Shams Consultant
Company formation in Dubai

Company formation in Dubai

Company formation in Dubai demands a wide range of knowledge, skill and understanding about the market place in UAE. These days there are different type of businesses and every business has its own merits and demerits, so it is very important for an investor to have knowledge about these businesses, legal form of the company, activity which he will perform and most important the legal aspects of doing business in UAE. We at Shams Consultant offer Company formation services, we have experienced and mostly expert of company formation, who have deep knowledge and understanding about different types of Company formation and it’s structure. UAE is a great choice for company formation because the law of UAE is very flexible for new startup companies. If you are planning to start a new company in UAE, then you are on a right place to get advice of experience consultants in this part of the world.

License for Company Formation in Dubai

To run a company in UAE, Company must be licensed by the government of UAE. License is a legal document which authorizes a Company to operate their business. Another word license is a certificate that authorizes company to practice a particular type of activity. There are special department in all emirates for issuing license. In Dubai DED is the authorize body to issue license for company formation in dubai. A Company which is register with DED is permitted to do business in local market without any restriction.

Company Formation Dubai | Professional License

  • Professional License Issued only to Professionals.
  • Professional License is Unlimited Liability license.
  • For Professional License UAE National is a Local Service Agent.
  • In Professional License expat are allowed to get 100% shares of the company.
  • Service Related Activities

Company Formation Dubai | Commercial License

  • Commercial License is for any Entrepreneur.
  • Commercial License is a Limited Liability Company.
  • In Commercial License UAE National is a Partner in the company.
  • In Commercial License expat are allowed to get Maximum 49% shares of the company.
  • In Commercial License Provision of physical services or trading activities.

Company Formation Dubai | Industrial License

  • Industrial License is for any Entrepreneur with expertise.
  • Industrial License is a Limited Liability Company (LLC).
  • In Industrial License UAE National is a Partner in the company
  • In Industrial License expat are allowed to get Maximum 49% shares of the company.
  • In Industrial License activities involving manufacturing

All these type of licenses are issued by the Economic Department. But some activities which come under some specific categories require approvals from different ministries and other authorities: for example, pharmaceutical and medical products from the Ministry of Health. Banks and other financial institutions require approval from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing companies required approval from the Ministry of Finance.

Company formation in Dubai required a physical office inside in Dubai. Virtual office is not entertained by the DED. It is necessary to do the maximum amount of preliminary analysis before applying for license.

Local sponsor for Company Incorporation in Dubai

Expatriates (non-GCC nationals) are not allow to hold 100% of share in the Company register with DED, there must be a local sponsor which will have majority of share in the company. For company formation in Dubai local sponsor will hold fifty one percent (51%) of shares and therefore the foreign investors will owns the remaining 49%. The profit and loss distribution with local sponsor (UAE National) is extremely a separate contract. Local sponsors are people or locally-owned companies for Company formation in Dubai. They have no obligation towards the company; however their duty is to help with all government associated work, like getting permits, trade licenses, visas and labor cards. His/her signature is going to be needed on most of official document.

Local Service Agent for Company formation in Dubai

In professional form of company formation in dubai foreigners are allowed to hold 100% share of the company but it still required to have a UAE national known as Local service agent. Local service agent has no share in the company. Local Service Agents are involved in contacts with government department on behalf of principal companies

Economic Activities of Company setup in Dubai

First – United Arab Emirates Nationals:

UAE nationals can operate all commercial, professional and industrial activities, in their company formation in dubai after they fulfill all Terms and Conditions. They can carry on activities through any of the subsequent legal forms:

  • Individual Establishment.
  • Limited Liability Company.
  • Joint Liability Company.
  • Private Shareholding Company.
  • Public Shareholding Company.
  • Civil Business Company.

Second – Nationals of GCCC

Gulf Cooperation Council Countries nationals may allowed to do commercial, professional and industrial activities, when they fulfill all term and Conditions which are required for that specific kind of activities. But in company formation in dubai they cannot do the activities like Haj and Umra, journals and magazine publishing, houses of disabled and old people, trade agencies, community service and printing houses as they are limited only to United Arab Emirates nationals. They can do the activities through any of the following legal forms:

  • Individual Establishment.
  • Limited Liability Company.
  • Private Shareholding Company.
  • Public Shareholding Company.
  • Civil Business Company.

