TYPES OF COMPANY STRUCTURE IN ABU DHABI MAINLAND.
There are several company structures to opt from for an investor looking for setting up a business in Abu Dhabi mainland. They are as follows:
- LIMITED LIABILITY COMPANY (LLC)
This is the most common business entity used to conduct all business activities in Abu Dhabi. As always, the company is a separate legal entity or ‘person’. In particular, a company is separate from its owners, shareholders and the persons who run it, the directors. A limited liability company must appoint a minimum of one director and two shareholders and a minimum issued share capital of US$41,000. LLCs are allowed to engage in all commercial or industrial activities.
- SOLE PROPRIETORSHIPS
Foreigners are allowed to invest in Abu Dhabi as sole traders, in their personal name. Under this establishment, a minimum capital of US$37,000 is required and the sole proprietorship must appoint a UAE national as his service agent. This kind of business entity is used by doctors, engineers, and lawyers.
- SHAREHOLDER AGREEMENT WITH A UAE NATIONAL
UAE company law allows foreign companies draft flexible, differential profit sharing arrangements, independent of the UAE shareholding percentage. Through a legal shareholders’ agreement, the UAE national will be designated a silent partner who will not interfere in daily activities of the Abu Dhabi company. The foreign investor legally enjoys full power to solely operate the business activities and corporate bank account. The shareholders’ agreement will be signed by both the foreign investor and the UAE local partner and witnessed by two different parties from each side. The shareholders’ agreement is legally valid in the Abu Dhabi courts to arbitrate any dispute between the foreign investor and the local partner. While foreign companies prefer to establish LLC with a silent partner, there are advantages to having an active local shareholder.
- ABU DHABI PROFESSIONAL SERVICES COMPANY
Foreign investor can incorporate an Abu Dhabi LLC to provide professional services without having a UAE national partner. Professional services include legal and accounting consultancy, IT and management consultancy, and marketing consultancy. This business entity type is also known as a civil business company. While the Abu Dhabi LLC can be 100% foreign owned, a UAE national must be appointed as a local service agent under an agency contract authenticated by a notary public. The service agent has no direct involvement in the business, and his role is limited to obtaining licenses, labor cards and sponsoring residence visas. He is paid a lump sum and/or percentage of profits or turnover.
- A FOREIGN BRANCH OFFICE AND A FOREIGN REPRESENTATIVE OFFICE
The commercial companies law regulates foreign company branches and representative offices in the UAE and stipulates they may be 100% foreign owned, provided a local agent or sponsor is appointed. Only foreign manufacturing and construction companies are allowed to establish these business entity types; An Abu Dhabi branch of a foreign company is allowed to invoice UAE customers, sign local sales contracts, and receive income from customers. A local UAE agent or distributor must be appointed to sponsor visas and licenses; While an Abu Dhabi representative office is 100% foreign-owned and controlled, it is not permitted to make direct sales within the UAE. Such an office will only engage in activities such as promoting the business of the parent company and market research. A local UAE agent or distributor must be appointed to sell goods and provide services to local companies; Before the government issues a license to foreign company branches or representative offices, a bank guarantee of US$13,700 must be provided to the ministry of commerce; Abu Dhabi branch offices cannot sell or distribute goods (but can provide a service) unless they are branch offices of UAE registered companies; A foreign company may establish an Abu Dhabi branch provided it has been approved by the executive council and the federal ministry of economy and commerce, is granted an appropriate license from the Abu Dhabi municipality, and been accepted as a member of the Abu Dhabi chamber of commerce.
- JOINT VENTURES
A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired business activity. Joint ventures in the UAE are established in the form of an LLC where 51% is owned by a UAE national, but the profit and loss distribution ratio can be mutually agreed; The foreign company deals with customers under the name of the local partner, the latter bears all liability. In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects.
- PUBLIC SHAREHOLDING COMPANY (PSC)
This business entity type is also known as a public joint stock company and is suitable for large projects or operations, involving a large investment of funds or raising private or public capital; If our client plans to offer shares to the general public to raise capital, we recommend forming a public joint stock company. This entity type is similar to a UK public limited company or (AG): A PSC requires a minimum share capital of US$2.7 million a minimum of 10 founders of which at least 51% owned by UAE nationals a board of directors consisting of a minimum of three to a maximum of fifteen persons. The chairman and a majority of directors must be UAE nationals; The law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies.
In a nutshell, in order to set up a business in Abu Dhabi mainland, one has to know the costs of the business set up, learn the legalities and the paperwork involved, understand the incorporation and licensing process, and know that the region is under the cultural borders.