Jenny Hunt

5 min

Company Formation In Abu Dhabi & Dubai - Which Structure Is Right For Your Business?

31st October 2019

Are you considering a company formation in Abu Dhabi or Dubai but not sure where to start? Don't worry, you are not alone! There are lots of different options to choose from and it can be confusing.

Most people ask 'What is the cheapest way for me to get a business license in Abu Dhabi?" or "How much does a company formation in Dubai cost?" It's difficult to answer these questions without any information about the planned company formation. A business really shouldn't be established based upon the cheapest cost.

To determine the right structure for your business its essential for the following to be considered:

Who will be the owner(s) of the business
Anticipated number of employees within the first 12 months
Activities of the business
Anticipated clients of the business
Location of the anticipated clients
Longer term expansion plans (if any)
Exit strategy

The above points will each impact where and how you business establishes itself in the UAE. These points will help to determine the legal structure of your business, such as a Limited Liability Company (LLC), Foreign Branch, or Representation Office. They will also help to determine the most appropriate jurisdiction(s), which could be either onshore (also referred to as mainland), free zone or perhaps a mixture of the two with a dual license.

Legal Structures

What is a Limited Liability Company?

Owners: Minimum 2, Maximum 50

Share capital: Dubai AED300,000. Abu Dhabi no longer specified

100% foreign ownership allowed?: Not yet. Foreign ownership is currently restricted to
49% (see about the FDI Law)

Emirati local sponsor required?: Yes a local sponsor is currently required to hold at
least 51%, but requirements are changing (see

about the FDI Law)

Activities: Any (excluding: banking & insurance & investment

of funds for third parties)

Premises: Mandatory. Minimum size & type dependent upon
business activity

Employees: No limitations. For large workforces, contracts

showing the requirement for such numbers will be

required.

What is a Foreign Branch?

Owners: Overseas parent company

Share capital: Parent company must have a minimum share

capital equivalent to AED50,000.

100% foreign ownership allowed?: Yes, the overseas parent company owns the

foreign branch 100%

Emirati local sponsor required?: An Emirati service agent is required but they do not

own any share of the foreign branch

Activities: Restricted to services only. (Selling products is not

allowed)

Premises: Mandatory. Minimum size & type dependent upon
business activity

Employees: No limitations. For large workforces, contracts

showing the requirement for such numbers will be

required.

What is a Representation Office?

Owners: Overseas parent company

Share capital: Parent company must have a minimum share

capital equivalent to AED50,000.

100% foreign ownership allowed?: Yes, the overseas parent company owns the

representation office 100%

Emirati local sponsor required?: An Emirati service agent is required but they do not

own any share of the representation office

Activities: Restricted to marketing the services of the parent

company. Transacting is not allowed

Premises: Mandatory. Office space.

Employees: Maximum of five employees.

What type of license will you choose?

What is an Onshore License?

An Onshore business license (Trade License) is issued by Emirate and allows the company to carry out its activities within that specific Emirate.
An Onshore business license (Trade License) is required to work with the government and semi-government departments.
Currently it is necessary to engage a local sponsor or service agent (depending upon the legal structure).
Governed by the Federal Law NO. 2, 2015, the Commercial Companies Law.
For companies wishing to apply for CICPA security passes an onshore business license will be required in Abu Dhabi.
For companies wishing to apply for Supreme Petroleum Council to contract directly with ADNOC (Abu Dhabi National Oil Company) an onshore business license will be required in Abu Dhabi.

What is a Free Zone License?

A free zone license is issued by the specific free zone and allows the company to carry out its activities within that specific free zone and with overseas companies. However, please note, at the time of writing: 10 Dubai free zones have this week announced a free zone passport which allows their registered companies to operate within any of those 10 free zones, free zone companies can work onshore directly via a dual license (see below).
Free zone companies can't supply directly to the government.
Allows for 100% foreign ownership.
Governed by the independent regulations of the specific free zone.
No customs duty.
Two Abu Dhabi free zones have agreements in place with the Supreme Petroleum Council which could allow their free registered companies to apply for Supreme Petroleum Council approval.

What is a Dual License?

A free zone company can apply for an onshore license in the same Emirate where its free zone license was issued, subject to certain terms and conditions.
Dual licenses negate the requirement for a local sponsor and commercial premises.
Dual licenses enable the company to work directly with the government.
Dual licenses are restricted to certain activities.

Conclusion

As you can see from the above overview, there are a lot of considerations before embarking on a company formation. Each of the routes and structures has different document requirements and processes for the company formation, which in turn affects the timescales for setting up, as well as the costs and the ongoing renewal costs each year. Given there are so many variables, this means fees will be specific to each company formation. Each company formation is personalized based upon the company's specific situation and requirements.

How can Gateway Group help your company expand to Abu Dhabi and Dubai?

Gateway provides concierge company formation and nominee corporate local sponsor to foreign companies expanding to Abu Dhabi and Dubai. Gateway protects its clients’ businesses and their profits. It provides foreign companies with the peace of mind their business is secure, they have full operational control, their profits are protected and their local sponsor is responsive whenever they might need support doing business in a new market. Gateway can also assist with ongoing compliance requirements, such as visa processing and trade license renewals. Furthermore, from a human capital perspective, Gateway can help your organisation to ensure you have the right people in place, appropriately motivated and maximizing productivity - ideal for getting your multicultural teams to work. To discuss how Gateway can help your organisation to expand into the UAE, email us: info@GatewayToUAE.com

Written by Jenny Hunt, Founding Partner & CEO

Gateway Group of Companies, Abu Dhabi & Dubai UAE