Third – Nationals of Other Countries:

Nationals of foreign countries are allowed to operate their economic activities through any of the following forms:

  • Individual Establishment.
  • Limited Liability Company.
  • Private Shareholding Company.
  • Civil Business Company.

Fourth – Foreign Companies:

A company which is incorporated outside the (UAE) United Arab Emirates can operate their business activities (commercial, industrial or professional) through one of the following legal forms:

  • Branch of a Foreign Company.
  • Limited Liability Company.
  • Private Shareholding Company.
  • Public Shareholding Company.

Legal form of Company Formation in dubai

Following are the main legal form of company formation in UAE.

  1. Sole Proprietorship / Establishment
  2. Commercial Companies
    • General Partnership
    • Simple Limited Partnership
    • Joint (Participation) Venture
    • Public Joint Stock Company
    • Private Joint Stock Company
    • Limited Liability Company
    • Partnership Limited with Shares
  3. Civil Companies
  4. Branch and Representative Offices

Sole Proprietorship / Establishment form of Company formation in Dubai

Sole Proprietorship form of company formation in dubai is the establishment completely owned by one individual, who is generally liable without limit to the full range of his assets for the liabilities of the company. This type of company can either conduct professional activities or commercial activities in UAE. According to company formation in dubai law, only UAE local and nationals of GCC countries (subject to certain conditions) are allowed to form Sole Proprietorship companies for carrying out commercial activities. However, foreigner are also permitted to form Sole Proprietorships only for performing professional activities, such as medical services, management consultancy, engineering consultancy, legal consultancy, IT consultancy and similar services. The Sole Establishment, 100% owned by a foreigner, should appoint UAE national as a Local Service Agent, who will be involved in the company contacts with government departments while applying for work permits, employment visas and other government approvals.

Commercial Companies form of Company formation Dubai

Commercial company setup in Dubai has several type which are specified in the Federal Law No. 8 of 1984 (Commercial Companies Law). They are basically formed to operate commercial activities in the local market, subject to certain exemptions. Under the Commercial Companies Law, the company setup in Dubai are normally described as “a contract in which two or more persons are parties are devoted to contribute in profit making economic project either by providing cash or work contributions and to divide between them profit or loss rising from such project”. Article 5 of the same Commercial Companies Law enumerates the following types of commercial company formation in UAE:

  • General Partnership / Joint Liability Partnership
  • Simple Limited Partnership / Sleeping Partnership
  • Joint – Venture
  • Public Joint – Stock Company
  • Private Joint – Stock Company
  • Limited Liability Company
  • Partnership Limited by Shares

General Partnership / Joint Liability Company form of company formation in UAE

General Partnership or joint liability company is the type of commercial company formation in UAE, which is the agreement between two or more parties in which each of them is equally liable for the company’s obligations to the full amount of all their assets, According to UAE Commercial Companies Law Article 23, Only UAE nationals are allowed to setup this type of partnership. Joint Liability Company formation in UAE option is not available to expat as probably the majority of their assets are located outside the UAE.

Simple Limited Partnership / Sleeping Partnership form of Dubai company formation

According to Article 47 of Company Commercial Law a simple limited partnership is the type of commercial company incorporation in Dubai which is composed of one or more jointly – connected partners liable for the company’s liabilities to the amount of all their assets together with one or more sleeping partners liable for the company’s obligations only to the amount of their respective contribution in the capital. This type of partnership is also limited only for UAE nationals.

Joint Venture form of company formation in Dubai

Joint Venture form of company formation in Dubai is also a contract between two or more partners to share profit or loss of a commercial company. In Joint Ventures, the business is carried out in the name of one of the partners. The local equity contribution in the joint venture must be at least 51%, but the profit and loss sharing can be mutually agreed. Joint Ventures forms of company formation in Dubai are fit for companies working together on short term basis or for a specific project. Joint Venture Agreement controls the relationship between partners. In practice, there is no registration formality for the Joint Venture in the government departments, as the Joint Venture partnership will operate using the license and name of one of the partners.

