Representative.
   
The above mentioned documents ( except No. 5 ) have to be notarised from the U.A.E. Embassy and the Ministry of Foreign Affairs in the country in which the foreign company is incorporated .

These notarised documents have then to be attested in the country of origin’s consulate in the UAE and then have to be attested in the Ministry of foreign affairs, Dubai, U.A.E.

These notarised and legalised documents have to be legally translated in Arabic and the translation has to be notarised by the legal translator (legal translator needs to be approved by Ministry of Justice).

   
1 Can a sole proprietorship/partnership company be converted into a L.L.C.?
  By virtue of the law (Enforced in Dubai) any partnership concern can convert into a Limited Liability Company pursuant to the Commercial Companies Law (8) of 1984 as amended, and the ministerial decrees.

Similarly a sole proprietorship concern can be converted into a LLC by adding one or more partners.

   
2 How many persons can form a company and who can be the partners?
  Minimum two and maximum fifty persons can form a limited liability company. However, U.A.E. National’s share in the capital should be minimum 51%; at any given time share of the U.A.E. National partner should not fall below 51%. Partners may be natural persons or a corporate body/company.

Each partner shall be responsible only to the extent of his share in the capital for the company’s liabilities.

   
3 What are the main contents of the Memorandum of Association?
  The Memorandum of Association is a contract between the partners to form a L.L.C. and it contains the following information:
 
   
Name of the company, its objectives and registered office address.
Name of the partners, their nationalities, place of residence and residential
 
Amount  of the share capital, share of  each  partner, value of  each  share,
  names of the partners and method of capital contribution by the partners.
Names of the directors and their nationalities.
Date of commencement and period of contract.
Method  of  profits or losses  distribution and  share of the  partners  in the
  profits or losses.
The procedure to be adopted for sending notices to the partners.
   
4 What are the benefits of forming a limited liability company?
 
   
Liability of partners is limited to the extent of unpaid capital.
Company attains a corporate entity different from its partners.
The  partners  can  appoint  Director(s)  who  are  authorised  by  the
  memorandum to carry on the business of the L.L.C. independently without involvement of the U.A.E. national partner.
   
5 Can the expatriate partner sponsor his family?
  Any expatriate partner in a Limited Liability Company is eligible for sponsoring spouse and other family members on residence visa if his share in the capital is Dhs. 70,000/- or more, also he should be a director in the company and his salary needs to be stated in the Memorandum of Association (as required by immigration rules).
   
6 Which business activities can be undertaken by the company?
  The company may undertake any business activity permitted by the Department of Economic Development except business of banking, insurance and investment of funds for third parties.
  By practice, the department does not permit,
  Two different classified business activities under one license e.g. trading and manufacturing need separate licenses.
  Or
  Two different designated classes of activities under one license, e.g. trading of electronics and Jewellery need separate trade licenses.
   
7 What are the capital requirements?
  Minimum share capital required for a specific trade license is U.A.E. Dhs. 300,000/- .

The share capital is divided into shares of Dhs. 1,000/- each.

For emirates other than Dubai capital requirement is Dhs. 150,000/- and Dhs. 1,500,000/- respectively. The share capital is divided into shares of Dhs. 1,500/- each

   
8 How is the capital to be contributed?
I Dhs. 300,000/- for Specific Trade License.
   
  Contribution in Cash
i Existing Sole Proprietor or partnership concerns can contribute capital in cash.
ii New companies have to compulsorily contribute capital in cash only.
   
  Contribution in Kind
i Existing Sole Proprietor or partnership concerns can alternatively contribute
  capital in kind viz, by contributing fixed assets and / or stock.
ii New companies cannot contribute capital in kind.
   
Notes:
1 In case of capital contribution in cash, full amount should be deposited in any
  bank operating in the U.A.E. This amount can be withdrawn only by the director of the company upon submission of proof of the company’s formation.
2 Kind contribution requires details of contribution in kind and full audited financial
 
   
II Dhs. 300,000/- for General Trading License.
   
Contribution in Cash
  New companies or existing Sole Proprietorship concerns converting into a Limited Liability Company have to compulsorily contribute capital in cash.
   
