How to Set Up a Company in United Arab Emirates

First of all and as general consideration, it shall be mentioned that the United Arab Emirates are a federation of 7 Emirates (Abu Dhabi – which is also the capital -,  Dubai, Ras Al Khaimah, Fujairah, Sharjah, Ajman, Umm Al Quwain).

Companies can be established in any of the Emirates, each of the Emirates has its own rules and regulations (to be then verified case by case if the latter are applicable or if reference shall be made to the federal laws) and in each Emirates the territory is divided into “Mainland” and “Free Zone”.

Free Zones are parts of the territory designated for a specific business (e.g. trading, healthcare, etc.) and each Free Zone is managed and administered by its own regulatory authority and functions under its own laws and regulations (sometimes reference is made to/these regulations are in line with federal laws, sometimes no).

Currently, there are in the UAE more than 40 Free Zones (to be noted that there are also two Free Zones dedicated to financial activities in which common law system is applied, Dubai International Financial Centre and Abu Dhabi Global Market).

The principal forms of companies that can be established in Free Zones are Free Zone Establishments (FZE) or Free Zone Companies (FZCO), both with limited liability, and Branches of local or international companies, which are extensions of existing locals or international companies, allowing to conduct business in the UAE while remaining legally dependent on their parent companies.

In Mainland, the principal forms are Representative Offices (not entitled to carry on trading activities), Sole Establishments, Limited Liability Companies (LLC) and Branches. 

Usually investors opt for the establishment of FZCO and LLC (kind of Italian “società a responsabilità limitata”).

Reason why FZCO and LLC are chosen and recommended is the fact that partner/s liability is limited to the amount of capital invested in the company.

For limited liability companies in Free Zones there have been always the possibility for foreign investors to own 100% of the shares capital. This was the main reason foreign investors were prefering most of the time the establishment in Free Zone rather than in Mainland, where at least 51% of the company’s share capital should have been owned by a local partner.

Currently, after certain amendments to the UAE Federal Law on Commercial Companies (now the Federal Decree-Law No. 32/2021 as amended), also limited liability companies in Mainland can be established by foreign shareholders without the necessary presence of a local partner, unless for certain sectors (e.g. oil sector).

Limited liability company in Mainland can also be established by one partner only and for example in Dubai the company is named “LLC – Single Owner”. 

In point of capital, for setting up a mainland company there is now a 0% minimum capital requirement: however, it shall be mentioned that relevant authorities can still ask for the indication in the memorandum of association of the local company of a minimum share capital.

For free zone companies each authority can determine the minimum share capital required, depending also on the activity/activities the company carries on.

It might also be requested evidence that the company share capital is deposited in the company’s bank account.

In case of limited liability companies the corporate governance requirements are in general the following.

a. Manager(s). In mainland, the Commercial Companies Law states that the management shall be entrusted to one or more managers as determined by the partners in the memorandum of association of the company.

Managers shall be selected from among the partners or from third parties and if not appointed in the memorandum of association of the company or under a separate contract, the general assembly shall appoint the managers.

If there is more than one manager, the partners can appoint a board of directors.

It is possible to specify if there are limitation to the powers granted to the manager/managers and/or, in case there are more than one manager, if powers – or certain powers – shall be exercised singly and/or jointly.

In this regards, to be noted that in practise and in general the memorandum of association can be issued by and before the competent authority e.g. Department for Economy & Tourism in Dubai (c.d. DET) for Dubai mainland or it is possible to have it issued before local notaries.

Usually, for example DET is providing for a template and it might be difficult to have it amended, while before local notaries it might be possible to insert more specific and detailed provisions.

In Free Zones, the free zone authority defines the rules for the appointment of the managers and/or directors of the company e.g. usually by the shareholders in the memorandum and/or articles of association.

Usually the memorandum and/or articles of association is a template provided by the free zone authority, including standard provisions, and it shall be executed before the latter. The issuance of a customized memorandum and/or articles of association is allowed by certain free zones.

The investors can also evaluate the opportunity to issue a separate deed in order to rule for example certain matters such as the detailed powers to be granted to management body of the company.

Both in Mainland and Free Zones, at least one manager shall be inserted in the company’s license.

In Mainland it is not required that the manager is UAE resident, while it shall be verified with the relevant free zone if it is necessary that the person/s to be appointed as management body of the company is/are UAE resident/s.

b. Memorandum and/or Articles of Association.

In certain Free Zones this deed is issued in English, while in other and in Mainland is issued in English and Arabic, being Arabic the prevalent version.

It contains provisions such as the indication of the company’s shareholders, the objects of the company, the majorities and the operation of the shareholders’ meetings,  the appointment of the management body of the company, the profit distributions.

