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1-General Partnership Company
It
is a firm which consists of two or more partners who are jointly and
severally responsible for all the firm’s liabilities. Partnership
companies are confined to UAE nationals only because partners are
responsible towards the liabilities of the firm by all their assets,
which may not applied to foreigners as in most of the cases their
assets are usually in abroad
2-Partnership in-commendams (Limited Partnership)
It
is a firm consisting of one joint partner or more who is liable with
all his money for the firm and another in-commendams partner or more
who shall not be responsible for the liabilities of the firm except to
the value of his share in the capital. According to law, all joint
partners in such type of firms should be nationals of the UAE.
3-Public Shareholding Company (PJSC)
Public
Shareholding Company is a company with a capital divided into equal
negotiable shares. In such companies a shareholder’s liability is
limited by the number of shares held by him. Minimum capital required
to form a Public Shareholding Company is AED 10 million (US
$ 2,724,796) with a nominal face value of AED 1–100, and for a
banking entity it is AED 40 million and insurance and investment
companies is AED 25 million.
Among the other requirements for the establishment of a public joint
stock company is the preparation of a founders’ agreement, a prospectus
or invitation for public subscription supported by an overall business
plan or feasibility study and an auditors certificate, a due diligence
survey, a memorandum and articles of association. A PJSC must have at
least 10 founder members and its management should be vested in a board
of directors consisting of a minimum of three to a maximum of fifteen
persons whose term of office may not exceed three years. The Chairman
and majority of the Directors in a public shareholding company must be
UAE nationals. In addition at least 51% of the shares of the PJSC
should be held by UAE nationals. The founder members may only hold 45%
of the share capital, as 65% is required to be offered to the public.
The Law stipulates that the companies engaged in banking, insurance or
financial activities should be run as public share holding companies.
Procedures to set up a public share holding company: |
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Capital |
AED 10,000,000 |
Duration of the Company |
To be decided by the founder members |
Memorandum of Association |
To be prepared in consultation with the standard Memorandum of Association available with the Ministry of Economy |
Number of founding members |
Minimum 10 |
Committee to continue |
3 – 5 members from the founding members |
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Subscription:
Founders |
20% or above but less than 45%. Certificate from the bank to be provided |
Subscription of Money |
25% of the commercial value. Balance 75% within a period of maximum 5 years. However, subject to company’s contract. |
Period of Subscription |
10 – 90 days |
Minimum Subscription |
100% |
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Entities, looking for raising finance through Initial Public Offering
(IPO) must have completed 2 years profitable operation in UAE
Application Procedure |
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A
1. Application |
2. Memorandum of Association |
3. Feasibility Study of the Project Application to be submitted to the Ministry of Economy and Planning |
4. Permission from the Emirate where the company is intended to be established. |
5. Suggested completion period of the execution of the project to start its operations to be provided |
B
1. The Ministry shall set up a committee to study the project |
2. The committee shall prepare a report within 2 weeks of the application |
3.
The Ministry shall issue a decision within 60 days from the date of
application. If the decision has not bee issued within the period the
application is deemed rejected. |
4. If the application is rejected, the applicants can contest before Civil Court within 60 days. |
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General Assembly:
The founding members shall invite the subscribers to a general assembly meeting within 30 days of the close of subscription.
Quorum:
¾ of the
Owners of the shares
If no quorum:
Second Meeting – After 30 days; quorum is half of the owners of shares
Third Meeting – After 15 days; no quorum required
After the general assembly within 7 days, application for declaration
of company to be in existence to be provided to the Ministry. Minister
will issue a decree within 30 days regarding the establishment of the
company.
4-Private Shareholding Company
A
Private Shareholding Company is incorporated by a number of persons not
less than three. Unlike public shareholding company, a private
shareholding company cannot invite the public for subscribing in its
shares. The minimum share capital to form a private shareholding
company is AED 2 million. (US $ 545,405). The Chairman and majority of
the Directors in a private shareholding company must be UAE nationals
5-Limited Liability Company (LLC)
A
Limited Liability Company is the most common form of business entity
currently formed in UAE. A limited liability company 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
participation by UAE national is 51%. Capital required to form a
limited liability company in Dubai is AED 300,000 (US$ 81,744)
contributed in cash or in kind. However, in other Emirates viz., Abu
Dhabi, Sharjah, Fujairah etc., the capital requirement is AED 150,000
(US$ 40,872). Profit or loss distribution can be prescribed and
responsibility of management of an LLC can be vested in the foreign or
national partners or third party. The shares of such company are not
open for subscription by the public and they do not issue negotiable
shares.
