Mainland Company

Mainland Company Formation i.e. outside Free Zones of UAE: Before 1984, each emirate in the UAE - Abu Dhabi, Dubai, Sharjah, Ajman, Ras Al Khaimah, Umm Al Quwain and Fujairah - followed its own procedures governing the operations of foreign business interests. The Federal Law No. 8 of 1984 and its amendment by Federal Law No. 13 of 1988 - the ‘Commercial Companies Law” and its by-laws have since been issued. The law makes it conditional that the companies be wholly owned by nationals or that nationals own at least 51% of its share capital, while the remaining 49% may belong to foreigners.

The law provides that commercial companies established in the UAE must take any of the following:

LEGAL FORMS

It is a firm which consists of two or more partners who are jointly and severally responsible for all the firm’s liabilities. Partnership companies are confined to UAE nationals only because partners are responsible towards the liabilities of the firm by all their assets, which may not be applied to foreigners as in most of the cases their assets are usually held abroad.

It is a firm consisting of one joint partner or more who is liable with all his financials for the firm and another in-commendam partner or more who shall not be responsible for the liabilities of the firm except to the value of his share in the capital. According to law, all joint partners in such type of firms should be nationals of the UAE.

Public Joint Stock Company is a company with a capital divided into equal negotiable shares. In such companies a shareholder’s liability is limited by the number of shares held by him. Minimum capital required to form a Public Joint Stock Company is AED 10 million with a nominal face value of AED 1 – 100, and for a banking entity it is AED 40 million and insurance and investment companies is AED 25 million. Among the other requirements for the establishment of a public joint stock company is the preparation of a founders’ agreement, a prospectus or invitation for public subscription supported by an overall business plan or feasibility study and an auditor’s certificate, a due diligence survey, a memorandum and articles of association. A PJSC must have at least 10 founder members and its management should be vested in a board of directors consisting of a minimum of three to a maximum of fifteen persons whose term of office may not exceed three years. The Chairman and majority of the Directors in a public shareholding company must be UAE nationals. In addition at least 51% of the shares of the PJSC should be held by UAE nationals. The founder members may only hold 45% of the share capital, as 65% is required to be offered to the public. The Law stipulates that the companies engaged in banking, insurance or financial activities should be run as public shareholding companies.

Provisions to set up a PJSC:

Basic Requirements To Set up a PJSC
Name To be derived from the purpose
Capital AED 10,000,000
Duration of the Company To be decided by the Founder Members
Memorandum of Association To be Prepared in Consultation with standard Memorandum of Association Available with the Ministry
Number of Founding Members Minimum 10
Committee to continue 3-5 Members from the founding members

A Private Shareholding Company is incorporated by a number of persons not less than three. Unlike public shareholding company, a private shareholding company cannot invite the public for subscribing in its shares. The minimum share capital to form a private shareholding company is AED 2 million (US $ 544,959). The Chairman and majority of the Directors in a private shareholding company must be UAE nationals.

A Joint Venture is a type of company where two or more partners agree by contract to share the profits or losses of one or more commercial enterprises, which will be carried on in the name of one of the partners. Contract of Joint Ventures may be written or oral and not required to be notarized. Third parties can recourse only to the partners with whom they deal. However, should the Joint Venture is disclosed to the third parties, all the partners are liable to the third parties. Existence of Joint Venture may be proved by any method of proof.

A Limited Liability Company (LLC) is the most common form of business entity formed in Dubai for engaging in commercial activities. A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. The minimum equity participation by UAE nationals is 51%. Capital required for forming a limited liability company should be enough to run the business without any difficulties and can be contributed in cash or in kind. Profit or loss distribution can be prescribed and responsibility of management of an LLC can be vested with national partners, foreign partners or third party. The shares of such company are not open for subscription by the public and they do not issue negotiable shares. As per the Commercial Companies Law, LLCs may be licenced to engage in a wide range of commercial activities, except for banking, insurance and the investment of money for third parties unless they obtain prior approval from the UAE Central Bank/appropriate authorities. An LLC can be used as the preferred vehicle for a joint venture between a foreign party and a UAE party (UAE national partner), if both the parties have a common business objective to be achieved in UAE.
[Currently DED has waived the requirement of producing capital confirmation from a local Bank.]

