business

There are various possibilities to conduct business in the U.A.E. Products can be sold or purchased via agents, representative offices or branches can be established or a company can be founded either as a corporation or as a non-incorporated business. Business in the U.A.E. is categorized as commercial, professional or skilful. The following types are available:
         *Proprietorships or partnerships
         *simple limited partnerships
         *joint participation,
         *public joint-stock companies
         *limited liability company partnership limited with shares,
         *free zone establishment (company incorporated in a free zone by only one shareholder)and
         *Free Zone Company (a company incorporated in a free zone by several shareholders, comparable to a company with limited liability).
In practice, a foreigner or a foreign entity will begin to conduct business in the U.A.E. with imports or exports via existing entities which are known to him, or he will establish a branch of his company or an entity in a free trade zone (free trade zone company or free trade zone establishment) or he will establish a company with limited liability or participate in such a company.
Most widely used is the company with limited liability (L.L.C.) due to the possibility to limit the liability for the foreign investor and to assume management responsibility at the same time. The minimum share capital of such entity amounts generally to Dhs 300,000 (approx. 75,000 Euro). However a foreigner may only acquire 49% ownership of a LLC. 51% of the shares must be held by a U.A.E. national or by a company fully owned by U.A.E. nationals. Generally, the foreign shareholders interests are to obtain a controlling interest. For this purpose, in practice, often shareholder enters into side-agreements to the articles of association or by laws, which reflect the true intentions of the parties involved.
On the basis of so-called sponsor or side agreements, the local partner nearly acts as a trustee of the foreign investor. Such a contract is legally not binding with respect to external relationships, is however also by the courts recognised and accepted with respect to internal relationships. Disputes, however, will normally lead to the liquidation of the company. It is therefore preferable to agree certain matters in the articles of association i.e. that profits are shared 80: 20 in favour of the foreign shareholders, etc.
In case a branch or a corporation is established in a free trade zone, 100% foreign ownership and full repatriation of capital and profits is granted. A branch does not have the legal status of a corporation, the parent company has unlimited liability for all its obligations. Free trade zone establishments (FZE) and free trade zone companies (FZC) are corporations (the liability is limited to the share capital). One individual, a FZC by 2 to 5 investors, can establish a FZE. The minimum capital is regulated by the administration of the respective free trade zone.
Corporations can generally not render professional services as they are restricted to trade and manufacturing activities. In order to render professional services, a professional firm similar to a civil law association can be established. The partnership interests can be held only by foreigners but a " local service agent " is required as contact. In such entity, it is however not possible to limit the liability.