Company Formation in Dubai : Dubai Company Formation Guide. Your ultimate guide to company formation in Dubai for investors and businessmen. Explore various options, procedures and requirements. Discover company formation procedure, cost, price, Dubai company formation agents & consultants. Company formation in Dubai has many opportunities for investors and businessmen. The past 15 years have witnessed incredible growth throughout all sectors of the Dubai economy. The emirate’s government is constantly working to improve its commercial transparency and introduce dynamic regulations that aid the formation of small and medium enterprises (SMEs) and have the ability to react to global financial challenges.
Dubai’s economy is no longer reliant on oil, but is more diversified, relying heavily on trade, services and finance sectors. Dubai has also implemented a strategy to make it the capital of the Islamic economy. The seven strategic directions of Dubai as a global leader in Islamic economy include: Islamic finance; halal food; family friendly tourism, Islamic digital economy; fashion, arts & design; economic education; and Islamic standards & certification. In addition, Dubai has already launched plans to be the global centre for issuance of sukuk (Islamic corporate bonds) and the establishment of an Islamic Governance Centre and the Dubai Centre for Islamic Banking & Finance.
With its central geographic location between Asian and European markets, Dubai has worked hard to establish itself as an integral part of the global trade mechanism. Its central location has also allowed Dubai to become a popular and accessible tourist destination. The Department of Economic Development has been exceptionally forward-thinking, and is moving towards a more streamlined electronic services system in which most aspects of the business set up process is conducted through the internet.
Dubai’s many free zones are another aspect of the city’s growing economy. Established as a way of attracting more foreign investment, free zones adhere to unique laws regarding ownership, taxation and labour. Unlike businesses in the rest of Dubai, which require at least 51% ownership by a UAE national, free zone businesses can have 100% foreign ownership. Legally, companies based in free zones are considered “offshore” so they are unable to trade within the city without an agent or distributor. Free zones also tend to assist new businesses in the set up process.
Company Formation in Dubai
Company Formation in Dubai : Dubai Company Formation Guide. Company formation in Dubai has many business opportunities for investors and businessmen. Get the info about various options for company formation in Dubai with methods and law. Dubai company formation can be tedious and the government has set up stringent rules regarding the type of business an individual or a foreign firm can set up as well as ownership guidelines for different types of businesses. Company formation in Dubai is governed by the emirate individually under the guidance of a Federal Government. Within the Middle East, Dubai is one of the most attractive environments for new company formations, and the government of Dubai is making every effort to ensure a business environment that allows owners a fair amount of operational flexibility within a framework of rules and guidelines. Within the emirate, different types of businesses may also need additional approval from specific agencies prior to obtaining a license.
Dubai Company Formation Options
Having a company presence within the region has several advantages: it is much easier to research market prospects, build contacts and establish a relationship with potential clients and customers. Owing to the unpredictable nature of businesses in the UAE, many businessmen prefer to interact with known entities or those that come through recommendations. This is an important aspect of conducting business within Dubai, even more so than in other countries.
There are several types of businesses an individual or a foreign investment company can opt to set up in the region:
- Direct Trade Company – Where business is conducted directly with dealers and distributors in the region.
- Branch Office in Dubai – Additional approval required by the Economic Development Department. Representative offices are allowed 100% foreign ownership with the appointment of a local sponsor. Although sponsors are not involved in the day to day running of the company, their primary purpose is to facilitate in obtaining legal documents such as visas and labour cards and they are usually paid a percentage of the company profits.
- Commercial Businesses in Dubai – Additional approval required by the Ministry of Economy and Commerce. Commercial businesses require a local individual or company appointee.
- Limited Liability Company in Dubai – Requires local equity of a minimum of 51% with approval from the Economic Development Department. An LLC company formation in Dubai can be set up by a minimum of two and a maximum of fifty persons. Minimum capital investment is currently USD 82,000 or AED 300,000.
