Most Gulf countries do not allow foreign control of companies. The UAE law stipulates that nationals must own at least 51% of the company’s share capital, while the remaining 49% may belong to foreigners. However, this rule is not applicable for companies that offer professional or service activities. Foreigners are allowed to own 100% of such companies but there must be an Emirati who acts as a Service Agent for the company.
The UAE federal authorities have recently waived the minimum share capital requirements for establishing local companies in order to encourage new and small investors to enter the market. Therefore, there is no need for a share capital deposit of proof from any local bank. This also cuts down the business start up costs and processing time.
Local companies in the UAE must adopt one of the following types of company:
- General Partnership
- Joint – Venture
- Public Joint – stock
- Private Joint – stock
- Limited Liability Company
- Commandite Limited by shares
According to UAE law, at least 51% of the company’s share capital must be owned by UAE nationals, while the remaining 49% may be owned by foreigners. This rule does not apply to free zone companies or professional companies. The limit on foreign ownership does not directly translate to receiving only 49% of the resulting profits. Furthermore, the most commonly used type, the Limited Liability Company (LLC), is highly flexible allowing for the profit and loss distribution to be mutually agreed upon.
Having become more established and as a global financial hub, Dubai has become an attractive place to establish a business for many foreigners. LLC is the most common type for foreign businesses to choose and is characterized by limited liability. It is quite flexible in its structure and each partner will be liable based on their share in the capital. Many companies opt to pay their local partner a fixed annual fee as it is more discrete than a percentage of sales or profits.
The advantages of an LLC is that there is limited liability, it is cost effective, they are easy to operate, profits are distributed as members of an LLC sees fit and there is limited liability for members of the LLC.