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Application for initial Approval of the following items : |
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The business activities of the proposed company, |
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The activities should be as per the activity code book issued by the department of economic development. Only a certain class of specific activities can be undertaken under a specific trade licence. |
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The proposed partners of the company have to be approved. |
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Specifically this application will not be processed unless the UAE national partner’s other licences are renewed as on the date of this application . |
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This application has to be signed by the UAE national partner and all the 49% partners. |
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This application has to be signed by the UAE national partner and all the 49% partners. |
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2 |
No objection letter from the UAE national partner’s employer (if he is employed |
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in any government department). |
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The business activities of the proposed company, |
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Application of Trade name. |
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The proposed names should be given from either the names of the partners or |
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the name should have a Arabic meaning. Please give at least 5 names in order of preference in ENGLISH and ARABIC. |
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3 |
If the name is foreign and has no arabic meaning the Economic Department will |
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charge a annual fees of AED 2000/-. This will be a part of the annual licence fees and is thus a recurring expense. |
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4 |
Copy of Partners passport and Nationality Certificate ( khulasat al kaid ) of UAE |
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national partner. The page containing UAE national’s file number on the passport is important. |
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The passport copies and the nationality certificates should bear a clear photograph of the person. If the photo is not clear they will not accept any documents. |
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If the expat partner/director is on a visit or transit visa, copy of passport showing date of entry in UAE required. Also copy of his visit or transit visa required. |
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5 |
Application to Commercial Register (2 copies). This has to be signed by the |
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partners. |
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6 |
Tenancy Contract for the office or the map of the place if it is owned by the UAE
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national partner. |
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Tenancy Residence contract for the Resident Partners and Resident Managing
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Director. If this is not available at the time of formation of the company , the Department of Economic Development will charge a lumpsum AED 1,000/- as part of the licence fees and in lieu of the 5% tax on the director’s residence. |
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8 |
Memorandum of Association of Limited Liability Company under formation duly |
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attested with Notary Public, Dubai (to be signed in the presence of Notary Officer in Dubai Courts or The Department of Economic Development, Dubai by all the partners). |
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9 |
Original Bank Certificate of AED 300,000/- (minimum) for the capital deposited in |
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the bank. For all new companies it is compulsory to deposit monies in the bank for the amount of capital. Partners will be required to sign the relevant papers in the bank. |
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Minimum Capital requirement depends on the Nature of Business. eg. For Contracting Companies the minimum Capital requirement is AED 1,000,000/-. |
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OTHERS |
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Certificate from Auditors for capital contribution confirming the capital ratio of the |
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partners. |
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11 |
Certificate from Director indicating capital contribution by partners duly certified |
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by auditors. |
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12 |
Letter to the Department of Economic Development from auditors confirming |
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their appointment as auditors of the company |
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13 |
Auditors Professional Licence copy and copy of membership certificate issued |
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by Ministry of Economy. |
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The following additional documents are required when a foreign company is a 49% partner :
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Certificate of Incorporation. |
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Memorandum and Articles of Association |
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Resolution passed by the foreign company appointing the director and |
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approving the incorporation of the limited liability company in U.A.E |
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Power of Attorney. |
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Passport copies of the Legal Representative. |
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The above mentioned documents ( except No. 5 ) have to be notarised from the U.A.E. Embassy and the Ministry of Foreign Affairs in the country in which the foreign company is incorporated .
These notarised documents have then to be attested in the country of origin’s consulate in the UAE and then have to be attested in the Ministry of foreign affairs, Dubai, U.A.E.
These notarised and legalised documents have to be legally translated in Arabic and the translation has to be notarised by the legal translator (legal translator needs to be approved by Ministry of Justice). |
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1 |
Can a sole proprietorship/partnership company be converted into a L.L.C.? |
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By virtue of the law (Enforced in Dubai) any partnership concern can convert into a Limited Liability Company pursuant to the Commercial Companies Law (8) of 1984 as amended, and the ministerial decrees.
