Next in our series we will talk about the different types of companies you can register in the UAE.
Entrepreneurs may decide to opt for a mainland company, free zone entity or an offshore company depending on the location of a target audience and company needs. Below is a brief overview of these three options.
They are typically used for trade within the local UAE market. The Federal Law No. (2) of 2015 On Commercial Companies defines the following forms in which companies can be established in the UAE:
- Joint Liability Company
- Simple Commandite Company
- Limited Liability Company
- Public Joint Stock Company
- Private Joint Stock Company
The law also sets out requirements for companies regarding shareholders, directors, minimum capital levels and incorporation procedures.
An important consideration when establishing a mainland company is that it should have one or more UAE partners holding at least 51% of the share capital of the company. Moreover, certain classes of activities (for example, real estate brokerage) can be exercised exclusively by UAE nationals. Due to the requirement of local participants, maximum foreign equity participation for mainland companies is 49%. However, agreements can be tailored so that the majority of profits go to the expat partner. Another consideration to keep in mind – mandatory existence of a physical office in the mainland.
Free zone companies
Free zone establishments do not require to have a UAE national as its partner, and this is one of the advantages of setting up a business in a free zone. Introduced to attract foreign investments, free zone companies can be 100% owned by a foreign investor. Hence for complete ownership, expat business owners may look to the free zones as base locations. Trading, distributorship, warehousing, manufacturing and many other activities may be performed in these zones, and there is no duty for import and export of goods into and from the free zone except for exports into mainland UAE.
A regulatory authority exists in each free zone, which governs and administers the companies located there according to the free zone regulations. Typically, free zones are industry focused and are tailored to particular industries and therefore, only authorise specific types of activities. The entity established in the free zone can only operate its activity within the free zone it is registered.
There are a large and growing number of free zones within the UAE, some of the most popular are:
- Dubai International Financial Centre (DIFC)
- Jebel Ali Free Zone (JAFZA)
- Dubai Multi Commodities Centre (DMCC)
- Dubai Creative Clusters (DCC, includes DIC, DMC, etc.)
- Khalifa Industrial Zone Abu Dhabi (KIZAD)
- Sharjah International Airport Free Zone (SAIF Zone)
- Ajman Free Zone (AFZ)
- Ras Al Khaimah Free Trade Zone (RAK FTZ)
An offshore company may be a solution if you do not need to set up a physical office, there is no requirement to issue residency visas, and all activities of the business are outside of the UAE. Offshore companies should operate their business from abroad and are not permitted to conduct business within the UAE. However, they can interact with local banks and set their local legal representatives.
Offshore companies are registered and located within free zones. Currently, there are two free zones in the UAE, where offshore companies can be established:
- JAFZA (Jebel Ali Free Zone Authority)
- RAKICC (Ras Al Khaimah International Corporate Centre)
In the next and final episode, we will talk about legal documents. Stay tuned!