In the UAE, mainland companies are licensed by the Department of Economic Development (DED) within each state of choice. These entities are overseen by the UAE Civil Code or the Federal Law No. 2 of 2015 and its amendments, concerning Commercial Companies. The key merit of mainland company setup is that there are no territorial restrictions on carrying out its business activities. Other structures such as a free zone or offshore companies may have operational restrictions on where business may be operated directly. Thus, for mainland companies, an office may be set up in any part of the emirate in which the company is registered.
A unique requirement for mainland companies is the mandatory presence of a UAE National who functions either as a Local Partner with at least 51% shareholding or a Local Service Agent without shares. In matters related to government applications and liaising with government authorities, the signature of the Local Partner/service agent is important. The expat investor can solely be in control for business operations with no input from the Local Partner/Service Agent unless agreed.
Another key aspect is the ability to conduct a variety of business activities within a mainland company. However, some business activities are regulated, and therefore require prior approvals by the respective government departments and authorities. For example, real estate and developer related licenses are regulated by RERA (Real Estate Regulatory Authority), while educationally related licenses are regulated by KHDA (Knowledge and Human Development Authority). Hospitals, Clinics and medically related licenses are regulated by DHA (Dubai Health Authority), while the Media Council regulates media and advertising related activities. These are just but a few as there are other specialized licenses that require special approvals. IBG is well placed to ensure the right license is obtained.
There are different types of licenses that can be obtained in the mainland.
Some of the different forms of the mainland or DED licensed entities are as follows:
It does not require business capital and it is 100% owned by one individual with a trade license that is issued in his/her own name. Often it is required that the name of the company be related to the activity of the company. The owner has unlimited liability and controls the management of the company. He/she can appoint one manager only as per the Department of Economic Development business regulations.
Where the activity is of an industrial or commercial type, only UAE Nationals or GCC Nationals may own it. If the proposed activity is a consultancy or service activity the owner must possess relevant qualification for the selected activity and some activities within this type can only be practised by UAE nationals.
Regarding ownership, a sole proprietorship with a professional activity can be owned by an individual of any nationality. However, he/she would require a Local Service Agent if they are not a national of the UAE or GCC. A corporate entity cannot own a sole proprietorship company.
This type of company is 100% owned by one natural person or one corporate body and must be a local/GCC person. It has similarities with the sole proprietorship, but its liability is limited to the single partner’s share.
Ownership is reserved with a UAE national, or GCC national. In the case where it is being owned by a corporate body, it must be a UAE or GCC establishment and 100% owned by UAE or GCC national(s), whose owner is called shareholder.
The owners can appoint up to 11 managers or at least one manager who can be of any nationality although subject to approvals and procedures. The company’s memorandum of association details its capital and the trade name which should be identical to its owner’s name followed by the suffix ‘One Person’ or ‘LLC’. It must state that it is a one-person company.
Individual professionals in recognized fields of work can form a civil company. For example, accountants, engineers, lawyers etc. The activities must be as approved by the DED in the state of registration.
Owners who are not UAE or GCC nationals must have a Local Service Agent as part of the company (the local service agent doesn’t have ownership in the company but holds a special role in facilitating government-related transactions such as immigration services when applying for work permits etc.).
It can also be owned by a foreign company whose profession must be the same as that of the proposed civil company.
Some activities are highly regulated such as engineering activity, for example, that must have one partner who is a UAE National, who owns no less than 51% of the business. The UAE national also must be an engineer with experience within the same proposed engineering field of service.
Consulting activities can be owned 100% by professional partners of the same type as the business’s activity who can also appoint only one manager.
The capital should be detailed in the agreement and name of the company must be related to the proposed service activity.
A Limited Liability Company or LLC should have a minimum of 2 to a maximum of 50 shareholders. Each partner subscribes to shares and so is liable up to the limit of their shares in the capital of the company. An LLC can also be changed to any other legal form, except for a public shareholding company.
A wide variety of activities are permissible within an LLC. For example, industrial, commercial, professional and tourism activities can be conducted with the use of an LLC. However, as it is with other types, some activities are considered specialized activities and so require special approvals from relevant departments to begin operations.
While this can be owned 100% by GCC nationals, for expat investors who are not GCC nationals, it requires that a UAE national be part of the company with a minimum shareholding percentage of 51%. It can be owned by individuals and corporate partners alike.
The management of the company can be assigned to 1 manager or up to 11 managers who can have management and administration powers assigned to them accordingly. Their decisions are binding on the company.
The minimum capital is AED 300,000 and should be specified in the Memorandum of Association. This capital is not required to be paid up during incorporation and its shares cannot be offered to the public to raise funds.