Public Joint Stock dubai Company registration

According to (Art. 64 of Company Commercial Law) Public Joint Stock Company registration in dubai is defined as an organization whose capital is divided into negotiable shares of equal value and a partner within – shall be responsible only to the amount of their share in the capital of the company. The Law requires a minimum share capital of AED 10,000,000 of which a minimum of 25% must be settled on subscription. A minimum of 55% of the shares of a public shareholding company must be offered to the overall public. Furthermore, it must have at least 10 founding members, except in case where the government body is involved. Also, any company in which the government or Public Organizations hold any share should be formed as Public Joint Stock Company. The Board of Directors must have a minimum of three and maximum twelve board members. The chairman, as well as a majority of the board members, must be UAE Locals.

Private Joint Stock Company form of company formation in Dubai

Private Joint Stock Company formation in dubai has the same characteristics as that of the Public Joint Stock Company. However, it has three exemptions as follows:

  • The minimum share capital is 2,000,000 AED
  • The shares cannot be offered to the public.
  • Only minimum of three founder participants are required to incorporate Private Joint Stock Company.

It can be converted into a Public Joint Stock Company by fulfilling its requirements.

Limited Liability Company form of company formation Dubai

Limited Liability Company is one of the most common forms of company formation dubai. The main reason for its commonness is that non-UAE nationals can contribute as partners in the company and their liability is limited only to the amount of their share in the capital. According to Article 22 of the “Commercial Companies Law”, 51 percent of the shares should be hold by the UAE national partner, and accordingly, 49% of the share can be owned by the expat partner. Distribution of profit and loss can be commonly agreed by the parties. The minimum numbers of shareholder in an L.L.C are two and the maximum are 50. The Law requires the minimum AED 300,000 amount of share capital divided into equal shares with a minimum face value of AED 1,000. However, at is now exempted to have capital amount deposit in the banks while incorporating the L.L.C.

Partnership Limited by Shares form of company formation Dubai

Articles 256 to 272 of the Commercial Companies Law allow another type of commercial company formation in Dubai known as Partnership Limited by Shares. It is very similar to Simple Limited Partnership as it is defined by Commercial Companies Law Art 256 as “a company formed by general partners who are jointly liable to the amount of all their assets for the company’s liabilities and contributing partners who are liable only to the amount of their shares in the capital.” The shareholders whose liability is not limited must be UAE nationals in according to Article 257 of the Commercial Companies Law. The minimum share capital restriction for partnership limited by share is AED 500,000.

Civil Companies form of company formation in Dubai

Civil Company is another form of company formation in dubai, it is an association in which two or more parties agreed to carry out professional works and to be liable to third parties against payment of consideration. Professional activity means those that are being conveyed using intellectual abilities, developed information or professional skills. Civil Companies are controlled by Federal Law No. 5 of 1985. Civil Companies form of company formation in dubai can be owned 100% by expat, subject to certain situations, it only required Local Service Agent. For example HR consultancy, Legal consultancy, Management consultancy are some of the professional and artisan activities that can be performed. Civil Company formation in dubai is similar to the General Partnership in form and legal status in which the partners are jointly liable for the company’s obligations to the full amount of all their assets.

Branches and Representative Offices form of company formation in UAE

it is another type of company formation in UAE. Both local and foreign companies can establish their branches and representative offices in the UAE. The rules of UAE want separate incorporation and license for the branches and representative offices, even though they are considered as part of their parent company. In terms of legal form and incorporation processes, the branches and representative offices are similar; but, there are certain differences between them. For example, the branches are allowed to engage in the activities similar to those of their parent company. However, the representative offices are only allowed to promote their parent company’s activities and thus are not allowed to do any trading or provide services. Furthermore, the representative offices cannot obtain credit facilities but the branches are permitted to get credit.

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