Process of establishing a 'LLC'
·
Obtain initial approval for name and activity from the Department of
Economic Development or the Economic Development
Department/Municipality/the Chamber of Commerce.
· Obtain approval from
concerned Ministry/Department in case the activity is of special nature
· Draw up company’s
Memorandum of Association and have it notarized from courts of
respective Emirates.
· Capital contribution
certificate to be obtained from banks for cash shares and auditor’s
certificate for both cash shares and kind shares.
· Submit applications
and initial approval along with notarized copy of Memorandum of
Association, capital certificate, tenancy contract etc., to the
Department of Economic Development or the Municipality.
· After scrutiny by the
legal department, the Company name will be entered in the Commercial
Register and have its Memorandum of Association published in the
Ministry of Economy and Commerce Bulletin.
· The Department of
Economic Development or the Municipality will then issue the license:
.
Department of Economic Development: Licensing Authority in the Emirate
of Dubai.
.
Economic Development Department: Licensing Authority in the Emirate of
Sharjah.
.
Municipality/Chamber of Commerce: Licensing Authority in other Emirates.
Activities requiring special approval
License
to practice majority of the activities are directly issued by the
licensing authority in the respective emirate. However, certain
activities require special approval from the related
Ministry/Department. (for e.g., medical, pharmacy etc – ministry of
health; air transport, air cargo etc – dept. of civil aviation,
financial institutions, banks, money exchange etc – central bank; new
industrial project, expansion – ministry of finance and industry;
publishing, printing, newspaper, advertising, video film, photography
etc., – ministry of information; education, training etc., - ministry
of education; agriculture, veterinary etc – ministry of agriculture;
customs clearance, freight forwarding, sea cargo etc. – seaports &
customs authority, telecommunication equipment – ministry of
communication; branch of foreign company, insurance company, chartered
accountants firm etc. – ministry of economy), legal consultancy -
rulers' office - engineering & contracting - municipality.
6-Joint Venture (Consortium Company)
A
Joint Venture is a type of company where two or more partners agree by
contract to share the profits or losses of one or more commercial
enterprises, which will be carried on in the name of one of the
partners. Contract of Joint Ventures may be written or oral and not
required to be notarized. Third parties can recourse only to the
partners with whom they deal. However, should the Joint Venture is
disclosed to the third parties, all the partners are liable to the
third parties. Existence of Joint Venture may be proved by any method
of proof
7-Professional Companies (Professional Partnership) |
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A firm shall be regarded as a professional company which practices a
profession as its main object and that partners rely on their
livelihood on the intellectual effort they exercise more than on
profiting from the business of others.
On this basis the professional companies are set up between
professionals or partisans and carry out non-commercial activities. The
firms, which are, registered as professional companies or firms may
only practice specific activities and not extend that to commercial
activities. Such activities include rendering the services of legal
practice and consultancy, auditing, organizing and keeping accounting
records and books, civil engineering, architecture consultancies and
services, managerial and economic consultancy and studies, technical
services, medical and curative services, educational services and other
similar services
8-Proprietorship Firm to practice professional activities
Foreign
investor is permitted to practice certain types of professional
activities without having a national partner. Such activities are legal
consultancy, IT consultancy, management consultancy, marketing
consultancy and similar services. However, it is a condition that
the firm must have a local service agent and accordingly the service
agency contract is required to be authenticated by a notary public
(except for legal consultancy services).
9-Appointing a Commercial Agent (Exclusive Distributor):
Foreign
investors may appoint a commercial agent to represent their interests
in the UAE. instead of establishing a permanent presence. The UAE,
Commercial Agencies Law (Federal Law No. 18 of 1981, as amended by
Federal Law No. 14 of 1988) regulates and governs the appointment of
commercial agents, sales representatives, and distributors in the UAE.
The law defines a commercial agency as any arrangement whereby a
foreign company is represented by an agent to “distribute, sell, offer,
or provide goods or services within the UAE for a commission or profit”.
The primary requirements and characteristics of commercial agencies are:
1. Commercial agents must be UAE nationals or companies incorporated in the UAE and owned entirely by UAE nationals.
2. Commercial agents must be registered with the UAE. Ministry of
Economy and Commerce to engage in commercial agency activities.
3. The agency agreement must be registered in order for the agent to
avail himself of the protections afforded under the law and to have the
agency relationship recognized under UAE. law.
4. Commercial agents are entitled to an exclusive territory
encompassing at least one Emirate for the specified products (Article
5(1) of the Commercial Agencies Law).