- Free Zone Companies in Dubai – Companies set up and governed by free zone authorities where the company is wholly owned by the person who sets it up without the need for a local sponsor to act as liaison. Free zone company formation in Dubai have many benefits including exemption from import duties, easy recruiting procedures allowing access to competitive skilled labour and a high level of administrative support from free zone authorities.
All Dubai company formations need a license to operate legally in the emirate and in general, should be registered with the Dubai Chamber of Commerce and Industry. These licenses fall into three main categories:
- Commercial licenses – These govern all types of trading activities
- Professional licenses – These govern professional services, craftsmen and artisans
- Industrial licenses – These govern industrial and manufacturing activities
Most licenses are issued by the Dubai Economic Development Department. However a few industry specific licenses are issued by other authorities and ministries:
- Department of Tourism and Commerce Marketing – Issues licenses for all hotel and tourism related businesses
- Central Bank of the UAE – Issues licenses for all banks and financial institutions
- Ministry of Economy and Commerce – Issues licenses for all insurance companies
- Ministry of Finance and Industry – Issues licenses for all manufacturing companies
- Ministry of Health – Issues licenses to companies dealing in medical and health related products and services
In general UAE law stipulates that UAE nationals hold a 51% stake in all companies established within the country with a few exceptions:
- Where local nationals are required to have 100% ownership such as in general partnership companies.
- In free zone areas where 100% foreign ownership is permitted without the requirement of a local sponsor.
- In professional companies or those that deal with artisans where 100% foreign ownership is permitted.
- Where wholly owned GCC (Gulf Co-operation Council) companies enter into a partnership with UAE nationals
- Where 100% ownership for GCC nationals is permitted
- When registering a branch or representative office in Dubai
Procedure for Company Formation & Registration in Dubai
Dubai company formation requires the completion of the following steps before a business owner is legally authorized to operate within the emirate of Dubai
- Determine type of business and categories of activities to be practiced. Each business license can register up to a maximum of ten activities per license.
- Determine the appropriate legal structure for your business including ownership requirements.
- Confirm all the requirements required for a new business registration including all approvals from relevant authorities.
- Establish a trade name for the business. There are some terms and conditions that apply to approved trade names for businesses.
- Visit the relevant department or apply online for initial approval and registration of selected trade name.
- Once initial approval is received, the owner can then select a location for the office with approval from the Planning Department of the Dubai Municipality.
- Apply to the relevant department for a signboard permit displaying the approved trade name
There are several agencies that can facilitate business set-up within Dubai and the Dubai and Jebel Ali Free Zones for a fee. Even though the laws governing Dubai company formation and registration are quite stringent, these have been established to meet the legal requirements of all governing authorities while striving for maximum profits for business owners.
Dubai Company Formation Cost & Prices
Dubai Company Formation Cost & Prices : Cost Breakup for LLC Company Formation in Dubai. Explore company formation procedure cost and prices.
- Initial approval from economic department cost & prices : 110 AED
- Trade name approval cost & prices : 210 AED – One time Expense
- Notary fees for court (depend on company share capital) : 900 AED
- Typing LLC contract (Arabic & English) cost & prices : 1250 AED
- Ministry of economic fees and expenses : 3000 AED
- Trade license fees and cost : 200 AED
- Owner accommodation fees (per partner) 1000 – Cost Per year
- Government cultural cost & prices : 10 AED Per year
- Trade Name Advertisement cost & prices : 500 AED Per year
- Commercial license – Tejari fees: 150 AED Per year
- Chamber of commerce Cost : 1200 AED Per year
- Waste fees municipality: 1000 AED Per year
- Commercial services improvement fees: 400 AED Per year
- License fees & Cost : 550 AED Per year
- Administrative Services Fee & Cost : 50 AED One time Cost
- Chamber of commerce fees AED 1200 per year is for normal trading company. If it is an industrial company then this fees comes to AED 2200.
- Waste fees for municipality AED 1000 per year is for normal trading company. If it is an industrial company then this fees comes to AED 2000.
- For foreign trade name there is an extra fees of AED 2000 per year.
- For the formation of General trading company one-time fees of AED 15,000 is required.
