The activity of a legal entity in Dubai is governed by the Company Law, which regulates the types of legal entities under which a company can be opened, the legislation for the incorporation of a structure,the limitation imposed to foreign entrepreneurs when setting up a business here and other provisions.
If you are interested in the provisions of the Company Act, our Dubai lawyers will provide an in-depth presentation upon this matter.
Types of legal entities in Dubai
1. General Partnership: This type of company may only be established between UAE nationals. A general partnership can be set up between two or more general partners who are unlimitedly and jointly responsible for the company’s liabilities.
2. Limited Partnership: This entity usually has at least one active partner who manages the company and at least oneinactive partner who does not participate in day-to-day management.
3. Joint Participation (Venture): This structure is actually an association between at least two business partners who will share the loss and profit in their commercial businesses conducted by one of them in his or her own name.
4. Public Joint Stock Company: This legal entity comprises any company in which a public body from UAE holds any share capital or any structure whose capital is split into publicly subscribed negotiable of equal value shares or. A minimum capital of 10 million AED is required (United Arab Emirates Dirham – UAE currency) and, based onthis capital, it must achieve the objectives of the company.
5. Private Joint Stock Company: This legal structure requires minimum three shareholderswho must fully subscribe to a minimum capital of two million AED. The shares of private joint stock companies may not be traded on the stock exchange Private joint stock companies may be converted into public joint stock companies if the company fulfills some legal conditions. If you are interested in more information regarding this subject, our law firm in Dubai will offer further details on the legal entities available in Dubai.
6. Limited Liability Company: This type of company is defined as an association of maximum 50 shareholders and a minimum number of two. Each partner’s liability is limited to the extent of its share participation in the capital of the company.
7. Partnership Limited with Shares: This legal entity is formed by participating partners who are liable to the extent of their share participation in the company and general partners who are jointly liable to the extent of their personal assets. The general partners have to be UAE nationals. The minimum capital required to form a partnership limited with shares is AED 500,000.
Provisions of the Company Act in Dubai Company
The new Company Act was enabled on the 1st of July 2015 and only applies to companies which operate in Dubai, while the companies from other Emirates’ free zones are subject to different requirements. According to the Company Act 2015, any company incorporated in Dubai must have one or more UAE partners who will own at least 51% of the share capital of the company. All legal entities must have a Memorandum of Association drafted in Arabic and legalized by a public notary. On the other hand, foreign businessmen can have 100% ownership in the free zones.
The shareholders can submit the capital in cash or kind. In order to have proof of all entity’s transactions, companies are required to maintain accounting records which will be kept for at least five years at the company’s office in Dubai. Limited liability companies and joint stock companies have to appoint independent auditors.
The alteration of the share capital is now forbidden if the changes will affect the minimum 51% held by the UAE business partner. Foreign entrepreneurs are now allowed to incorporate joint stock companies and limited liability companies as holding structures in Dubai. Another important provision of the new Company Act in Dubai is that a single shareholder is now allowed to open a limited liability company. In addition, a minimum share capital of 30 million AED will be required for registering a public joint stock company, while 5 million AED represents the minimum share capital for a private joint stock company.