A local company in UAE: purpose and features of registration

A local company is a company that is registered on the mainland of the emirate (mainland), geographically outside the free zones (freezone) and in partnership with a citizen of the United Arab Emirates (so-called, local partner).

The local partner should own 51% of the company's shares. Owning a 51% stake in a local partner is a prerequisite for registering a local company in the UAE. The local partner is present in the statutory documents of the company - a license and legally owns a 51% share of the company.

Business activity in the UAE in the form of LLC company

The Limited liability company (LLC, an analogue of the Limited Liability Company) is the most common legal form of a company outside the free zones among non-residents of the UAE. This is the only option that assumes the maximum ownership of the company for non-residents in the UAE - 49% of the shares.

 A non-resident may act as the head of an enterprise and have full company management. Local shareholders are entitled to receive profits from the company's activities (on profits) only if the directors decide on the distribution of profits in the form of dividend payments.

In order to protect your business additionally, a so-called “inactive partner” is used, which concludes an agreement with the owner, who owns 49% of the shares, according to which the local inactive partner receives a reward in exchange for waiving the right to manage the company to make a profit in favour of the owner non-resident.

The number of directors and investments

The number of owners in a local company can be from 1 to 50 persons. The authorized capital required to open a limited liability company is 300,000 United Arab Emirates dirham (about $ 82,000), which must be paid in cash.

Cases in which registration is only necessary for a local company:

1) If the activity is conducted in the entire emirate. Here it is worth remembering the feature of the company registered in the free zone. A company in the free zone (FZE or FZC) has the right to operate only within the free zone in which the company is registered;

2) To participate in public tenders.

A local company is required to file audit reports and have an office in any mainland part of the emirate. When registering a local company, there is no virtual office option, but there is a wide range of choices for selecting the appropriate office in the market. All company employees must have medical insurance.

Law and Trust International invite future investors to open a company in the UAE. You will learn about the features of registration and its cost at a free consultation by contacting our lawyers.