Similarly a sole proprietorship concern can be converted into a LLC by adding one or more partners. |
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How many persons can form a company and who can be the partners? |
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Minimum two and maximum fifty persons can form a limited liability company. However, U.A.E. National's share in the capital should be minimum 51%; at any given time share of the U.A.E. National partner should not fall below 51%. Partners may be natural persons or a corporate body/company.
Each partner shall be responsible only to the extent of his share in the capital for the company’s liabilities. |
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3 |
What are the main contents of the Memorandum of Association? |
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The Memorandum of Association is a contract between the partners to form a L.L.C. and it contains the following information: |
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Name of the company, its objectives and registered office address. |
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Name of the partners, their nationalities, place of residence and residential |
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addresses. |
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Amount of the share capital, share of each partner, value of each share, |
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names of the partners and method of capital contribution by the partners. |
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Names of the directors and their nationalities. |
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Date of commencement and period of contract. |
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Method of profits or losses distribution and share of the partners in the |
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profits or losses. |
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The procedure to be adopted for sending notices to the partners.
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4 |
What are the benefits of forming a limited liability company? |
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Liability of partners is limited to the extent of unpaid capital. |
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Company attains a corporate entity different from its partners. |
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The partners can appoint Director(s) who are authorised by the |
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memorandum to carry on the business of the L.L.C. independently without involvement of the U.A.E. national partner. |
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5 |
Can the expatriate partner sponsor his family? |
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Any expatriate partner in a Limited Liability Company is eligible for sponsoring spouse and other family members on residence visa if his share in the capital is Dhs. 70,000/- or more, also he should be a director in the company and his salary needs to be stated in the Memorandum of Association (as required by immigration rules). |
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6 |
Which business activities can be undertaken by the company? |
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The company may undertake any business activity permitted by the Department of Economic Development except business of banking, insurance and investment of funds for third parties. |
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By practice, the department does not permit, |
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Two different classified business activities under one license e.g. trading and manufacturing need separate licenses. |
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Or |
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Two different designated classes of activities under one license, e.g. trading of electronics and Jewellery need separate trade licenses.
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7 |
What are the capital requirements? |
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Minimum share capital required for a specific trade license is U.A.E. Dhs. 300,000/- .
The share capital is divided into shares of Dhs. 1,000/- each.
For emirates other than Dubai capital requirement is Dhs. 150,000/- and Dhs. 1,500,000/- respectively. The share capital is divided into shares of Dhs. 1,500/- each
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How is the capital to be contributed? |
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Dhs. 300,000/- for Specific Trade License. |
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Contribution in Cash |
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Existing Sole Proprietor or partnership concerns can contribute capital in cash. |
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New companies have to compulsorily contribute capital in cash only. |
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Contribution in Kind |
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Existing Sole Proprietor or partnership concerns can alternatively contribute |
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capital in kind viz, by contributing fixed assets and / or stock. |
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New companies cannot contribute capital in kind. |
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| Notes: |
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In case of capital contribution in cash, full amount should be deposited in any
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bank operating in the U.A.E. This amount can be withdrawn only by the director of the company upon submission of proof of the company’s formation. |
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Kind contribution requires details of contribution in kind and full audited financial |
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statements. |
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II |
Dhs. 300,000/- for General Trading License. |
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Contribution in Cash |
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New companies or existing Sole Proprietorship concerns converting into a Limited Liability Company have to compulsorily contribute capital in cash. |
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Contribution in Kind |
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Only existing partnership companies are allowed to contribute capital in kind. |
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In case of capital contribution in cash, full amount should be deposited in |
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any bank operating in the U.A.E. This amount can be withdrawn only by the director of the company upon submission of proof of the company’s formation. |
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2 |
Kind contribution requires details of contribution in kind and full audited |
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financial statements. |
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9 |
In what ratios are the profits/ losses to be distributed ? |
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The partners in the proportion of their capital generally distribute Profits/ losses after setting aside 10% of net profits to legal reserve. The company has to set aside 10% of net profits to legal reserve till the legal reserve equals to 50% of the capital of the company.
