New Businesses & Entrepreneurial Law

Ahmed Law Firm represents new businesses and entrepreneurs in transactional and advisory matters common to start-ups. Our firm also offers legal audit services, where we will review your company structure (or proposed structure) and relevant legal documentation to evaluate and identify your legal priorities.
We offer legal services to cover the entire spectrum of needs for a new and emerging business, including:
• Contract drafting, review, and negotiation
• Entity choice and formation
• Corporate governance matters
• Articles/Memorandum of Association, Bylaws, LLC Operating Agreements
• Corporate formalities (minutes, board meetings, resolutions, powers of attorney)
• Employment documents: offer letters, employment agreements, employee manual, non-disclosure and confidentiality agreements
• Intellectual property protection (trademark search and registration, licensing agreements)
• Website Privacy Policy and Terms & Conditions
• Commercial lease review

Company Formation in the UAE

The Ahmed Law Firm covers all aspects of doing business in the UAE. This includes incorporation, offshore company formation and helping businesses deal with the Free Trade Zones. We advise our clients on which business form would best suit their needs within the UAE and help them navigate the sometimes-complicated legal field of the UAE commercial companies laws.

UAE Commercial Companies Law and Permitted Forms

The statutory basis for company formation and related commercial laws is the United Arab Emirates Commercial Companies Law No. (8) of 1984, as amended, a federal statute that governs all of the emirates within the UAE (hereinafter referred to as the UAE CCL). Under Article 5 of this law, there are seven different types of companies that may be created within the UAE

1. General Partnerships
2. Simple Limited Partnerships
3. Joint Participation
4. Public Joint Stock Companies
5. Private Joint Stock Companies
6. Limited Liability Companies
7. Partnerships Limited with Shares

In general, with a few exceptions in certain emirates, any company form that engages in commercial activities and is not one of the seven listed above is void under UAE law and is not governed by the UAE CCL. Individuals who engage in contracts on behalf of invalid companies are personally and jointly liable for any liabilities arising from such contracts.

However, under Federal Law No. 13, certain companies are valid under the law yet not governed by the UAE CCL. These include; companies established in the UAE’s free zones if the free zone in question has special rules regulating entities within its zone; companies which are involved in the oil and gas industry, water treatment and transmission, and the production of electricity and gas; companies which have been exempted from the UAE CCL by a resolution of the cabinet of ministers.

It should be noted that under Article 22 of the UAE CCL all companies registered under the law must have a local majority holding. This means that one or more UAE nationals must hold at least 51% of the capital of the company. Again, certain companies, such as oil and gas companies or banks may be granted exemptions to this rule. Other companies with 100% foreign ownership or with less than 51% UAE national ownership may operate within the UAE as long as they engage in non-commercial activities.

Although all companies established in the UAE are considered to have local domicile and nationality, a company having UAE nationality does not automatically entitle it to all the rights and privileges given to UAE nationals. For example, if UAE nationals do not wholly own a company the company cannot purchase real estate or other immovable property in the UAE.

Incorporation and Licensing Requirements

All companies incorporated in the UAE, except for joint ventures, must have a notarized Memorandum of Association that is in Arabic. The UAE CCL also mandates that UAE incorporated companies, again companies other than joint ventures, have their names listed in the Commercial Register. Without registration, a company cannot begin to do business within the UAE. Furthermore, failure to register makes void a company’s Memorandum of Association as against third parties.
Companies must also acquire trade licenses from the local licensing authority in the emirate in which they intend to operate. In Dubai, the Department of Economic Development is the statutory body that regulates and controls the licensing procedures for business entities in Dubai.

The three major types of licenses issued are the following;
1. Professional licenses; for professional activities conducted by accountants, lawyers, engineers etc.
2. Industrial Licenses; for activities such as manufacturing.
3. Trade Licenses; for activities such as wholesale or retail trade enterprises, transportation, hotels etc.
Foreign companies are also required to satisfy UAE licensing requirements before they can establish offices and conduct business within the UAE. Articles 313 to 316 of the UAE CCL regulate foreign company licensing.

Entity Requirements

Each valid business form under the UAE CCL has different requirements. We will discuss some of the requirements below.

1.General Partnership Company

A General Partnership Company consists of two or more partners who are jointly and severally responsible for all the firm’s liabilities. There is no prescribed minimum capital requirement for general partnership and assignment of a partner’s share without the consent of all partners involve is not allowed. This company form is only available to UAE nationals.

2.Limited Partnership

A Limited Partnership consists of one joint partner or more who is the general partner and is personally liable for the firm and one partner in commendams or more who is only liable up to the value of his share in the capital. Only UAE nationals may become general partners, but non-UAE nationals are allowed to become partner in commendams or “dormant” partners. There is no minimum capital requirement and the Limited Partnership may not issue negotiable shares. UAE nationals must have at least 51% of the share of the partnership.