5. Unless otherwise agreed, commercial agents are entitled to receive
commissions on sales of the products in their designated territory
irrespective of whether such sales are made by or through the agent
(Article 7 of the Commercial Agencies Law).
6. Commercial agents are entitled to prevent products subject to their
agency from being imported into the UAE. if the agent is not the
consignee.
7. Commercial agents are entitled to receive compensation from the
principal if the agency is terminated without substantial justification
or if the agency is not renewed by the foreign principal and the agent
may be able to preclude the foreign party from appointing a replacement
agent in such circumstance.
10-Opening a branch or representative office of the foreign company
The Companies Law, in article (313) allows a foreign company
to exercise its main activity in the UAE by opening a branch or a
representative office. The difference between the two is that the
foreign company which opens a branch in the UAE may exercise freely the
activities for which it is licensed whereas a representative office may
practice only promotional business for the products and services
provided by the parent company.
Unlike a foreign branch a representative office cannot conduct business
operation or market directly its product. In order to engage a foreign
branch to conduct its operation in UAE it should obtain a license from
the Ministry of Economy & Planning prior to obtain the license from
the concerned authority in the respective Emirate. Foreign companies
licensed to operate in UAE may not start their activities before being
inscribed in the Ministry’s Register of foreign services.
An agent should be a UAE national. A service agent is not an
empowered agent who can bind his principal as explained in the
definition of the term “agent” in the Commercial Companies Law. A
service agent is not responsible to undertake any financial obligations
concerning the activities of the company’s branch or office within the
UAE or abroad. He should not interfere in the matters related to the
company’s management or activities. His duties towards the company and
others are confined to providing such services as required by the
principal. These services usually include obtaining of entry/residence
permits, acquiring of the necessary licenses or facilitating the
processing of its transactions with the government authorities. The
service agent is remunerated in lump sum for the services rendered to
the foreign company, which sum shall be the subject of an agreement
between him and the company.
Foreign company's branch or representative offices are required to
submit a bank guarantee of AED 50,000 favoring the ministry being part
of the license processing procedure. The license of the foreign
company's branch/representative office shall be cancelled if it is not
renewed within two years after the expiry date and the fee due to the
ministry shall be deducted from the guarantee.
11-Establishments by GCC Citizens
The states of the Gulf Cooperation Council (the UAE, Saudi Arabia,
Sultanate of Oman, Qatar, Kuwait and Bahrain) signed the United
Economic Agreement in Riyadh on 7th June 1981, with a view to
coordinate and unify economic, financial, monetary, commercial and
industrial legislations and UAE endorsed this agreement in 1982.
It is conditional as per the Federal Law No. 2 of 1989 concerning
permitting the GCC citizen to conduct a business operation in UAE that
the investor should be a natural person residing in UAE and practice
the required activity by himself and have a license to practice the
activity in his country of origin. In case the investor is a juridical
person wishing to conduct retail or wholesale trade then the investor
must be in the form of a company of which the share owned by UAE
nationals is not less than 50% of the capital.
Setting up of Branch of GCC Companies in Dubai
The dept. of economic Development, Dubai has recently released a
circular clarifying the procedures of setting up Branches of GCC
companies wholly owned by GCC nationals.
The circular stipulates that Branches of GCC Companies shall be
required to register only in the DED and the concerned parties shall
not refer to the Ministry of Economy, provided other Government
Departments' approvals may be required for the activities in question.
· The GCC Companies shall not be required to appoint Service Agents. |
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If there are shareholders who are not from the GCC in the mother
company, such company shall be considered as a foreign company and
still required to register at the Ministry of Economy and Planning in
accordance with usual procedure
The founding members shall invite the subscribers to a general assembly
meeting within 30 days of the close of subscription.Quorum: ¾ of the
Owners of the sharesSecond Meeting – After 30 days; quorum is half of
the owners of sharesThird Meeting – After 15 days; no quorum
requiredAfter the general assembly within 7 days, application for
declaration of company to be in existence to be provided to the
Ministry. Minister will issue a decree within 30 days regarding the
establishment of the company.A Private Shareholding Company is
incorporated by a number of persons not less than three. Unlike public
shareholding company, a private shareholding company cannot invite the
public for subscribing in its shares. The minimum share capital to form
a private shareholding company is AED 2 million. (US $ 545,405).
The Chairman and majority of the Directors in a private shareholding
company must be UAE nationalsA Limited Liability Company is the most
common form of business entity currently formed in UAE. A limited
liability company 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 participation by UAE national is 51%.
