Company formation in Dubai

The Department of Economic Development, with the institutional support from the Dubai Chamber of Commerce & Industry, is the statutory body that regulates and controls the licensing procedures, which is the basic requirement for all business activity in Dubai. There are mainly three categories of licences:

• Commercial licences covering all kinds of trading activity.
• Professional licences covering professions, services, craftsmen and artisans.
• Industrial licences for establishing industrial or manufacturing activity.

However, licences for some categories of business require approval from certain ministries and other authorities, according to their area of functioning.

Dubai Ownership Requirements

It is required that fifty-one per cent of the share must be held by a UAE national, for all UAE established companies except:

• Where the law requires 100% local ownership.
• In the Jebel Ali Free Zone.
• In activities open to 100% AGCC (Arab Gulf Countries Council) ownership.
• Where wholly owned AGCC companies enter into partnership with UAE nationals.
• In respect of foreign companies registering branches or a representative office in Dubai.
• In professional or artisan companies where 100% foreign ownership is permitted.

In practice, however, Dubai followed the same general system, whereby foreign companies operated in one of three ways: with a local sponsor, through a partnership with a UAE national or company, or through a private limited company or public shareholding company incorporated by Ruler's decree.

The Federal Law defines seven categories of business organisation which can be established in the UAE. They are:

• General partnership company
• Partnership-en-commendam
• Joint venture company
• Public shareholding company
• Private shareholding company
• Limited liability company
• Share partnership company

Partnerships Companies

Partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnership-en-commendam and share partnership companies.

Joint Venture Companies

A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who - unless the agreement is publicised - bears all liability.

Public and Private Shareholding Companies

The law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office.

Shareholding companies are suitable primarily for large projects or operations, since the minimum capital required is Dh. 10 million for a public company, and Dh. 2 million for a private shareholding company. The chairman and a majority of directors must be UAE nationals and there is less flexibility of profit distribution.

Limited Liability Companies

A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company's capital. Such companies are recognised as offering a suitable structure for organisations interested in developing a long term relationship in the local market.

In Dubai, the minimum capital is currently Dh. 300,000, contributed in cash or in kind. While foreign equity in the company may not exceed 49%, profit and loss distribution can be prescribed. Responsibility for the management of a limited liability company can be vested in the foreign or national partners or a third party.

The following steps are required in establishing a limited liability company in Dubai.

• Select a commercial name for the company and have it approved by the licensing department of the economic department;
• Draw up the company's Memorandum of Association and have it notarised by a Notary public in the Dubai courts;
• Seek approval from the economic department and apply for entry in the commercial register;
• Once approval is granted, the company will be entered in the commercial register and have its memorandum of association published in the ministry of economy and commerce's Bulletin. The licence will then be issued by the economic department;
• The company should then be registered with the Dubai Chamber of Commerce and Industry.

Branches and Representative Offices of Foreign Companies

Branches and representative offices of foreign companies may be 100% foreign owned, provided a local agent is appointed. Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents. Local agents assist in obtaining visas, labour cards, etc and are paid a lump sum and/or a percentage of profits or turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature.

To establish a branch or representative office in Dubai, they should:

• Apply for a licence from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company. Before issuing the licence, the Ministry will:
  • forward the application to the Economic Department to obtain the approval of the Dubai government;
  • forward the application specifying the companies’ activity to the Federal Foreign Companies Committee for approval;

• Once this has been done, the Ministry of Economy and Commerce will issue the required ministerial licence
• The branch or office should be entered in the Economic Department's Commercial Register and in the Foreign Companies Register of the Ministry of Economy and Commerce;
• Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry.

Professional firms and sole proprietorship

In setting up a professional firm, 100% foreign ownership, sole proprietorships or civil companies are permitted. A sole proprietorship is a professional business entity whereby an individual trades for his own account pursuant to a trade license issued in his own name. Such firms may engage in professional or artisan activities but the number of staff members that may be employed is limited. This kind of license is issued to certain services like medical practitioners, engineers and lawyers. A UAE national must be appointed as local service agent.