Contribution in Kind
  Only existing partnership companies are allowed to contribute capital in kind.
Notes:
 
1 In case of capital contribution in cash, full amount should be deposited in
  any bank operating in the U.A.E. This amount can be withdrawn only by the director of the company upon submission of proof of the company’s formation.
   
2 Kind contribution requires details of contribution in kind and full audited
  financial statements.
   
9 In what ratios are the profits/ losses to be distributed ?
  The partners in the proportion of their capital generally distribute Profits/ losses after setting aside 10% of net profits to legal reserve. The company has to set aside 10% of net profits to legal reserve till the legal reserve equals to 50% of the capital of the company.

Before distribution of the profits director’s remuneration can be charged as expenses as specified in the memorandum of association of the company.

The Department of Economic Development, Dubai presently permits to distribute Profits/Losses in the ratio upto maximum of 20% : 80% (instead of 51% : 49%), in such a case directors cannot be paid remuneration.

   
10 Who will manage the business of the company?
  The shareholders / partners may appoint themselves or other persons as Directors to run and manage the business of the company. Only the directors have the powers to run and manage the day to day operations of the company, the partners are not given any powers to run and manage the company.

Either there will be one Director or Board of Directors appointed to manage the company.

All Powers of Directors are generally stated in the Memorandum of Association including power to open and operate bank accounts and borrow money from banks.
Even a company can be appointed as a Director of the company.

   
11 What are the responsibilities of the directors?
  The directors are responsible for the following important matters:
 
I The directors will manage the day-to-day business operations of the
  company as per the powers given in the Memorandum of Association of the company. His actions will be binding upon the company provided he has acted in his capacity as Director of the company and he has not exceeded his powers.
   
Ii Proper books of accounts have to be maintained and audited on a yearly
  basis. The directors are responsible for preparation of the balance sheet and the profit and loss account and a report on the activities and the financial position of the company including the proposal on distribution of the profits of the company within three months of the closing date of the financial year. The directors within the following ten days to the approval of the above shall present them to the ministry and the competent authority.

It is said that if creditors file a suit for winding up and the court auditors do not find proper books of accounts and are not able to ascertain why the company is not in a position to pay the creditors, then the company’s partners and directors would be held jointly responsible to the full extent of their fortunes for the company’s liabilities.

   
Iii The directors shall convene the annual general meeting of all the partners
  at least once a year within four months following the end of the financial year to conduct the following business:
 
  Hearing the report of the director and the auditor.
  Discussing and adopting the balance sheet and the profit and loss
  account
  Determining the profits to be distributed
  Re- appointing the directors and fixing their remuneration
  Re- appointing the auditors and fixing their remuneration
   
Iv The phrase “Limited Liability” should be added to the name of the company
  in addition to a statement showing the company’s capital. If the directors fail to comply with these requirements they shall be jointly responsible to the full extent of their fortunes for the company’s liabilities.
   
V A register containing the following information shall be kept at the
  registered office:
 
a The names of the partners, their residence addresses, nationalities and
 
b The number and value of shares owned by each partner.
c Details of share transfers, date of transfers etc.
   
12 Can the directors’ be paid remuneration?
  Directors’ can be remunerated in the following manner (and /or): -
 
A Monthly salary
B Perks viz. fully furnished accommodation, car and its maintenance, medical
  benefits for self and family, electricity and water, etc.
  Leave salary and gratuity.
  Fist class return air fare for self and family.
C Management fees based on percentage of sales of the company.
   
13 When can the partners lose their limited liability protection?
  Partners who are appointed to manage the L.L.C. also run the risk of losing their limited liability protection under the Companies Law where they are a party to deception or abuse or exceed the authority vested in them or violate the companies law or the memorandum of association of the company. Similarly protection can be lost where such partners mismanage the affairs of the L.L.C. Only those partners who have had their objections to the actions giving rise to the liability recorded in the minutes of the meeting at which the actions were considered, or were absent when the decision to take such actions was made, will be exonerated.

Also where partners have provided personal guarantees, they agree to be bound to repay the loans to the extent the L.L.C. is unable to repay. If the personal guarantee is called upon, the partner’s liability while limited to the value of the guarantee may well exceed the value of his shares in the L.L.C. As such the advantage of the limited liability could be lost.