Unlike a commercial company which requires 51% UAE national equity participation, foreign investors who are qualified, can set up a partnership firm to practice a professional activity. The firm shall be regarded as a professional company which practices a profession. On this premises the professional companies are set up between professionals or partisans to carry out non-commercial activities. The firms registered as professional entities may only practice the specific professional activity and not any commercial activity. Such professional activities include rendering management consultancy, marketing consultancy, consulting on various other fields, organising and keeping accounting records or similar activities approved by DED from time to time. However, it is mandatory for such entities to appoint a UAE national as the Service Agent. (It is also permitted to practice such profession as a sole proprietorship entity fully owned by a foreign investor with a Service Agent).

The Companies Law, in article (313) allows a foreign company to exercise its main activity in the UAE by opening a branch or a representative office. The difference between the two is thatthe foreign company which opens a branch in the UAE may exercise freely the activities for which it is licenced whereas a representative office may practice only promotional activities for the products and services provided by the parent company. Unlike a foreign branch a representative office cannot conduct business operation or market its product. In order to engage a foreign branch to conduct its operation in Dubai it should obtain a licence from the Ministry of Economy prior to obtaining the licence from the Department of Economic Development. However, it is now allowed for foreign professional and service companies to open their Branch in Dubai without Ministry of Economy registration whereas foreign companies registering their presence as a Representative Office must obtain registration with the Ministry of Economy.

The main condition for opening a representative office or a branch of a foreign company in the UAE is to appoint a Service Agent who should be a UAE national. A service agentis not an empowered agent who can bind his principal as explained in the definition of the term “agent” in the Commercial Companies Law. A service agent is not responsible to undertake any financial obligations concerning the activities of the company’s branch or representative office within the UAE or abroad. He should not interfere in the matters related to the company’s management or activities. His duties towards the company and others are confined to providing such services as required by the principal. These services usually include obtaining entry/residence permits, acquiring the necessary licences or facilitating the processing of transactions with the government authorities. The Service Agent is remunerated in lump sum as agreed between him and the foreign company for the services rendered to the foreign company.

The states of the Gulf Cooperation Council (the UAE, Saudi Arabia, Sultanate of Oman, Qatar, Kuwait and Bahrain) signed the United Economic Agreement in Riyadh on 7th June 1981, with a view to coordinate and unify economic, financial, monetary, commercial and industrial legislations and UAE endorsed this agreement in 1982. It is conditional as per the Federal Law No. 2 of 1989 concerning permitting the GCC citizen to conduct a business operation in UAE that the investor should be a natural person residing in UAE and practice the required activity by himself and have a licence to practice the activity in his country of origin.

A company registered in a GCC country can open its branch in Dubai without obtaining prior approval from the Ministry of Economy. However, the branch must fulfil the requirement of obtaining prior approval from an external department if the licence procedure requires so. The GCC Company is not required to appoint a Service Agent. However, if there are shareholders who are not from the GCC in the mother company, such company shall be considered as a foreign company and still required to register at the Ministry of Economy in accordance with usual procedure.



SPECIALIZED ENTITIES

DTCM is empowered to issue relevant legislations and instructions to govern tourism industry in Dubai. DTCM is responsible for issuance of all kind of tourism licences, classification of hotels, hotel apartments and guest houses. DTCM is further responsible for issuance of permits and control over the concerned establishments.

Type of Permits
Tour Boats, Travel and Tourism services, Desert Camps, Entertainment Activities, Parties with tickets, Hotel Establishment Parties without Tickets, Fashion show with and without tickets, Entertainment Activities for non-hotel establishment, Permits for Tourism conferences and exhibitions.

DHA came into existence in 2007 to oversee Dubai’s complete healthcare sector and enhance a dynamic, efficient and innovative private sector engagement in this field. DHA issues permission for all health care facilities such as setting up hospital, medical clinics, and specialist clinics and licensing health care professionals.

The companies and professionals must adhere to various regulations, procedures and codes of practice in order to get the permission and practicing licence.

Upon successful completion of the required formalities with the DHA and receipt of Initial Approval the investor shall proceed for completing the registration of the legal entity and obtain the final licence from DED. The government now allows forming a limited liability company (LLC) as the approved legal structure for practicing health care related activities.