3.Public Joint Stock Companies

A Public Joint Stock Company (PJSC) is a company with its capital divided into equal negotiable shares. The following are some characteristics of a PJSC in the UAE;

a.Shareholders are liable up to their respective share value.

b.The minimum capital requirement is AED 10,000,000 or US $2,722, 570.

c.A minimum of ten founding members are required to subscribe to at least 20 % and no more than 45% of the share capital of the company.

d.UAE nationals must hold at least 51% of the shares of the PJSC.

e.The management of the company should be vested in a board of directors numbering no less than 3 and no more than 12 persons whose term may not exceed 3 years.

f. A PJSC must appoint an accredited auditor on an annual basis

g.The Board of Directors must have a UAE national majority and the chairman of the board must be a UAE national.

The PJSC is the only business form that allows shares to be offered to the public. In the UAE, the public joint stock company business form is necessary for any business venture involving banking, insurance or investment of funds for third parties.

4.Private Joint Stock Companies

A Private Joint Stock Company, unlike a Public Joint Stock Company, may not offer its shares to the public. The minimum capital requirement is AED 2,000,000 or US $544,514. Furthermore, only three founding members are required. Similar to a Public Joint Stock Company, a majority of the Board of Directors of the company must be UAE nationals and the chairman must be a UAE national as well.

5.Limited Liability Company (LLC)

A limited liability company may be established by a minimum of two and a maximum of 50 persons. The liability of shareholders is limited to their share in the company’s capital. UAE nationals must own 51% of the equity.

The capital required to form an LLC in Dubai is AED 300,000 or US $81, 744. Other emirates require a smaller amount. Management of the LLC may be vested in foreign partners, national partners or third parties. LLCs may not issue negotiable shares.

Many expatriate investors prefer the LLC form to other forms because it allows them to maintain control over the management of the company.

6.Joint Participation (Joint Ventures)

In a Joint Venture, two or more partners agree by contract to share the profits or losses of one or more commercial enterprises. The commercial enterprises are carried on in the name of one of the partners. The partner(s) who personally performs the venture’s business is deemed a trader(s) and therefore is the only one who will be required to obtain a trade license and enter his name in the Commercial Register.

The contract governing the Joint Participation need not be written. There are no minimum capital requirements.

7.Limited Partnership With Shares

In this business form, all general partners must be UAE nationals but participating partners may be foreigners. The capital of the firm must be divided into negotiable shares of equal value. The capital of the company must not be less than AED 500,000 or US $136,128.50. UAE CCL provisions relating to instruments issued by a joint stock company are applicable to shares issued by a partnership limited with shares as well.

Please note that the UAE CCL does not govern companies that engage in non-commercial activities and such companies are still valid under the law. A good example of such an entity is a service establishment or professional company. A professional company would be a firm registered to practice a profession and render services as its main activity. Examples include rendering the services of legal practice and consultancy, auditing, architecture consultancies, civil engineering firms, medical services, and educational services.

LLC Formation Process

As an example of forming a company in the UAE, we have chosen the procedure required to establish an LLC. The following is a brief summary of the steps required;

1.Approve company name: Approval for the name and activity of the LLC must be obtained from the Department of Economic Development.

2.Approve Memorandum of Association: The Memorandum of Association should be notarized and be in accordance with the requirements laid out by the UAE CCL. Once authenticated, the managing directors should submit the following original documents to the Department of Economic Development; The notarized Memorandum of Association, a signed prescribed application form, and a certificate from a bank operating in Dubai certifying that the company has deposited its capital with it.

3.Register the Company: After obtaining approval, the LLC must submit many original documents to the Commercial Registry at the Trade License and Commercial Registration Department of the Department of Economic Development. These documents include but are not limited to; the Memorandum of Association with a copy, the prescribed application form signed by the appropriate parties, a certificate issued by the manager(s) and signed by the company’s auditor(s) stating that all shares in kind or cash are fully paid up, Letter of approval of the company’s name issued by the Department of Economic Development, and several other documents. Once the Commercial Registry considers all the documentation to be in order, the company’s name will be entered into the Commercial Register. The representative of the company will then have to submit several original documents to the Federal Ministry of Economy & Commerce.

4. Publish Company in Companies Bulletin: Approval documents sent to the company representative should be taken to the Ministry of Economy & Commerce so that the company’s details can be published in the Ministry’s Companies bulletin. The associated fee is approximately AED 3,000 or US $816.77.

5. Obtain Trade License: Once all approvals have been achieved the company should apply to the Department of Economic Development for the appropriate license.

6. Register LLC with the Dubai Chamber of Commerce & Industry: In Dubai, it is necessary for the company to register the LLC with the Dubai Chamber of Commerce & Industry.

Dubai provides investors and entrepreneurs with terrific opportunities. The legal environment promotes foreign investment and trade, creating a very favorable business climate. Company formation in many instances is the key to success. The Ahmed Law Firm aims to assist clients in all aspects of company formation, from advising on what form best suits your business needs to drafting and helping submit key documents. Please contact us for further information.