Legal Structures for Business

Its laid down in the Federal Law that a local equity of not less than 51% in any commercial company is necessary and it also defines seven categories of business organisation, which can be established in UAE.  List of requirements in terms of shareholders, directors, minimum capital and incorporation procedures have been set out minutely and in detail.

The seven categories of business organisation defined by the Law are:

General partnership company

Partnership-en-commendam

Joint venture company

Public shareholding company

Private shareholding company

Limited liability company (LLC)

Share partnership company

LLC Company is one of the favourite among the foreign investors of the above mentioned seven activities.

Apart from these seven categories, FDIs are encouraged through Branches and representative offices of foreign companies and 100% foreign owned professional firms . 100% foreign ownership is permitted in the Free Trade Zones too.

Limited Liability Company
A minimum of 2 and a maximum of 50 persons are required to form a LLC, whose liability is limited to their shares in the Company’s capital.  Its been observed that companies having expatriate partners have opted for LLC, based on the fact that this is the only option which will give a maximum legal ownership i.e. 49% to the expatriates for a trading license.

The general requirement for the LLC is that a UAE national holds 51% share in the company, thereby the normal shareholding pattern for an LLC will be.

Local sponsor - 51% and
Expatriate Shareholder (s) - 49%

Branch / representative Offices of Foreign Commercial Companies
The formation and regulation of branches and representative offices of foreign companies is covered by The Commercial Companies Law in the UAE and it stipulates that they may be 100% foreign owned, provided a local service agent is appointed.

Legally regarded as a part of its foreign company, a branch office is a full-fledged business which is permitted to perform contracts or conduct any other activities specified in its license.

A branch office must engage itself in the activities similar to those of its parent company.

On the other hand a rep office is limited to promoting its parent company’s activities which includes gathering of information, soliciting orders and projects to be performed by the HO.

Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local service agents. Local service agents -- also sometimes referred to as sponsors -- are not involved in the operations of the company but assist in obtaining visas, labour cards, etc and are paid a lump sum fee per annum.

Professional Firms
100% foreign ownership, sole proprietorships or civil companies are permitted to set up a professional firm in UAE. These firms may engage themselves in professional or artisan activities. A local service agent who is a UAE national should be appointed.

Licensing
The basic requirement for all business activity in UAE is one of the following three categories of licenses:
Commercial licenses covering all kinds of trading activity;
Professional licenses covering professions, services, craftsmen and artisans;
Industrial licenses for establishing industrial or manufacturing activity.
License for majority of the activities are directly issued by the licensing authority – Department of Economic Development, Dubai .

For more information on Limited Liability and other company formation contact us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it