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A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51%, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who – unless the agreement is publicised – bears all liability.
In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects.
A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. Such companies are recognised as offering a suitable structure for organisations interested in developing a long term relationship in the local market.
In Dubai, the minimum capital is currently Dh. 300,000 (US$ 82,000), contributed in cash or in kind. While foreign equity in the company may not exceed 49%, profit and loss distribution can be prescribed. Responsibility for the management of a limited liability company can be vested in the foreign or national partners or a third party.
The following steps are required in establishing a limited liability company in Dubai.
The Commercial Companies Law also covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100% foreign owned, provided a local agent is appointed.
Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents (which should not be confused with the term “commercial agent”). Local agents — also sometimes referred to as sponsors — are not involved in the operations of the company but assist in obtaining visas, labour cards, etc and are paid a lump sum and/or a percentage of profits or turnover. In general, branches and offices of foreign commercial companies are not licensed to engage in importing activity except for re-export or in the case of products of a highly technical nature.
To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows:
• Apply for a licence from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company. Before issuing the licence, the Ministry will:
• forward the application to the Economic Department to obtain the approval of the Dubai government;
• forward the application specifying the activity that the office or branch will be authorised to undertake in the UAE, to the Federal Foreign Companies Committee for approval;
• Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial licence specifying the activity to be practised by the foreign company;
• The branch or office should be entered in the Economic Department’s Commercial Register, and the required licence will be issued;
• The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce;
• Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry.
• What are the capital requirements to set up business in UAE ?
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
•How is the capital to be contributed?
Dhs. 300,000/- for Specific Trade License.
Contribution in Cash
Existing Sole Proprietor or partnership concerns can contribute capital in cash.
New companies have to compulsorily contribute capital in cash only.
• Is residential address to be stated anywhere?
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.
• Which are the documents required to be submitted to the Department of Economic Development?
A complete list of documents required to form a Limited Liability Company is enclosed herewith. Refer Annexure A.
After Formation of the Company in Dubai
• Can the company open branches in Dubai?
The company can open branches in Dubai by submitting an application alongwith the original trade licence and other documents.
• Apply to the Ministry of Economy
An application must be made to the Ministry of Economy (MOE) (the UAE Commercial Companies Law, article 314). trade name reservation certificate and initial approval
Obtain licence from the Department of Economic Development
The MOE will issue a formal approval to either the Abu Dhabi Department of Economic Development or the Dubai Department of Economic Development, as appropriate (collectively referred to as the DED here).
Becoming a member of the Chamber of Commerce and Industry
The final step is for the branch or representative office to register as a member with the Abu Dhabi Chamber of Commerce and Industry or the Dubai Chamber of Commerce and Industry, as appropriate. The procedure is largely the same. It will be necessary to complete an application, and provide copies of the commercial licence and office lease agreement along with passport copies of the authorised signatories of the branch or representative office.
Notarisation and translation of documents
The foreign company will have to present the documents listed above for authentication at the foreign ministry of the country in which the company 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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Abu Dhabi, Dubai