- For Contracting License one time fees of AED 10,000 is required.
- For Real Estate Brokers Company fees for Economic Department of AED 5,000/- is required.
- 5 % of Amount premises rent to be paid to Government.
Dubai Company Formation Guide
Dubai Company Formation : Dubai Company Formation Guide. Your ultimate guide to company formation in Dubai for investors and businessmen. Explore various options, procedures and requirements. Discover company formation procedure, cost, price, Dubai company formation agents & consultants. Company formation in Dubai has many opportunities for investors and businessmen. Advantages of Dubai company formation attract many investors and businessmen from all over the world to this vibrant city every year. Favorable business conditions in Dubai is one of the major reasons why investors from various origins and sectors consider company formation in Dubai.
A guide to company formation in Dubai. Explore various options and requirements. There are various options for Dubai company formation. The most ideal choice of course depends on the type of business and its goals. This guide to “Dubai Company Formation and business setup in Dubai“ explains the various options for business registration in Dubai which was originally published in the website of Cross Border Business Consultants.
In order to set up a business in the United Arab Emirates, and hence in Dubai, a foreign investor is required to setup a formal legal presence (directly or through an agent) within the United Arab Emirates through any of the following means:
- Local business setup in Dubai.
- Register a branch or representative office in Dubai.
- Free zone company formation in Dubai.
- Entering into a commercial agency relationship.
1. Mainland Company Formation in Dubai
A local entity can be formed under either the UAE Civil Code or the Company Law.
Dubai Company Formation under the UAE Civil Code.
Businesses formed under the United Arab Emirates (UAE) Civil Code are restricted from carrying out “non-commercial” or civil activities — these are activities that promote the skills and ability of the people conducting the business. Most consultancy services, the production of works of art or literature and the sale of agricultural products by farmers are examples of activities that may be conducted by a United Arab Emirates Civil Code entity.
A Civil Code entity in United Arab Emirates (UAE) may take one of the following forms:
- (i) the professional services entity.
- (ii) the speculative venture partnership.
- (iii) an Islāmic Shari’a-compliant arrangement known as a Mudaraba.
Although these three entities are generally called companies, legally they are not companies. The only companies which may be formed in the United Arab Emirates (UAE) are those set up under the Companies Law.
The most common form of UAE civil code entity used by foreign investors is the professional business services company. Such entities are only proper for carrying on service businesses.
The primary benefit of a professional business services company is that a foreign person can own 100% of such companies. However, a national agent must be engaged by all such companies. The national agent generally receives a fixed fee. He / she is not liable for the debts and liabilities of the company and has no management authority. The agent is required to sponsor the professional business services company for its license application and interact with government bodies.
A key disadvantage of a professional services company is that it is not a separate legal entity from its foreign owner. So in spite of a great business environment, the foreign owner may face tough legal and economic situations depending on the fate of the UAE Civil Code entity.
Dubai company formation under the Companies Law.
All locally incorporated companies (other than those formed under the UAE Civil Code) must be setup by the Companies Law. The Companies Law requires companies to adopt one of the following forms:
- Limited Liability Companies (Dubai LLC).
- Private Joint Stock Companies.
- Public Joint Stock Companies.
- Joint Participation Ventures (or Private Unlimited Companies).
- Limited Partnerships.
- Partnership Limited with Shares.
- General Partnerships (or Joint Liability Companies).
Of the entities listed above, most foreign businesses choose the option of Dubai LLC (limited liability company). Foreign partners can exert significant control over a Dubai LLC (limited liability company). Moreover it requires a relatively small amount of capital to start a Dubai LLC.
Such an entity may, however, be inappropriate to meet certain business goals. For example, businesses involving banking, insurance or investment activity for third parties may only be conducted by a public joint stock company and not by a Dubai LLC. Limited liability companies may not offer their shares for public subscription, which is a central feature of the public joint stock company.