Before distribution of the profits director’s remuneration can be charged as expenses as specified in the memorandum of association of the company.
The Department of Economic Development, Dubai presently permits to distribute Profits/Losses in the ratio upto maximum of 20% : 80% (instead of 51% : 49%), in such a case directors cannot be paid remuneration. |
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| 10 |
Who will manage the business of the company? |
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The shareholders / partners may appoint themselves or other persons as Directors to run and manage the business of the company. Only the directors have the powers to run and manage the day to day operations of the company, the partners are not given any powers to run and manage the company.
Either there will be one Director or Board of Directors appointed to manage the company.
All Powers of Directors are generally stated in the Memorandum of Association including power to open and operate bank accounts and borrow money from banks.
Even a company can be appointed as a Director of the company.
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| 11 |
What are the responsibilities of the directors? |
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The directors are responsible for the following important matters: |
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The directors will manage the day-to-day business operations of the |
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company as per the powers given in the Memorandum of Association of the company. His actions will be binding upon the company provided he has acted in his capacity as Director of the company and he has not exceeded his powers. |
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Proper books of accounts have to be maintained and audited on a yearly |
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basis. The directors are responsible for preparation of the balance sheet and the profit and loss account and a report on the activities and the financial position of the company including the proposal on distribution of the profits of the company within three months of the closing date of the financial year. The directors within the following ten days to the approval of the above shall present them to the ministry and the competent authority.
It is said that if creditors file a suit for winding up and the court auditors do not find proper books of accounts and are not able to ascertain why the company is not in a position to pay the creditors, then the company’s partners and directors would be held jointly responsible to the full extent of their fortunes for the company’s liabilities. |
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The directors shall convene the annual general meeting of all the partners |
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at least once a year within four months following the end of the financial year to conduct the following business: |
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Hearing the report of the director and the auditor. |
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Discussing and adopting the balance sheet and the profit and loss |
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account |
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Determining the profits to be distributed |
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Re- appointing the directors and fixing their remuneration |
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Re- appointing the auditors and fixing their remuneration |
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iv |
The phrase “Limited Liability” should be added to the name of the company |
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in addition to a statement showing the company’s capital. If the directors fail to comply with these requirements they shall be jointly responsible to the full extent of their fortunes for the company’s liabilities. |
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A register containing the following information shall be kept at the |
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registered office: |
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The names of the partners, their residence addresses, nationalities and |
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professions. |
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The number and value of shares owned by each partner. |
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Details of share transfers, date of transfers etc. |
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| 12 |
Can the directors’ be paid remuneration? |
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Directors’ can be remunerated in the following manner (and /or): - |
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Monthly salary |
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Perks viz. fully furnished accommodation, car and its maintenance, medical |
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benefits for self and family, electricity and water, etc. |
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Leave salary and gratuity. |
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Fist class return air fare for self and family. |
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Management fees based on percentage of sales of the company. |
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| 13 |
When can the partners lose their limited liability protection? |
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Partners who are appointed to manage the L.L.C. also run the risk of losing their limited liability protection under the Companies Law where they are a party to deception or abuse or exceed the authority vested in them or violate the companies law or the memorandum of association of the company. Similarly protection can be lost where such partners mismanage the affairs of the L.L.C. Only those partners who have had their objections to the actions giving rise to the liability recorded in the minutes of the meeting at which the actions were considered, or were absent when the decision to take such actions was made, will be exonerated.