Engineering firms operating in Dubai shall adopt one of the following forms:
Local Engineering Firm
Branch of a Foreign Firm

Local Engineering Firm
Partner/s must be a UAE national. Partners must hold university degree in engineering from a recognized university.
» Proven experience in the specialization field not less than three years after qualifying.
» Membership in the Engineers’ Association of the Country.
» Shall neither own contracting companies nor building materials trading companies.
Expatriate investor may, pursuant to the following stipulations and conditions provided for, apply for registration in the register of practicing engineers:

» Exclusively dedicated to the business of the Engineering Firm
» Proven experience in the engineering field not less than 5 years after obtaining the university degree
» Expatriate engineer must reside in UAE not less than 9 months in a year.
» One or more expatriates may jointhe firm provided they are entered inthe Register of Practicing Engineers and the maximum shareholding in the capital allowed shall not exceed 49%.

Branch of a Foreign Firm
Foreign Engineering Firm’s Branch Office is defined as “the branch established in the Emirate by one of the foreign specialized engineering firms”. Licensing of the same shall be limited to the fields of sophisticated specialization not commonly provided by local engineering firms.

Companies providing sea cargo and logistics services must obtain prior approval from Dubai Maritime City. Similarly if the company wants to engage in air cargo, activity must be approved by Dubai Civil Aviation Authority (cargo section). Also, in order to assist importers and exporters for clearing the goods at the ports, the company must obtain customs broking permit fromDubai Customs Department. It is a pre- requisite to submit a bank guarantee of AED 50,000 to the customs department for obtaining customs broker permit.

Upon obtaining the approvals from Dubai Maritime City, Dubai Civil Aviation Authority and Dubai Customs Department, the investor shall proceed for completing registration process and obtaining the licence from DED.

Trakhees was established by the Ports, Customs and Free Zone Corporation with the aim of integrating licensing and compliance functions, already performed by the Civil Engineering Department and Environment, Health and Safety Department. The Commercial Licensing Division (CLD) of Trakhees issues licences for the entities within Dubai World Communities, such as Nakheel, Limitless and Istithmar. CLD is an integrated licensing and government services provider of Trakhees to the clients from various segments of commercial, professional, industrial, tourism etc. who wish to establish within Dubai World Communities. CLD has established strategic alliances with Dubai’s government authorities to strengthen its position as a new governmental regulatory authority having agreements with DED, DNRD, Free Zone Authority, DTCM etc.

Type of Licences provided by Trakhees CLD: Licences as per Dubai Laws (local laws) Licences as per Free Zone Laws

Licences as per Dubai Laws (local laws)
A proposed entity in Dubai World Communities may adopt any of the legal structures prescribed by the UAE Commercial Companies Law and with due compliance to the procedures adopted by the Department of Economic Development, Dubai for licensing such entities.

Licences as per Free Zone Laws
An investor(s) may set up a Free Zone Establishment, Free Zone Company or Branch of a Foreign Company in Dubai World Communities subject to the prevailing rules and regulations of Economic Zones World applicable to that particular community.

The KHDA is a Dubai government authority that oversees education, both private and public, in Dubai. The KHDA aims to develop both the education and human resource sectors in Dubai.KHDA is a regulatory authority of the Government of Dubai and is responsible for the growth, direction and quality of private education and learning in Dubai. Licensing of all educational institutes in Dubai (including those located in free zones in Dubai) is governed by the KHDA.



Though licences are issued predominantly by the respective Free Zone Authorities, there are certain Free Zone areas where DED also issues licences as per the local and federal laws such as:

Free Zones where Department of Economic Development (DED) Issues License
Tecom – A & B DED issues license to companies who opt to operate in Tecom A&B subject to Tecom Approval
Dubai Silicon Oasis Companies licensed by DED may choose to operate out of freehold buildings in Dubai Silicon Oasis by obtaining a special permit from DSO Authority
Dubai Flower Centre Companies specializing in perishable items like floriculture, horticulture, fruits and vegetables can operate out of Dubai Flower Centre
Dubai World Communities (Trakhees) Entities in Dubai World Communities may adopt any of the legal structures prescribed by the UAE Commercial Companies Law and the due compliance to the procedures adopted by the DED


Licence to practice majority of the activities are directly issued by the Department of Economic Development. However, certain activities require prior approval from the relevant Ministry/Department such as:

Financial institutions, banks, money exchanges Central Bank
Tourism Department of Tourism and Commerce Marketing
Health Care Dubai Health Authority
Agriculture, veterinary, environmental consultants Ministry of Environment and Water
Customs clearance, freight forwarding, sea cargo Departments of Ports and Customs
Air Cargo, Travel Agent Department of Civil Aviation
Construction companies, restaurants, clinics, engineering firms Municipality
Telecommunication Equipment Ministry of Telecommunication
Registration of ships, boats, yachts Ministry of Communication
Branch of foreign company (distribution), insurance company, insurance agents Ministry of Economy


A foreign company wishing to supply goods and services from abroad, but without establishing a physical presence in Dubai may find it advantageous to appoint a commercial agent. The UAE Commercial Agencies Law, Federal Law No. 18 of 1981, as amended by Federal Law No. 14 of 1988, and Federal Law No. 13 of 2006 (the “2006 Amendments”), and Federal Law No. 2 of 2010 (the “2010 Amendments”) regulates and governs the appointment of registered commercial agents in the UAE. The Commercial Agency Law is supplemented by, inter alia, the UAE Commercial Transactions Law, Federal Law No. 18 of 1993 (the “Commercial Code”), implementing regulations, custom and practice.

Together, the Commercial Agency Law and the Commercial Code provide the primary regulatory framework for agency relationships through which foreign businesses provide products and services in the UAE.

» Commercial agents are entitled to receive commissions on sales in their designated territory irrespective of whether such sales are made by or through thecommercial agent, unless otherwise agreed

» Commercial agents are entitled to prevent products subject to their agency from being imported into the UAE if the commercial agent is not the consignee, unless the UAE Council of Ministers hasexempted the subject products from application of the Commercial Agency Law. A principal may not terminate or fail to renew the agency agreement unless there is a material reason justifying such termination or non-renewal. Either party is entitled to claim compensation for damages suffered and losses incurred due to termination or non-renewal of a registered commercial agency. In practice, this is a benefit to the commercial agent only. Furthermore, commercial agents are not limited to seeking remedies under the Commercial Agency Law. For example, a registered commercial agent might also claim damages for improper termination or for non-renewal pursuant to the Commercial Code.

» A registered commercial agent can preclude the foreign principal from appointing a replacement registered agent even if the registered agency was for a fixed term and expired, unless the former agent consentsor the principal obtains a favourable decision from the specialized agency disputes committee or a proper court in the UAE.

» Commercial Agency Law provides that commercial agency agreements shall be governed exclusivelyby UAE law notwithstanding any provision to the contrary in the agency agreement.



INDUSTRIAL SECTOR IN DUBAI

Dubai’s manufacturing sector is one of the major economic sectors, besides construction, trading and services, on which Dubai is counting for its drive of economic diversification. It is estimated that Dubai’s industrial production contributes almost 13% of its GDP. Inorder to boost the manufacturing sector

Dubai government has established two dedicated industrial zones viz., Dubai Investments Park and Dubai Industrial City in addition to the existing industrial areas.

DTCM is empowered to issue relevant legislations and instructions to govern tourism industry in Dubai. DTCM is responsible for issuance of all kind of tourism licences, classification of hotels, hotel apartments and guest houses. DTCM is further responsible for issuance of permits and control over the concerned establishments.

Type of Permits
Tour Boats, Travel and Tourism services, Desert Camps, Entertainment Activities, Parties with tickets, Hotel Establishment Parties without Tickets, Fashion show with and without tickets, Entertainment Activities for non-hotel establishment, Permits for Tourism conferences and exhibitions.

A subsidiary of Dubai Investments PJSC, DIP is divided into three distinct zones – each setting the benchmark for high quality projects in a well-planned, fully-integrated master community development. It is well connected to Dubai’s key business districts and can be accessed from both Sheikh Zayed Road and Emirates Road. As a premier residential and business destination, DIP redefines the concept of living and work making it one-of-a-kind development in Dubai.

Salient Features:
» Divided into three zones – Residential, Commercial and Industrial, Dubai Investments Park is the most thoughtfully conceived self-sustained development where each zone complements the other to offer a complete solution in terms of manufacturing, housing, trade, research, development, education, distribution and logistics. Dubai Investments Park is a mixed-use development, which has a strong focus on industrial sector but also has the Green Community residential development.

