The United Arab Emirates has become a type of country where several investors of different nationalities, willing to expand their businesses or open them in foreign countries, have turned their attention in recent years. 

The interest of the government of this country has caused its legal and financial system to have some benefits for foreign and even domestic investment. This is mainly the reason why they have been diversifying their economy to be less dependent on oil and maintain their luxurious lifestyle as they have been doing. 

Foreign investors or international companies wishing to establish a business within the UAE will have to take some legal procedures to do so, but first, they will have to establish the type of company they want to open, as there is a different procedure for each type of company. 

The UAE offers a relatively wide range of business types that investors can study carefully to decide which type of company best suits their interests before investing large sums of money. This is necessary in order to know whether the presence of a legal representative is necessary or not necessary at all. 

There are a number of federal laws in this country that regulate the legal process of establishing a company in the UAE, among the most relevant are: 

-Commercial Companies Law (CCL)

-Commercial Agencies Law (CAL)

-Labour Law

.Civil and Commercial Codes

Before addressing the legal structures in UAE, we must understand that there is also three types of licenses:

Plus, this country also has 100% tax-free zones, which we will discuss later in this article. 

Mainland Companies

A mainland company consists of a company registered in the UAE Department of Economic Development, which means that if you want to run a business in UAE, you must register your company before this entity, and then they will give you a license to conduct your business in UAE’s territory. There are different types of mainland companies. 

Sole Proprietorship 

For this type of company, a business licence is granted to an individual in his or her name, who will be the representative responsible for each of the assets and liabilities that the company incurs during its operation in this country. However, only UAE nationals have the power to open a sole proprietorship company in the emirate of Dubai.

Only a few foreign nationals may choose to open a sole proprietorship company in the UAE in specific industries, only if they are residents in the country and if the license they are applying for is a professional one. These companies that are registered as professional companies can only operate in this line of business, without any commercial character. 

In addition, in order to handle the entire legal process of this type of company, a national agent must attend the legal processes to open the company without necessarily having direct involvement in the business, but must be paid a percentage of the volume generated by the company. This is if the licence is of a professional nature.

For the commercial type of license, this agent is not required because only UAE nationals are authorised to open this type of company. 

Civil Company

This type of company is quite similar to sole-proprietorship in that a national agent must attend to all the legal processes that the company must take before the opening of the business, with the same economic requirements for this agent without being directly involved. 

The license granted to this type of company is professional and is allowed for investors of all nationalities worldwide without any restriction. The number of owners and shareholders differs slightly from the previous type of company as it allows 2 or more individuals to be involved. However, 51% of the ownership must be held by a UAE national. 

Limited Liability Company

This type of company is preferred by expatriates willing to invest in this country. The most attractive aspect for these individuals is that it gives them maximum legal ownership of 49% (51% for UAE nationals) for a license of the business type. 

This type of company will require a minimum of 2 individuals and a maximum of 50 in order to form an LLC. The capital of each individual within this company will determine the level of responsibility and profit of each individual. 

Although a UAE national has to own 51% of the ownership, arrangements with respect to capital/profit can be made in different ways between the same partners and participants directly linked to this company. The start-up process can be done relatively quickly, in less than a month.

The type of services and activities the company is going to offer must be specified to apply for the type of license required. The more activities, the more fees will have to be paid to the relevant entities, so the investors involved should be prepared for it. 

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Public and Private Joint-Stock Company

A Public Joint-Stock Company requires a minimum capital of AED 10,000,000, in addition to having at least 10 founding members (mostly UAE nationals), being chaired also by a UAE national. 

The shares of this type of company may be offered to the public for subscription, as well as it must be published in at least two local dailies. The liability for these companies is limited to the extent of the share in the total capital between the founders/owners. 

As for the Private Joint-Stock Company, the minimum number of founders must be 3 individuals, of which all must be UAE nationals. The regulations for this type of company are quite similar to the public one, with the difference that the shares must not be offered to the public. 