Also where partners have provided personal guarantees, they agree to be bound to repay the loans to the extent the L.L.C. is unable to repay. If the personal guarantee is called upon, the partner’s liability while limited to the value of the guarantee may well exceed the value of his shares in the L.L.C. As such the advantage of the limited liability could be lost. |
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| 14 |
Can the partners give interest-bearing loans to the company? |
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The partners can give loans to the company and they can be paid interest at the commercial rates prevailing in the market. It is advisable to add such a clause in the memorandum of association of the company. |
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| 15 |
What are the major costs payable to the economic /other government |
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department for forming a limited liability company? |
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One time charges to Economic Department Dhs. 3,000/-. |
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Part of license fees are based on - |
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5% of the tenancy contract value of expatriate Director's residence |
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(located in Dubai or any other Emirate) or AED 1000/- in absence of the Directors residence tenancy contract. |
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Dhs. 750/- charged for Director being appointed for unlimited period. |
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10% of the tenancy contract value of office, go down, stores, shop rented |
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by the company. |
Note: Expatriate partner's residence is not considered for license fees if he is not a Director in the company. If all partners are U.A.E nationals, their residence, offices, shops, etc. are not considered for license fees.
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Notarization fees - 0.25% of capital OR a sum arrived at by multiplying |
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the annual salary of each director with the number of years of his appointment as stated in the memorandum of association, which ever is higher; maximum Dhs. 10,000/- only. No further fees for alteration of capital is payable if initially Dhs. 10,000/- have been paid. |
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Other miscellaneous fees and Chamber of Commerce fees. |
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| 16 |
Can a separate power of attorney be issued by the partners to the directors |
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/others? |
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Separate Power of Attorney can be issued by partners to Directors/ others giving all powers to run and manage the company. This Power of Attorney can be given to government departments / third parties who want to know about the powers of the Director’s / others instead of giving them the full Memorandum of Association. |
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| 17 |
When can the company commence business activities? |
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The partners can commence business on receipt of the Certificate of Commercial Registration, provided the partners have obtained a residence visa. The partners shall be jointly liable for all acts and transactions performed on behalf of the company prior to its registration. |
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| 18 |
If the other existing licenses of a local partner are expired will the |
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Department of Economic Development accept the documents submitted to form the L.L.C.? |
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The Economic Department will not allow a company to be incorporated if any licence issued in the name of the local partner has expired.
Therefore before submitting the name and objects approval form to the Economic Department the investor has to ensure that all the licences issued in the name of the local partner are valid. |
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| 19 |
Is residential address to be stated anywhere? |
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The residential address of the expatriate partners has to be stated in the Memorandum of Association and supported by the tenancy contract copy as 5% tax has to be paid on the per annum rental value. |
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| 20 |
Which are the documents required to be submitted to the Department of |
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Economic Development? |
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A complete list of documents required to form a Limited Liability Company is enclosed herewith. Refer Annexure A. |
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| AFTER FORMATION OF THE COMPANY |
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| 21 |
Can the company open branches in Dubai? |
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The company can open branches in Dubai by submitting an application alongwith the original trade licence and other documents. |
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| 22 |
Can the company open branches in other Emirates? |
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The company will have to incorporate a new company in other emirates with the required capital and with a new Memorandum of Association stating therein that this new company is a branch of the Dubai Company. |
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| 23 |
Can the staff of H.O. work in a branch or vice versa? |
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Yes, the staff of H.O. and branch can work at either place as per the current regulations. |
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| 24 |
Can a L.L.C. of another emirate open branch in Dubai? |
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Yes, but if the capital of the company is less than Dhs. 300,000/- then it should be raised to Dhs. 300,000/- by an amendment to the Memorandum of Association. The original and the amendment to the Memorandum of Association alongwith other documents have to be filed with the Department of Economic Development, Dubai.
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| 25 |
Can the partners admit a new partner? |
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Existing L.L.C. can admit new partner with full capital contribution in cash or kind. If the company opts for kind contribution the following documents are required:
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Sale of shares agreement. |
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Audited financial statements |
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Statement of capital contributed in kind by all the partners |
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Resolution of the partners |
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Amendment in the Memorandum of Association of the company |
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26 |
Can a partner transfer his shares to any other partner or person? |
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Yes, the following documents are required to transfer shares by one partner to another partner/ person: |
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Sale of shares agreement |
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Amendment to Memorandum of Association |
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Department of Economic Development will give advertisement in Arabic |
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newspaper for 15 days for no objection by any member of the public. |
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