   
14 Can the partners give interest-bearing loans to the company?
  The partners can give loans to the company and they can be paid interest at the commercial rates prevailing in the market. It is advisable to add such a clause in the memorandum of association of the company.
   
15 What are the major costs payable to the economic /other government
  department for forming a limited liability company?
 
One time charges to Economic Department Dhs. 3,000/-.
Part of license fees are based on -
 
5% of the tenancy contract value of expatriate Director’s residence
  (located in Dubai or any other Emirate) or AED 1000/- in absence of the Directors residence tenancy contract.
Dhs. 750/- charged for Director being appointed for unlimited period.
10% of the tenancy contract value of office, go down, stores, shop rented
  by the company.
Note: Expatriate partner’s residence is not considered for license fees if he is not a Director in the company. If all partners are U.A.E nationals, their residence, offices, shops, etc. are not considered for license fees.
Notarization fees – 0.25% of capital OR a sum arrived at by multiplying
  the annual salary of each director with the number of years of his appointment as stated in the memorandum of association, which ever is higher; maximum Dhs. 10,000/- only. No further fees for alteration of capital is payable if initially Dhs. 10,000/- have been paid.
Other miscellaneous fees and Chamber of Commerce fees.
 
   
16 Can a separate power of attorney be issued by the partners to the directors
  /others?
  Separate Power of Attorney can be issued by partners to Directors/ others giving all powers to run and manage the company. This Power of Attorney can be given to government departments / third parties who want to know about the powers of the Director’s / others instead of giving them the full Memorandum of Association.
   
17 When can the company commence business activities?
  The partners can commence business on receipt of the Certificate of Commercial Registration, provided the partners have obtained a residence visa. The partners shall be jointly liable for all acts and transactions performed on behalf of the company prior to its registration.
   
18 If the other existing licenses of a local partner are expired will the
  Department of Economic Development accept the documents submitted to form the L.L.C.?
  The Economic Department will not allow a company to be incorporated if any licence issued in the name of the local partner has expired.

Therefore before submitting the name and objects approval form to the Economic Department the investor has to ensure that all the licences issued in the name of the local partner are valid.

   
19 Is residential address to be stated anywhere?
  The residential address of the expatriate partners has to be stated in the Memorandum of Association and supported by the tenancy contract copy as 5% tax has to be paid on the per annum rental value.
   
20 Which are the documents required to be submitted to the Department of
  Economic Development?
  A complete list of documents required to form a Limited Liability Company is enclosed herewith. Refer Annexure A.
   
AFTER FORMATION OF THE COMPANY
   
21 Can the company open branches in Dubai?
  The company can open branches in Dubai by submitting an application alongwith the original trade licence and other documents.
   
22 Can the company open branches in other Emirates?
  The company will have to incorporate a new company in other emirates with the required capital and with a new Memorandum of Association stating therein that this new company is a branch of the Dubai Company.
   
23 Can the staff of H.O. work in a branch or vice versa?
  Yes, the staff of H.O. and branch can work at either place as per the current regulations.
   
24 Can a L.L.C. of another emirate open branch in Dubai?
  Yes, but if the capital of the company is less than Dhs. 300,000/- then it should be raised to Dhs. 300,000/- by an amendment to the Memorandum of Association. The original and the amendment to the Memorandum of Association alongwith other documents have to be filed with the Department of Economic Development, Dubai.
   
25 Can the partners admit a new partner?
  Existing L.L.C. can admit new partner with full capital contribution in cash or kind. If the company opts for kind contribution the following documents are required:
 
Sale of shares agreement.
Audited financial statements
Statement of capital contributed in kind by all the partners
Resolution of the partners
Amendment in the Memorandum of Association of the company
   
26 Can a partner transfer his shares to any other partner or person?
  Yes, the following documents are required to transfer shares by one partner to another partner/ person:
 
Sale of shares agreement
Amendment to Memorandum of Association
Department of Economic Development will give advertisement in Arabic
  newspaper for 15 days for no objection by any member of the public.
   
   
Operating in DIFC
Establishment of DIFC Registrar of Companies

The Registrar of Companies (ROC) is established under Article 7 of DIFC Law No. 3 of 2006 (Companies Law) as a statutorily created “Centre Body”, as defined in DIFC Law No. 9 of 2004, pursuant to which the principal Centre Bodies of the DIFC were established and assigned their respective roles and responsibilities.