As it is with other business types, the suffix LLC or Limited Liability Company shall follow the name of the company. The company can establish one or more branches to conduct business as per the activities of the parent company.
PJSC or a Private Shareholding Company or a Private Joint-Stock Company is a partnership which can have from 2-200 individuals. The company can conduct commercial or industrial activities. However, professional activities are not permitted under this type. Approvals must be obtained from the ministry of economy to fully operate a PJSC.
Partners can be from any nationality as well as a corporate partner. However, 51% must be owned by UAE Nationals. The company can be owned 100% by GCC nationals. The minimum capital required for registration is AED 5,000,000.
The trade name needs to include the name of one or more partners and followed by the phrase “Private Shareholding Company”.
A Public Share Holding Company is a company whose capital is divided into transferable shares of equal value and unlike the private form, the public form can practice any industrial, commercial or professional business activity.
Partners can be from any nationality as well as a corporate partner. It must have at least 5 founding members who are UAE Nationals from among the partners, owning between 30% and 70% of the capital shares.
The company can appoint a maximum of 5 managers with a minimum capital of AED 30,000,000 required for incorporation.
Unlike the private form, the public shareholding company cannot include the name of partners in its trade name, except for patents registered in the name of a shareholder or if the business uses a store that has the name of a shareholder. It must have ‘Public Shareholding Company’ attached to the name.
This type must have a minimum of two partners, with one being a general partner and the other a limited partner. The general partner is liable for the company’s liabilities to the extent of all their personal and business assets; the limited partner is liable for a share of company liabilities equal to their share of the company capital.
The business can operate commercial and industrial activities only and cannot undertake professional activities.
General partners are limited to UAE nationals only while nationals of other countries can be limited partners. However, the shares of the company can be owned in any amounts by all partners irrespective of the classification. A limited partner may not intervene in management or administrative issues related to the other partners. If he or she does so, that limited partner shall be responsible for all the business’s obligations.
The trade name should be that of one or more of the general partners, with the name belonging to the company. It can also have a special trade name. Meanwhile, the name of any limited partner should not be mentioned in the name of the company.
The Branch is usually licensed by DED and regulated by the Ministry of Economy. It carries on business under the name of the parent company and is represented by the parent company. This means it is permitted to promote products and services of the parent company while entering into agreements to facilitate business with the parent company.
It can conduct professional activities as well as some commercial and industrial activities as well. Special approvals may be required for some industrial and commercial operations.
Ownership is by the parent company (100%) with a business operated under the name of the parent entity. However, a Local Service Agent is required for registration.
A manager appointed by the board of directors is present to represent the company and manager the affairs of the branch company which are binding on the company.
A representative office may be like a branch. However, it is not permitted to earn profits for business conducted under the Rep Office. Its activities are usually limited to marketing and promoting the main principal company (the parent company it is representing). It is licensed by the DED and regulated by the Ministry of Economy.
In a similar nature, it is required to have a Local Service Agent. A UAE National or a company owned by one or more UAE Nationals can act as the LSA for the Rep Office. They are not a partner in the company.
UAE based companies can also register a branch of the company within the country and they must operate in one or all the activities that are permitted within the parent company. A company can have multiple branches but the same principle concerning activities applies to all the branches.
Similarly, it must be owned 100% by the parent entity and with a Local Service Agent. The operating trade name of the branch company but be the same as the parent company. Names, however, are subject to approval as and when available at the time of registration.
Companies registered within UAE free zones may operate branches outside the free zone in the mainland. However, they may be restricted to carrying out certain activities that have specialized requirements in mainland such as labour supply services, restaurant services among others.
Having Local shareholders is mandatory in the main company having a minimum of 51% shares. If the local shareholder owns less than 51% shares, it would be required to obtain approvals from the Ministry of Economy as well as having a Local Service Agent appointed for registration. Entities that have a 100% shareholding by GCC nationals would not require a local service agent.
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An onshore company is a company that incorporates in a particular region or country along with its business operations in another country according to all of its tax filing requirements and other legal compliances. Unlike offshore companies that intend to do business seeking for tax and legal benefits in a country, onshore companies keep their business process utilizing the resources of the home country.
Onshore outsourcing is also called near-shore outsourcing or domestic outsourcing. It is a process that involves one or more business processes or services of an external but local company. With onshore outsourcing, companies utilize their services, products, supports, contacts and other operations. It helps the companies reduce their support staff and internal infrastructure while keeping themselves complied with the legal and operational requirements of business.
A beneficiary is the owner of an onshore company whereas ownership may formally belong to someone else. It is kept veiled and the information about the ownership is provided only to the concerned banks and the agent responsible for the registration.
Yes, beneficiary is the actual owner who receives the income of the company.