As stated above, usually Free Zones are providing a template and customization is allowed by certain Free Zones only.

In Mainland, for example in Dubai, see above comment.

c. General Assembly: in Mainland, as per the Commercial Companies Law, limited liability companies shall have a General Assembly made up of all the partners. The General Assembly shall be convened by a call of the manager or the board of directors at least once in the year during the four months following the end of the company’s fiscal year for the approval of the financial statements.

Also, it shall be convened in case of request by shareholders holding at least 10% of the company’s share capital.

For Free Zones company, the matter is ruled by the regulations of the latter (which can be in line or not with the Commercial Companies Law).

d. Auditor: in Mainland a certified auditor shall be appointed and companies are requested to prepare audited financial statements.

Free zones can rule the matter differently, according to specific regulations issued by the same.

In general, to incorporate a limited liability company in the United Arab Emirates, the following documents are requested.

1. Submission of a resolution issued by the competent body of the parent company including the willing to establish a company in the United Arab Emirates.

This resolution can include a power of attorney to certain persons based in the United Arab Emirates with the powers related to the establishment of the company and for example for the representation of the company as future shareholder of the local entity.

Such resolution if issued abroad shall be duly attested and legalized (United Arab Emirates are not part of The Hague Apostille Convention) by the competent foreign and local authorities. Translation into Arabic is requested in Mainland and might be requested by certain Free Zones.

2. A copy of the commercial registration (or equivalent document) of the parent company. Also this document shall carry on the formalities under point 1 above.

3. A copy of the memorandum and/or articles of association of the parent company, also with the formalities indicated in point 1 above.

4. UBO declaration can be requested.

5. Copy/copies of passport/s of the shareholder/s and/or of the manager/s.

Local companies shall obtain the license from the competent authority e.g. for Dubai mainland from the Department from Economy & Tourism in Dubai, c.d. DET; for Free Zones, from the authority governing the latter.

To be noted that if the company will be operating in a regulated sector (e.g., healthcare, food etc.) it can be required the approval from the relevant government authority (e.g. Dubai Municipality) before the license can be issued.

It can be requested that the company has an office. In this regards, to be noted that certain Free Zones offer the office included in the license, sometimes Free Zones do not required a physical office but a virtual office c.d. flexi desk. In Mainland, it can be that the authority requests the submission of a registered lease office.

Office requirements also can depend on the number of employees and type of activity conducted by the company. 

Companies shall be registered for Corporate Tax. There is no VAT registration at the incorporation stage, but it may be required later if taxable supplies exceed the mandatory threshold (currently set at AED 375,000).

Employment and labour issues are managed through the Free Zone Authority for companies in Free Zone, while in Mainland companies shall open a file with the Ministry of Human Resources and Emiratisation. 

Also to be noted that the company shall open the c.d. e-channel, as means necessary to be “connected” with the immigration authority for the issuance of company’s visas (such authority is the Federal Authority For Identity, Citizenship, Customs & Port Security for all the Emirates, unless for Dubai for which the competence is of the General Directorate for Identity and Foreigners Affairs for Dubai).

The process for incorporation of limited liability companies may vary according to the fact that the company shall be established for example in Mainland or in a Free Zone and from an Emirate to another.

In general, it may be said that the process include:

• verification of the list of activities provided by the competent authority in order to verify which among them is that – or are those – that the newco should carry on;
• verification about the need or not of third party approval according to the selected activity/activities;
• submission of the documents such as the resolution for the establishment;
• reservation of the company name;
• issuance of the memorandum and/or articles of association;
• opening of e-channel for immigration and visa/s files with the competent authority (Federal Authority For Identity, Citizenship, Customs & Port Security or General Directorate for Identity and Foreigners Affairs for Dubai);
• issuance of visa/s;
• opening of a corporate bank account and deposit the required capital;
• registration with the Ministry of Human Resources and Emiratisation.

• Verify where it might be convenient to set up a company and then to select the activities the company shall carry on checking the relevant list and dealing with authories for the same.
• Have all the documents attested and legalized, both in the foreign country and the in United Arab Emirates.
• Obtain third party approval as the process may take time and require understanding of the regulator’s specific requirements.
• Understand the local laws, regulations, culture, business practices, and the importance of “personal” relationships as it can be different from other countries.
• Deal with multiple authorities because it can be complex and time-consuming without local expertise
• Understand if companies are required to comply with quotas for hiring Emiratis nationals as it might be necessary to deal with the local authorities for the same matter.
• Find reliable local counsel, having knowledge of the legal and tax system but also of the cultural system and of the ways authorites practically operate.