Joint Participation
The formation of joint participations must be between two or more partners who agree to share the profits and losses of one or more commercial businesses operating in the UAE. Third parties will not have the right to recourse except towards the partner with whom they had dealt with. The advantage of using this structure is that a joint participation does not need to be formally registered and can therefore be established immediately. In normal circumstances the joint participation would trade under the name and trade license of the locally registered partner. The main disadvantage of a joint participation is that it will not always be possible to obtain independent financing or to hire its own employees. All such activities are likely to be carried on in the name of the local party.
Public Joint Stock Company
Any company whose capital is divided into equal-negotiable shares shall be considered a public joint stock company. Partners of PJSC shall only be liable to the extent of his/her share in the capital.
It requires a minimum share capital of AED 10,000,000 and a minimum of 10 founders, who are responsible for the incorporation of the company.
It must have between 3 to 15 directors, who are elected for terms of three years. The Chairman and a majority of the board of directors must be UAE nationals.
The founders are obliged to subscribe for a minimum of 20% and a maximum of 45% of the share capital.
The invitation for shares in a PJSC must be offered for public subscription at least 5 days before the commencement of the subscription by publishing notices in two local daily newspapers.
Private Joint Stock Company
A private Joint Stock Company requires a minimum of three founders to incorporate the company and a minimum share capital of AED 2,000,000. Shares cannot be offered for public subscription, but in all other respects the regulations applicable to a PJSC are the same for a private joint stock company. A private joint stock company may be converted to a PJSC after a period of not less than the expiration of two financial years.
Limited Liability Company
This is the most commonly used form of commercial entity for foreign companies wishing to conduct commercial activities in the UAE.
At least 51% of the share capital of the company must be held by one or more UAE nationals, or by a company wholly owned by UAE nationals.
It should be noted that the Companies law allows for profits and losses to be shared disproportionately. Therefore the foreign investor can put the vast majority of the share capital and receive the vast majority of the profits.
It must have a minimum of two shareholders and a maximum of 50 share holders.
There is no restriction on the nationality of the management of an LLC. The minimum number of directors is one, and the maximum is 5.
The initial share capital of such an LLC must be at least Dhs 150,000.
All of the initial share capital must be fully paid up prior to an LLC being formed. Subscription will have to be evidenced by a bank certificate.
Individual shares will have an equal nominal value of at least Dhs 1,000 per share.
The liability of the shareholders of an LLC is limited to the extent of their respective shareholdings in the LLC.
Several administrative steps must be completed before the LLC is incorporated. These include approval of the LLC's name and memorandum by the Department of Economic Development, as well as the deposit of the minimum share capital with a bank operating in the UAE.
Professional/Service Company
Full foreign ownership is generally permitted. Professional firms may be established in the form of a sole proprietorship or a civil company. A UAE national must be appointed as the local service agent, but will have no direct involvement in the business and is paid a lump sum and/or a percentage of profits or turnover. The role of the local service agent is intended to assist in obtaining licenses, visas, and labor cards.
These are the 5 types of business establishments applicable to foreign entities under the UAE commercial Law.