A minimum capital of AED 2,000,000 is required to open this type of business, and only commercial and industrial licenses apply, as professional licenses are not allowed for this sector.

Simple Limited Partnership

This type of company is composed of a minimum of 2 partners, one general partner and one limited partner. The individual or group of people who are "general partners" will be responsible for and legally represent all the assets of the company, while the other type is limited to the extent of the capital invested. 

It should be noted that to hold the position of the general partner, the individual must be a UAE national, while individuals of other nationalities must hold the position of a limited partner. 

Representative Office

This type of company is an extension of an existing overseas company, with 100% ownership of the parent company operating its business from abroad. 

Usually (but not always), a UAE national agent is required to make the necessary legal arrangements for the establishment of the representative office, the legal personality of this extension is never separated from the parent company. 

Free Zones

Free Zones in the UAE are offshore jurisdictions within the country. These are the only parts of the UAE that allow the foreign investor to own 100% ownership of the company, with no major restrictions on foreign exchange or other commercial/legal operational activities. 

In addition, these zones are 100% tax-free, as long as the investor understands that the operation of the business must only be applied within the territory that the UAE has established as a free zone. To operate outside this territory, the investor will have to apply for the corresponding licenses described above and go through the administrative process involved.

The fundamental characteristics of the types of companies that are established in these zones are similar to the regular ones, with the difference that there is no limitation of any kind regarding the nationality of the owners or the percentage that each partner must have, in addition to the fact that in the free zones they are completely exempt from taxes. 

The companies that can be established in the free zones are: 

-LLC (2 or more owners)

-Establishment (1 owner)

-Representative office (Parent company is the owner)

Offshore Companies

Finalmente tenemos las compañías offshore en los UAE. Este tipo de compañía se refiere a una entidad legal que está establecida dentro del país de su incorporación, pero cuyas actividades comerciales son realizadas en el extranjero. 

En los Emiratos Árabes, abrir una compañía offshore es atractivo por el nivel de confidencialidad que tiene el sistema bancario de este país, además de la seguridad que brinda a sus clientes.

Estas compañías tienen sus ventajas y su desventajas, por lo que es necesario estudiar muy bien la opción de abrir una compañía offshore antes de proceder a hacerlo. Entre las ventajas más importantes que puede tener esto son: 

-Confidentiality

-100% foreign ownership 

-Unlimited number of shareholders

-Tax exemptions 

-No minimum authorized capital 

-No local office required

-No restriction upon the repatriation of capital

As for the disadvantages, it is very difficult to operate financially within the territory of the country, also the insurance might have some limitations on these companies. 

Offshore companies do not receive any kind of licence from the Department of Economic Development (DED), which is the corresponding institution to grant permits and licences to operate in the UAE. Nevertheless, offshore companies receive a certificate of incorporation. 

The types of offshore companies are as follow: 

-Company Limited by Shares (CLS). The liability of the shareholders is limited to the amount of capital they have invested in this company. It must have at least one director and one shareholder. These companies have the power to issue bonus shares, unpaid shares or partially paid shares. 

-Company Limited by Guarantee (CLG). The liability of the members is limited to a specific amount of capital that is previously set. The membership rights of these members can not be transferred to anyone else. A member remains liable for one year after they stop being a member. 

-Unlimited Company (UC). The liability of the members is not limited at any time. The members have a joint obligation to meet any lack of funds in the assets of the company, very similar to a general partnership. An UC is capable of owning assets to its name. 

As for the necessary documentation to open an offshore company, your agent will likely have all the paperwork prepared for you, the only thing you have to do is be ready. The documents might differ depending on the jurisdiction, but as general requirements we have: 

-Article of association

-Letter of appointment of agent

-Passport copy

-Proof of residence of the shareholders. 

At Mundo we can provide you with the best quality advice to open a business in UAE, please do not hesitate to contact us for more information.

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