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INVESTING IN A MAINLAND LIMITED LIABILITY COMPANY IN UAE

Thanks to the keenness of the country’s leaders to achieve excellence and ease in the economic sector, the UAE maintains a solid position as a top business hub among the countries preferred by expatriates around the globe. Nevertheless, a new investor in the UAE still needs time and effort to get a proper understanding of the local business practices. Also, the legalities, and the liabilities involved in setting up an LLC license in Dubai and the UAE. The establishment of a successful company in the UAE requires a thorough business plan and, ideally, some good advice from accredited consultants.

The first dilemma arises when the investor must choose between a mainland or a free zone company. A venture may flourish regardless of either type of company in the UAE. However, if an investor wants to conduct economic activities without any restrictions in the UAE, then the setting up of a mainland company is impossible to avoid. The restrictions on setting up a business in a free zone could be on the location, customers, and suppliers. Also, whether it is a regulated activity or not allowed in any of the designated free zones.

The Department of Economic Development (DED) of each Emirate is the governmental authority responsible for the issuance of a mainland company’s license in the UAE. The license can take different legal forms such as a limited liability company (LLC), a civil company, or a branch of a foreign company. An LLC company formation in UAE is by far the most common type of company set up by foreign investors to conduct commercial activities in the UAE mainland.

Basic legal aspects that a foreign investor needs to know about the LLC COMPANY FORMATION IN DUBAI AND UAE

    • A UAE national is not required to hold 51% of the shares in the company unless stipulated by the authorities based on any regulated activity held by the license.
    • LLCs may have a minimum of one and a maximum of fifty partners. One sole shareholder whether an individual or a company is also allowed. In this case, the shareholder is a UAE national or a UAE-owned corporate entity.
    • It is possible to establish an LLC as a holding company. This allows the LLC to conduct activities through subsidiaries.
    • The managers or the authorized signatories of an LLC Company in UAE, are liable for acts and commitments towards the LLC. As long as the individuals have the power to act on behalf of the company.
    • A maximum of three managers can be appointed.  Managers are not allowed to manage any other business in competition with the LLC without the approval of the general assembly.
    • It is possible for the partners in an LLC Company in UAE to pledge their shares in the company.
    • LLCs are subject to annual mandatory audits of accounts. The regulatory requirement is to keep accounting records for five years.
    • It is a need for company auditors to follow International Accounting Standards and Practices.
    • The quorum for the general assembly of an LLC is 50% of the share capital present or represented.

An LLC can operate under the following license types

    • Commercial: covering all kinds of trading activity
    • Professional: covering professions, services, and crafts
    • Industrial: covering industrial or manufacturing activities

UAE Foreign Ownership Restrictions

The principle limitation for foreign investors setting up an LLC is the “UAE foreign ownership restrictions”.

If your business requirement is to trade in the UAE mainland with local companies then you need a DED-licensed company. This no longer requires a local partner or a local sponsor in Abu Dhabi, Dubai, or the UAE.

Formation of Limited Liability Company(LLC) in UAE

Following are the procedures for the LLC formation in UAE of getting an LLC license in Dubai and the UAE:

  • Signing of prescribed application form by partners. Then, obtaining approval of the trade name, activities, and partners. The approval needs to be acquired from the DED, Government of Dubai. For certain activities, there is a requirement of an NOC from other Departments or Ministries. For example, an NOC from the Central for Exchange companies, KHDA for schools, etc.
  • Signing of the Memorandum of Association for forming an LLC before a Notary Public.
  • There is a requirement to deliver the following documents to the Office of the DED:
    • Prescribed application approving trade name, activities, and partners. All this requires approval from the DED.
    • Notarised Memorandum of Association in original and copy.
    • Passport copies of all partners.
    • Tenancy contract for the premises.
  • If the partner is a foreign body corporate, the following documents need submission. These documents need notarisation at the place of incorporation and legalised by the UAE Embassy. They also require attestation by the UAE Foreign Ministry and an Arabic translation:
    • Resolution of the Board of Directors.
    • Power of Attorney in favour of the Representative.
    • Memorandum & Articles of Association and Certificate of Incorporation.
  • The DED checks the application and the above-mentioned documents. They enter these details in the Commercial Register and furnish them to the Ministry of Economy and Commerce.
  • Once approved, they will then notify The DED accordingly.
  • Activities of an LLC can only commence after the above-mentioned details get approved. It also must obtain the trade license from The DED before commencing any activity.
  • It is possible for an LLC to set up branches in other Emirates only after complying with the trade license rules of the concerned Emirate.

 

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