The key limitation on entities incorporated under the Companies Law is that 51 percent of the capital of a company must be owned by a national of United Arab Emirates. However, it is possible for the constitutional documents of a Dubai LLC (limited liability company) to contain the following provisions designed to protect the interests of a foreign minority shareholder:
- The foreign shareholder may appoint all the directors.
- Foreign shareholder may appoint the general manager.
- Foreign shareholder may veto major decisions of the company.
- Foreign shareholder may be entitled to all the assets of the company on winding up.
- Foreign shareholder may be entitled to more than 49 percent of the company’s profits.
2. Opening a Branch or Representative Office in Dubai
Articles 313 to 316 of the Companies Law let foreign companies to open branches or representative offices within the UAE. A branch or a representative office of a foreign company may be wholly owned by foreigners. However, Article 23(1) of the UAE Commercial Code requires non-UAE nationals engaging in “commercial business” in the UAE to partner with a UAE national who owns 51 percent of the capital of the company.
Accordingly, branch and representative offices which are wholly owned by foreigners may typically only engage in non-commercial business.
Further, a branch office must only engage in those activities that are carried out by its parent company. A representative office is more limited than a branch office in the scope of activities that it is permitted to undertake. A representative office may only conduct marketing and administrative functions such as business services for its foreign parent.
3. Free Zone Company Formation in Dubai
There are many free zones in Dubai where foreign investors can set up their business. It is a fact that the business environment in the country has been benefited and improved with the presence of many free zones. This particular topic will be discussed in our posts later. In this article, we will just discuss the very basic features of a Dubai Free Zone Business Formation.
UAE Free Zones offer an attractive alternative to Dubai mainland business. UAE Free Zones are particularly useful for companies which carry out a major part of their businesses with countries other than UAE. The main benefit of a Dubai free zone company is that it can be wholly owned by a foreigner. A Dubai free zone company can also be granted certain ancillary financial benefits depending on the policies and business environment of the free zone authority. Free zone company formation in Dubai will generally take one of the following three forms:
- A branch or representative office of a foreign company.
- A free zone company.
- A free zone establishment.
The key limitation of a UAE free zone company is that it is generally permitted to conduct business solely within its relevant free zone and is limited to performing solely those activities specified in its license.
A UAE free zone entity must typically hold one of the following licenses issued by the relevant UAE free zone authority:
- (i) Trading license.
- (ii) Service license.
- (iii) Manufacturing / industrial license.
For a UAE free zone entity to engage legally in sales within the United Arab Emirates (and outside of the relevant free zone), the entity will generally have to keep a commercial agent or distributor. However, UAE free zone entities with service licenses have been known to offer services outside of their free zone without any movement of goods, people and assets outside of the free zone.
4. Commercial Agency Relationship
If a foreigner wishes to carry out business in the UAE but does not wish to keep up a physical presence in the UAE, it may enter into a commercial agency relationship with a wholly local owned entity or UAE national. Commercial agents are generally used by foreign manufacturers and traders who are engaged in the large-scale importation of goods into the UAE.
Under a commercial agency, the foreign business and the commercial agent agree to the terms of the sales commission, the territory of the distributorship (at least, this would be one Emirate) and the duration of the relationship. If the commercial agent registers the contract with the Ministry of Economy and Commerce, the agent can get the various protections afforded to agents under the UAE Commercial Agencies Law.
These protections include:
- Exclusivity — registered commercial agents have the exclusive right to import the goods which are the subject matter of the agency.
- Commissions — registered commercial agents are entitled to receive commissions on the sales they make as well as commissions on sales made in the UAE by the principal or any other party.
- Termination — the principal may only end a registered commercial agency arrangement unilaterally for “material reasons”. Such reasons must be acceptable to the Commercial Agencies Committee. Further, a principal may not refuse to renew a registered commercial agency agreement after its expiry date without the payment of compensation to the registered commercial agent.
Dubai Company Formation Online Resources
Free Zones in the UAE – UAE Interact
Statistical surveys in the UAE – Dubai Statistics Center
Why invest in Dubai – Dubai Health Authority
Dubai for business – Dubai International Finance Centre
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