 

Structure and Management

The incumbent Registrar of Companies (ROC), appointed by resolution of the DIFC President, His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai on 17 September 2004, is Dean A. Ferris, CLO of DIFC Authority.  In addition to the ROC, the function is staffed with and supported by a Deputy Registrar of Companies, an Assistant Registrar of Companies, Senior Administrative Officer and Registry Documentarian.

 

The Role and Functions of DIFC Registrar of Companies

The role of the ROC staff is to advise on, receive, review and process all applications submitted by prospective DIFC registrants seeking to establish a presence in the DIFC in accordance with the Companies Law, the General Partnership Law,  the Limited Liability Partnership Law, or the Limited Partnership Law, and the implementing regulations applicable thereto.

 

Types of Companies

Under the Companies Law, a prospective registrant may seek to establish a company limited by shares (LTD), limited liability company (LLC) or a branch office of a pre-existing foreign company (Recognized Company).  A party may also seek to transfer the incorporation of an existing company to the DIFC from another jurisdiction (Continued Company).

Under the Limited Liability Partnership Law a prospective registrant may seek to establish a limited liability partnership (LLP), or a branch of a pre-existing foreign limited liability partnership (RLLP).  Under the General Partnership Law, a prospective registrant may seek to establish a general partnership (GP) or branch of a pre-existing foreign general partnership (RP).  Under the Limited Partnership Law, a prospective registrant may seek to establish a limited partnership (LP) or a branch of pre-existing limited partnership (RLP).  A party may also seek to transfer the existing limited partnership into DIFC from another jurisdiction (Continued Limited Partnership/Foreign Limited Partnership).

An LTD or LLC, may be established in the DIFC by one or more natural persons or corporate entities (persons).  LLPs, GPs and LPs may be established by two or more persons provided in the case of an LLP, that a natural person is the “designated member” of the LLP.  The Recognized Company may only be set up by another corporate entity, while the Recognized Partnerships may only be set up by other existing partnerships.  While LTDs, LLCs, LLPs and LPs are “incorporated” entities, having separate and independent legal status from their incorporator(s), the Recognized Company and Recognized Partnerships are “registered” entity and, as such, are mere extension (and, for purposes of legal authority and liability, is an inseparable part) of the foreign-incorporated company/partnership through whose head office it is registered in the DIFC. A transfer of incorporation, once completed, has the effect of establishing the transferred company in the DIFC as if it were incorporated under the Companies Law.   A transfer of limited partnership, once completed, has the effect of establishing the transferred partnership in the DIFC as if it was incorporated under Limited Partnership Law.

Upon the establishment of an LTD, LLC, LLP or LP, the ROC issues to the incorporator(s) a “Certificate of Incorporation”.  Upon the establishment of a Recognized Company or Recognized Partnership/Recognized Limited Liability Partnership/Recognized Limited Partnership the ROC issues to the head office or partnership, respectively, a “Certificate of Registration”. Upon transfer of incorporation or limited partnership to the DIFC, the ROC issues to the transferred company a “Certificate of Continuation”.

In all other respects the three documents are identical in form, bearing the seal and signature of the ROC, the name and status of the incorporated, continued or registered entity, its registration number, and the date of issuance.

 

Non-Regulated Commercial License

According to DIFC Operating Regulations, simultaneously with the issuance of a certificate of incorporation, registration or continuation, the ROC issues a corresponding Commercial License. The purpose of a Commercial License is to expedite contracting for municipal and commercial services essential to the establishment and operation of the licensee’s premises and carrying out its on-going operations.  The application for a certificate of registration, incorporation or continuation is considered to also be an application for a Commercial License. The Commercial License sets out the license number as well as the licensee’s name, operating name, legal status, address, permitted activities, authorized manager’s name, and the issuance and expiry dates of the license. The Commercial License does not authorize the licensee to undertake Financial Services requiring a DFSA license, as is conspicuously indicated on the Commercial License. The Commercial License is renewed annually, by payment of annual renewal fee to the ROC no later than thirty (30) days after the expiry date.