Under United Arab Emirates (UAE) laws, there are five types of business establishments applicable to foreign entities/individuals interested in establishing a formal presence in the UAE. A person can establish a new company, a branch office of an existing company, create an entity in a UAE free zones including International Companies “off-shores”, create a civil company (currently limited to Sharjah and Dubai), or enter into a commercial agency agreement.
The UAE Commercial Companies Law No. 8 of the year 1984, requires that each company established in the UAE have one or more UAE national partner(s) who hold at least 51% of the companies capital. Companies that undertake certain activities are exempt from the 51% UAE nationals share requirement, such as oil companies with concession agreements, companies involved in the oil and gas industry, companies that produce electricity and gas, companies involved in treatment of water and transmission and distribution. Foreign banks are exempt from having to appoint a sponsor. Companies established in free zones are exempted from the 51% UAE nationals share requirement.
There are seven different methods by which this can be achieved:
General Partnerships: This entity may only be established between UAE nationals. A general partnership may be established between two or more general partners who are jointly and unlimitedly, to the extent of their personal assets, responsible for the companies liabilities.
Commandite: This entity is comprised of at least one or more jointly associated partner liable for the partnerships obligations to the full extent of their assets, along with at least one or more inactive partner liable for the partnerships obligations limited to this partners capital contributions. This entity usually has one active partner who manages the company and a silent partner who does not participate in day-to-day management.
Joint (Ventures): This entity is an association between at least two partners who will share the profit and loss in one or more commercial businesses conducted by one of the partners in his or her own name.
Public Joint Stock Companies: This entity comprises any company whose capital is split into publicly subscribed negotiable shares of equal value or any company in which a UAE public body holds any share capital. There is a minimum capital requirement of AED 10 million and that capital must adequately achieve the objectives of the company. This entity requires a minimum of 10 founding members. It is important for foreign companies to understand that anyone who signs the initial memorandum and articles of association will be regarded as a founding member and therefore liable. UAE businesses involving banking, insurance or investment of funds on behalf of third parties must take the form of a public joint stock company.