» Freehold areas are allowed in Dubai Investments Park: Dubai Govt has issued Regulation No. 2 of 2012 earmarking freehold real estate ownership for non-UAE citizens in some of the areas of Dubai Investments Park. According to the regulation issued by His Highness Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and the Ruler of Dubai, after considering the provisions of Law No. 7 of 2006 regarding real estate registration in the Emirate and Regulation No. 3 of 2006 specifying the areas where non-UAE nationals may own real estate properties in Dubai and its amendments, non-citizens are allowed to acquire the usufruct right (life interest) for a period not exceeding 85 years for property located on pieces of lands in Dubai Investments Park 1 and 2.

Operation Since 2004
Legislation Law No. 1 of 2000
Owned by Dubai Investments PJSC
Regulations In DIP, Federal Law No. 8 of 1984 is Applicable. This law stipulates that all companies have at least one national partner holding minimum 51% of the share capital
Segments Manufacturing, Assembly, Warehousing
Type of Legal Entities Limited Liability Company
Minimum Capital AED 300,000
No. of Share Holders Minimum 1 and Maximum 50
Shareholding Structure Natural Person(s) and/or Corporates(s)
Facilities Offered Commercial Office Spaces, Warehouse/Light Industrial Unit/ Land
Size of Facilities Land: Various Sizes
Warehouses: 500 sq. meters and above
Office Spaces: Different sizes
Lease Period 30 to 50 years
Rental Office: AED 650 - 850 : Warehouse, LIU: AED 220 – 300
Commercial: AED 45 : Industrial: AED 35
Fees As decided by Department of Economic Development and Ministry of Industry
No. of Visa As per Ministry of Labour norms

Dubai Industrial City is an industrial cluster designed to attract and support the growth of light to medium industries. It also offers the largest logistics operations in one location within the UAE. DI provides excellent connectivity by road, air and sea to all major markets in the Middle East and North Africa and the Indian Subcontinent.

Salient Features:
Warehouses in DI are designed for cold, chemical and general storage, as well as for light industrial use. DI has 7 million sq.feet of warehouses that come in two units: 5,000 and 10,000 sq.feet. There are also 122 retail showrooms of 10,000 and 15,000 sq.feet in size that are equipped with back side storage allowing retailers more storage space for displaying products.

Plots of Land are allotted for:
» Industrial Land is available from 25,000 sq. meters for long term lease with stable supply of utilities and easy access to major roads, ports, and airports
» Commercial Offices: Plot with GFA varies from 8,200 sq. meters to 200,000 sq. meters are available.
» Residential: Plot with GFA varies from 7,700 sq. meters to more than 8,400 sq. meters are available.
» Hotels: Plots of land for hotels and other commercial properties are available in different sizes

Open Storage yards: DI offers 3 million sq. feet of open yards for storage of construction equipment, materials and automobiles. The yard is fully fenced, tarmaced and with 24 hour onsite security in place.

Labour Villages: A series of labour cities offer business owners affordable, high quality labour accommodation managed and operated at very high standards. The accommodation is built to house both skilled and un-skilled workers.

Taasees at DI is a one-stop shop to address all government related issues including licensing, registration, permits and visas. In addition, the DI Permits Department assists companies with their proposals for construction of industrial facilities and commercial developments, a single window approach to expedite developments. The Permits Department reviews the architectural designs, permit requests, construction plans and infrastructure requirements for adherence to local and statutory requirements.

Operation Since 2004
Legislation Law No. 1 of 2000
Owned by TECOM Investment
Regulations In DI, Federal Law No. 8 of 1984 is applicable. This law stipulates that all companies have at least one national partner holding minimum 51% of the share capital
Segments DI features six distinct industrial zones: Food and Beverage, Chemicals, Minerals, Machinery and Equipment’s, Base Metals and Transport
Type of Legal Entities Limited Liability Company (LLC)
Minimum Capital AED 300,000 [However, capital may vary according to value of project]
No. of Share Holders Minimum One and Maximum Fifty
Shareholding Structure Natural Person(s) and/or Corporate(s)
Facilities Offered Industrial and Commercial Land, Warehouses, Labour Accommodation, Office Space, Open Storage Yards
Size of Facilities Land: 25,000 sq. meters and above Warehouses: 500 sq. meters and above Office Spaces: Different sizes
Lease Period Up to 49 years
Rental Land: AED 25 Warehouse: AED 170 Office Space: AED 850 Labour Villages: AED 330 per bed per month inclusive of utilities + facility management cost
Fees As decided by Department of Economic Development and Ministry of Industry
No. of Visa As per Ministry of Labour norms