A Limited Liability Company (LLC) is recommended for companies planning to trade within the region. An LLC requires a minimum of two and a maximum of fifty shareholders whose liability is limited to their shares in the capital of the company.
In December 2020, the UAE Government announced the Federal Decree Law No. 26/2020 (the Amendment) amending the Federal Law No. 2/2015 on Commercial Companies (CCL). The Amendment removed the requirement for a UAE national (local sponsor) to hold 51 % of the capital of the LLC and, it has come into effect on the 1st June 2021. The new foreign investment applies to most of the commercial and industrial activities, except for activities with a strategic impact.
Recent amendments to the CCL have also removed the requirement for a minimum share capital (previously AED 300,000 in Dubai and AED 150,000 in other Emirates), allowing founders of an LLC the freedom to determine the company’s share capital.
Shares of an LLC are not open for subscription by the public. Despite the split in shareholdings, profits may be divided in other ratios agreed upon, taking into consideration efforts of foreign partners in management, provision of technology or expertise. An LLC must appoint a minimum of one manager and up to a maximum of five managers for the business. Responsibility for the management of a LLC can be vested in the foreign partner, UAE national partner, or a third party. Managers must be appointed by a Memorandum of Association or by a management contract, for a fixed term or an unlimited term. Unless the Memorandum of Association states otherwise, the manager has full powers of administration and management of the LLC. An LLC is not allowed to practice its activities in the UAE without a Trade License and Commercial Registration Certificate.
Trinity can assist in identifying a suitable 51 % local sponsor where still required and also arrange for a corporate local sponsorship company managed by Trinity.
Based on the UAE Commercial Laws, foreign companies can register in the UAE either a Branch or a Representative Office.
A branch office has the same legal identity as its parent company and conducts business under the name of its parent company. Whilst each Emirate has its own licensing rules for branch offices, this type of entity can carry out a variety of activities (as approved by the Department of Economic Development of the relevant Emirate).
A branch office is permitted to perform contracts or conduct other activities as specified on its license but may only engage in activities similar to those of its parent company and is not permitted to import the products of its parent company – a function reserved for local trade agents. In some cases, the branch of a foreign company must obtain an additional license from UAE Ministry of Economy.
A representative office is limited to promote its parent company’s activities, i.e. gathering information, or soliciting orders and projects to be performed by the company’s head office. Representative offices are also limited in the number of employees that they may sponsor (usually three or four) and are not allowed to enter into business transactions or market products directly.
For both types of company formation, a wholly owned UAE national company or a UAE national must be appointed as a “service agent.”A service agent is not permitted to own equity in or participate in the substantive management of the branch or representative office. The local agent typically provides specific services, such as assisting in communications with government departments or undertaking other administrative matters. The fees paid to the service agent are a contractual matter between the service agent and the foreign company.
Trinity can assist you in identifying a suitable local service agent and, if required, provide a corporate local service agency managed by Trinity to act as the local service agent of the branch or representative office.
A professional service company, also known as a Civil Company, is the most common form of entity used by foreign investors / professional individuals in Dubai and Sharjah to provide professional services. A professional license is awarded to skilled professional having the relevant qualifications and experience.
The primary benefit of establishing a professional services company is that such entity may be 100% foreign owned. However, it is mandatory to appoint a UAE national as a Local Service Agent (LSA), whose role is only to assist in obtaining the required approvals from the various Government Departments in order to obtain the license.
A professional service company owned by one individual can be formed as a Sole Establishment, while, in case there are two or more partners, the legal form would be a Civil Works Company.
The material on our website is intended to provide only general information and comment to our clients and the public. Although we make our best efforts to ensure that the information found on our website is accurate and timely, we cannot, and do not, guarantee that the information is either.
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