Forms of Businesses (outside Free Zones)
Legal Forms of Business Structures
Individual Establishment: It is an establishment owned by a sole proprietor to operate an economic activity (commercial, professional, industrial, agricultural or real estate). An establishment’s financial liability is linked to the proprietor who shall be responsible for all its financial obligations.
Commercial Company: A company is a contract by which two or more persons enter into an economic profit-generating enterprise. They shall each subscribe a share either in the form of money or work effort, and share an enterprise’s profit or loss. An economic enterprise includes any commercial, financial, industrial, agricultural, real estate or any other type of economic activity.
Civil Companies: Civil companies are formed to practice activities that involve the use of the individual's intellectual powers and effort and/or using tools/instruments (e.g.) lawyers, engineers, consultants, carpenters, etc. Professional companies may be 100% foreign owned. However, it is necessary to appoint a local service agent. The obligations of the local service agent towards his principal and third parties shall be restricted to render the usual services in order to enable him to practice the professional or craftsmanship work in the Emirate without holding any responsibility or financial commitment with respect to his principle’s business or activity inside the Emirate or abroad. The relations between the two parties shall be regulated by an agency agreement.
Professional Work: A professional is a person who independently practices a profession based on investing his intellectual powers and acquired information, which generates an income. In such work, he either depends on his own physical effort or uses the help of some tools and equipments, whether solely or with a maximum number of five workers.
Legal Forms of Commercial Companies: Legal forms of commercial companies, pursuant to Federal Law No. 8 of 1984.
General Partnership is an arrangement between two or more partners whereby each of the partners are jointly and severally liable to the extent of all their assets for the company’s liabilities. The Commercial Companies Law provides that only UAE nationals are allowed to be partners in a general partnership company. There is no prescribed minimum capital requirement for the establishment of a partnership company.
Limited Partnership Company. A limited partnership company is a company formed by one or more partners, with liabilities to the extent of their assets. In case of one or more limited partners, their liabilities would be limited to the extent of their respective shares in the capital of the company.
Joint Venture Company. A joint venture is a company concluded between two or more parties to share the profits or losses of one or more commercial businesses being performed by one of the partners in his personal name. The company shall be confined to the relationship between the partners and will not be effected by third parties. A joint participation venture is restricted to the arrangement between the partners therein and must not be made to third parties. Between the partners themselves, the arrangement is essentially a partnership. Each partner conducting business will generally do so in his own name and will not declare the interest of the other partners to others. The liability of the partners who are conducting business is unlimited with respect to the liabilities of the company. If the liability of the other partners is disclosed, the venture will be treated for every purpose as a general partnership. There are no registration formalities for this type of company as it is not a distinct legal entity. A joint venture company uses the business name and the license of the partner conducting the business. A Memorandum of Association should, however, be prepared to indicate the rights and liabilities of the partners and the method of distribution of the profits and losses.
Public Joint Stock Company (PJSC). A public joint stock company is a company whose capital is divided into equal value negotiable shares. The shareholders of a PJSC are liable only to the value of their shares in the capital of the company. The minimum share capital requirement is Dh. 10 million with a nominal face value of AED 100, a banking entity AED 40 million for banks and AED 25 million for insurance and investment companies. A PJSC must have at least 10 founder members and its management should be vested in a board of directors consisting of a minimum of three to a maximum of fifteen persons whose term of office may not exceed three years. Directors however can be re-elected when their term of office has expired. A PJSC is required to have a chairman (of the board of directors) who must be UAE national. The majority of the board of directors are required to be UAE nationals.
Private Joint Stock Company. A private joint stock company is essentially the same as a public joint stock company with the following differences: The minimum capital requirement is Dh. 2 million. The shares of a private joint stock company cannot be offered to the public. Only three founder members are required. A Private joint stock company may be converted into a public joint stock company. In order to do so, the following conditions must be met:
The nominal value of the issued shares is fully paid up. A period of not less than two financial years has passed since the company was formed. During the two years preceding the application for conversion, the company has achieved net profit distributable to the shareholders, of which average is not less than 10% of the capital. A resolution of the extraordinary assembly for the conversion of the company is adopted by a majority of three-quarters of the company shareholders. The Ministry’s decision to convert the company form a private joint stock company to a pubic joint stock company is published in the Official Gazette.
Limited Liability Company (LLC). Limited Liability Company is one with limited liability, where the number of partners may not exceed fifty and should not be less than two. Each of the partners shall only be liable to the extent of his share in the capital. The partners’ participation should not be represented by negotiable certificates. In addition, an LLC has the following legal and commercial characteristics: The minimum share capital must be AED 300,000 divided into equal shares with a minimum face value of AED 1.000 per share. (for most of the Commercial Industrial activities except General Trading AED 3 million, contracting 1 million, commercial/industrial/agricultural holdings and trust companies AED 3 million). UAE nationals must hold at least 51% of the shares. Public subscription for raising capital is not permitted. The management or managers are appointed by Memorandum of Association, by a separate management contract or the general assembly of the partners.
Managers may be one or more of the partners or any other parties provided that they do not exceed a total of five persons. It is possible to provide in the Memorandum of Association that the profit and losses will be shared in a ratio different to that of the share capital ratios.
It is necessary to appoint an auditor who must be accredited in the UAE.
Branch of a Foreign Company. A branch office is legally regarded as part of its parent company and does not have a separate legal identity from that of its parent company. Branch offices are nevertheless required to have a national agent. If the agent is a company, it must be wholly owned by UAE nationals. The national agent, however, will not acquire any rights or interest in the business of the branch office and will simply provide services on matters which concern federal and local government departments.