Setting up a UAE Limited Liability Company

January 2012

Contacts

Introduction

The UAE Commercial Companies Law (CCL) is the main legislation governing the setting up of companies and carrying on of business in the UAE. Under article 22, all UAE registered companies must have a local majority holding with at least 51 per cent of their share capital being held by UAE nationals, subject to certain permitted exceptions. Some activities require an even higher ownership threshold, but these ownership requirements do not apply at all to entities established in the UAE’s free zones.

For persons intending to conduct business in the UAE there are two principal concerns:

  • selecting the appropriate business organisation from the types of company recognised under the CCL
  • obtaining the necessary trade licences and other governmental approvals.

Here we focus on the requirements and procedures for establishing a limited liability company (LLC) under the CCL, since LLCs are currently the most common form of corporate entity used by foreign investors in the UAE1.

Step 1: trade name reservation and initial approval

The first step in registering the LLC is to reserve the trade name and obtain initial approval to proceed with an application to register the LLC. This is achieved by applying to the Abu Dhabi Department of Economic Development or the Dubai Department of Economic Development, as appropriate (collectively referred to in this article as the DED).

The following documents should be submitted to the DED as part of the initial process:

  • trade name application form
  • licence application form
  • (if one or both shareholders are corporate entities) certificate of incorporation, memorandum and articles of association and board resolution approving the subscription in the LLC, together with a power of attorney authorising an individual to act on behalf of the corporate shareholder on the establishment of the LLC
  • passport copies of any individual shareholders, proposed directors and general manager of the LLC.

The DED will then issue an initial approval. Further approvals may be required from other governmental authorities depending on the proposed activities of the LLC. Significantly however, HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai has recently issued a new law that aims to, amongst other things, organise the conducting of economic activities in the Emirate of Dubai and streamline the licensing process by facilitating coordination between the various government entities in Dubai. This new law, known as the “Law of the Organization of Economic Activities Practice in the Emirate of Dubai No. (13) of 2011” (the Licensing Law), provides that all Dubai based applications will be dealt with by the DED which will act as a window to the other applicable government departments. In addition, the DED will be responsible for classifying and regulating the types of economic activities which may be undertaken in Dubai. The introduction of the Licensing Law is likely to be viewed as a welcome development by many businesses wishing to establish a presence in Dubai. Previously applicants had to obtain a number of different approvals from various authorities before being able to conduct business - the Licensing Law seeks to offer a streamlined approach to this process. However, given its fairly recent introduction, the full effects and actual implementation of the Licensing Law remain to be seen.

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Step 2: signing the Contract of Establishment of the LLC

Once initial approval is issued, and required approvals from any other applicable authorities are obtained, the proposed shareholders (or, in the case of any corporate shareholder, its duly appointed attorney), should sign the Contract of Establishment2 before a notary public in the relevant Emirate.

This Contract of Establishment must be drafted in Arabic3.

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Step 3: completing the administrative tasks

Based on the initial approval (step 1) and the notarised Contract of Establishment (step 2), the authorised representative of the LLC should arrange for:

  • a lease for office space for the LLC in the appropriate Emirate
  • a bank account in the UAE in the name of the LLC (under incorporation) and the deposit of the share capital of the LLC (there are no minimum capital requirements under the CCL but, as a practical point, authorities will expect the LLC to be established with a sufficient level of capital to conduct its proposed activities) - various anti-money laundering and verification documents will be needed at this stage
  • the issuance of a certificate by the bank confirming the deposit of the share capital
  • the appointment of an auditor for the LLC, together with a copy of the auditor’s licence and a certificate from the auditor confirming its appointment
  • publication of the Contract of Establishment in the Companies Gazette issued by the Ministry of Economy.
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Step 4: obtaining the commercial licence of the LLC

Once steps 1 to 3 have been successfully completed, the LLC will be in a position to obtain its commercial licence from the DED, which will require the following documents:

  • the initial approval (as per step 1) and any additional authority approvals as a result of the LLC’s proposed activities
  • the duly notarised Contract of Establishment (as per step 2)
  • (if one or both shareholders are corporate entities) the corporate documents referred to in step 1
  • passport copies of any individual shareholder, proposed director and general manager of the LLC (as per step 1)
  • the bank certificate confirming the deposit (as per step 3)
  • the auditor’s certificate confirming its appointment (as per step 3)
  • a copy of the office lease agreement (as per step 3)
  • receipt from the Ministry of Economy indicating publication of the Contract of Establishment in the Companies Gazette.

The DED will then issue the LLC’s commercial licence, specifying the activities which may be undertaken. This is usually valid for a year and renewable annually4.

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Step 5: becoming a member of the Chamber of Commerce and Industry

All LLCs registered in Abu Dhabi must register with the Abu Dhabi Chamber of Commerce and Industry (ADCCI), while, in Dubai, it is the Dubai Chamber of Commerce and Industry (DCCI). The procedure for registering at each is broadly the same and involves the completion of an initial membership application, together with submission of the following documents:

  • a copy of the LLC’s commercial licence
  • passport copies of the authorised signatories of the LLC
  • a copy of the office lease agreement.

If these are in order, and once the annual membership fee is paid, the LLC will be registered as a member and required to renew its membership on an annual basis.

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Fees

Various fees arise during this process. These vary from Emirate to Emirate and, in the case of the commercial licence, from Ministry to Ministry – depending on the LLC’s proposed activities.

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Notarisation and translation of documents

Any foreign shareholder will need to present documents for authentication at the foreign ministry of the country in which it is incorporated and subsequently to the UAE consulate. Before they can be presented to the authorities in the UAE, they must also be translated into Arabic by an official translator. The notarisation process should be commenced as early as possible as it can take a significant amount of time. Where the responsible UAE embassy is not located in the country of incorporation, the process can be delayed further.

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Footnotes

  1. It should be noted that: (i) the formalities and procedures are generally determined by each Emirate separately - this article has been prepared as a brief overview of the main steps and key documents common throughout the Emirates and, where possible, has highlighted some of the key differences between Abu Dhabi and Dubai (being the main Emirates where registrations take place); (ii) a company may need to meet additional requirements in order to operate within its relevant industry; (iii) each application will be considered on its merits by the relevant government authorities and, in each case, additional requirements may be imposed or usual requirements may be waived; and (iv) a LLC must have a minimum of 2 shareholders and a maximum of 50.
  2. LLC equivalent to memorandum and articles of association.
  3. It is common practice for the Contract of Establishment to be in both Arabic and English.
  4. The Licensing Law provides that, upon special request, it may be possible to obtain a four year licence.
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