Capital required to form a limited liability company in Dubai is AED
300,000 (US$ 81,744) contributed in cash or in kind. However, in other
Emirates viz., Abu Dhabi, Sharjah, Fujairah etc., the capital
requirement is AED 150,000 (US$ 40,872). Profit or loss distribution
can be prescribed and responsibility of management of an LLC can be
vested in the foreign or national partners or third party. The shares
of such company are not open for subscription by the public and they do
not issue negotiable
shares. Obtain initial
approval for name and activity from the Department of Economic
Development or the Economic Development Department/Municipality/the
Chamber of Commerce.·
Obtain approval from concerned Ministry/Department in case the activity
is of special nature·
Draw up company’s Memorandum of Association and have it notarized from
courts of respective
Emirates.· Capital
contribution certificate to be obtained from banks for cash shares and
auditor’s certificate for both cash shares and kind
shares.· Submit
applications and initial approval along with notarized copy of
Memorandum of Association, capital certificate, tenancy contract etc.,
to the Department of Economic Development or the
Municipality.· After
scrutiny by the legal department, the Company name will be entered in
the Commercial Register and have its Memorandum of Association
published in the Ministry of Economy and Commerce Bulletin.
·
The Department of Economic Development or the Municipality will then
issue the license: Department of Economic Development: Licensing
Authority in the Emirate of
Dubai..
Economic Development Department: Licensing Authority in the Emirate of
Sharjah..
Municipality/Chamber of Commerce: Licensing Authority in other
Emirates.Activities requiring special approvalLicense to practice
majority of the activities are directly issued by the licensing
authority in the respective emirate. However, certain activities
require special approval from the related Ministry/Department. (for
e.g., medical, pharmacy etc – ministry of health; air transport, air
cargo etc – dept. of civil aviation, financial institutions, banks,
money exchange etc – central bank; new industrial project, expansion –
ministry of finance and industry; publishing, printing, newspaper,
advertising, video film, photography etc., – ministry of information;
education, training etc., - ministry of education; agriculture,
veterinary etc – ministry of agriculture; customs clearance, freight
forwarding, sea cargo etc. – seaports & customs authority,
telecommunication equipment – ministry of communication; branch of
foreign company, insurance company, chartered accountants firm etc. –
ministry of economy), legal consultancy - rulers' office - engineering
& contracting - municipality.A Joint Venture is a type of company
where two or more partners agree by contract to share the profits or
losses of one or more commercial enterprises, which will be carried on
in the name of one of the partners. Contract of Joint Ventures may be
written or oral and not required to be notarized.
Third parties can recourse only to the partners with whom they deal.
However, should the Joint Venture is disclosed to the third parties,
all the partners are liable to the third parties. Existence of Joint
Venture may be proved by any method of proofA firm shall be regarded as
a professional company which practices a profession as its main object
and that partners rely on their livelihood on the intellectual effort
they exercise more than on profiting from the business of others.On
this basis the professional companies are set up between professionals
or partisans and carry out non-commercial activities. The firms, which
are, registered as professional companies or firms may only practice
specific activities and not extend that to commercial activities. Such
activities include rendering the services of legal practice and
consultancy, auditing, organizing and keeping accounting records and
books, civil engineering, architecture consultancies and services,
managerial and economic consultancy and studies, technical services,
medical and curative services, educational services and other similar
servicesForeign investor is permitted to practice certain types of
professional activities without having a national partner. Such
activities are legal consultancy, IT consultancy, management
consultancy, marketing consultancy and similar services. However, it
is a condition that the firm must have a local service agent and
accordingly the service agency contract is required to be authenticated
by a notary public (except for legal consultancy services).Foreign
investors may appoint a commercial agent to represent their interests
in the UAE. instead of establishing a permanent presence.
The UAE, Commercial Agencies Law (Federal Law No. 18 of 1981, as
amended by Federal Law No. 14 of 1988) regulates and governs the
appointment of commercial agents, sales representatives, and
distributors in the UAE. The law defines a commercial agency as any
arrangement whereby a foreign company is represented by an agent to
“distribute, sell, offer, or provide goods or services within the UAE
for a commission or profit”.The founding members shall invite the
subscribers to a general assembly meeting within 30 days of the close
of subscription.Quorum: ¾ of the Owners of the sharesSecond Meeting –
After 30 days; quorum is half of the owners of sharesThird Meeting –
After 15 days; no quorum requiredAfter the general assembly within 7
days, application for declaration of company to be in existence to be
provided to the Ministry. Minister will issue a decree within 30 days
regarding the establishment of the company.A Private Shareholding
Company is incorporated by a number of persons not less than three.
Unlike public shareholding company, a private shareholding company
cannot invite the public for subscribing in its shares.
The minimum share capital to form a private shareholding company is AED
2 million. (US $ 545,405). The Chairman and majority of the Directors
in a private shareholding company must be UAE nationalsA Limited
Liability Company is the most common form of business entity currently
formed in UAE. A limited liability company 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 participation by
UAE national is 51%. Capital required to form a limited liability
company in Dubai is AED 300,000 (US$ 81,744) contributed in cash or in
kind. However, in other Emirates viz., Abu Dhabi, Sharjah, Fujairah
etc., the capital requirement is AED 150,000 (US$ 40,872). Profit or
loss distribution can be prescribed and responsibility of management of
an LLC can be vested in the foreign or national partners or third
party. The shares of such company are not open for subscription by the
public and they do not issue negotiable
shares. Obtain initial
approval for name and activity from the Department of Economic
Development or the Economic Development Department/Municipality/the
Chamber of Commerce.·
Obtain approval from concerned Ministry/Department in case the activity
is of special nature·
Draw up company’s Memorandum of Association and have it notarized from
courts of respective
Emirates.· Capital
contribution certificate to be obtained from banks for cash shares and
auditor’s certificate for both cash shares and kind
shares.· Submit
applications and initial approval along with notarized copy of
Memorandum of Association, capital certificate, tenancy contract etc.,
to the Department of Economic Development or the
Municipality.· After
scrutiny by the legal department, the Company name will be entered in
the Commercial Register and have its Memorandum of Association
published in the Ministry of Economy and Commerce Bulletin.
·
The Department of Economic Development or the Municipality will then
issue the license: Department of Economic Development: Licensing
Authority in the Emirate of
Dubai..
Economic Development Department: Licensing Authority in the Emirate of
Sharjah..
Municipality/Chamber of Commerce: Licensing Authority in other
Emirates.Activities requiring special approvalLicense to practice
majority of the activities are directly issued by the licensing
authority in the respective emirate. However, certain activities
require special approval from the related Ministry/Department. (for
e.g., medical, pharmacy etc – ministry of health; air transport, air
cargo etc – dept. of civil aviation, financial institutions, banks,
money exchange etc – central bank; new industrial project, expansion –
ministry of finance and industry; publishing, printing, newspaper,
advertising, video film, photography etc., – ministry of information;
education, training etc., - ministry of education; agriculture,
veterinary etc – ministry of agriculture; customs clearance, freight
forwarding, sea cargo etc. – seaports & customs authority,
telecommunication equipment – ministry of communication; branch of
foreign company, insurance company, chartered accountants firm etc. –
ministry of economy), legal consultancy - rulers' office - engineering
& contracting - municipality.A Joint Venture is a type of company
where two or more partners agree by contract to share the profits or
losses of one or more commercial enterprises, which will be carried on
in the name of one of the partners. Contract of Joint Ventures may be
written or oral and not required to be notarized.
Third
parties can recourse only to the partners with whom they deal. However,
should the Joint Venture is disclosed to the third parties, all the
partners are liable to the third parties. Existence of Joint Venture
may be proved by any method of proofA firm shall be regarded as a
professional company which practices a profession as its main object
and that partners rely on their livelihood on the intellectual effort
they exercise more than on profiting from the business of others.On
this basis the professional companies are set up between professionals
or partisans and carry out non-commercial activities. The firms, which
are, registered as professional companies or firms may only practice
specific activities and not extend that to commercial activities. Such
activities include rendering the services of legal practice and
consultancy, auditing, organizing and keeping accounting records and
books, civil engineering, architecture consultancies and services,
managerial and economic consultancy and studies, technical services,
medical and curative services, educational services and other similar
servicesForeign investor is permitted to practice certain types of
professional activities without having a national partner. Such
activities are legal consultancy, IT consultancy, management
consultancy, marketing consultancy and similar services. However, it
is a condition that the firm must have a local service agent and
accordingly the service agency contract is required to be authenticated
by a notary public (except for legal consultancy services).Foreign
investors may appoint a commercial agent to represent their interests
in the UAE. instead of establishing a permanent presence. The UAE,
Commercial Agencies Law (Federal Law No. 18 of 1981, as amended by
Federal Law No. 14 of 1988) regulates and governs the appointment of
commercial agents, sales representatives, and distributors in the UAE.
The law defines a commercial agency as any arrangement whereby a
foreign company is represented by an agent to “distribute, sell, offer,
or provide goods or services within the UAE for a commission or profit”. |
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