The UAE Commercial Companies Law 1

1. Introduction
The Uni ted Arab Emi rates Commerci al Compani es Law, Law No. ( 8) of 1984 as amended by Law
No. ( 13) of 1988 and Law No. ( 15) of 1988 ( the CCL) i s a federal statute appli cable to all the
seven emi rates that consti tute the UAE.
The pri mary objecti ves of the CCL are to provi de for an exhausti ve uni form commerci al
compani es law appli cable throughout the UAE; to regulate the formati on and functi oni ng of
compani es and to lay down the di fferent types of corporate enti ti es that are permi tted to be
regi stered as compani es i n the UAE.
At the outset, i t may be stated that the CCL i s based pri mari ly on the compani es laws of European
ci vi l juri sdi cti ons. I t i s thus essenti al for readers fami li ar wi th compani es laws i n common law
juri sdi cti ons to keep thi s fact i n mi nd i n order to appreci ate the provi si ons of the CCL i n thei r
correct perspecti ve and to avoi d confusi on i n understandi ng the concept and structure of
compani es provi ded for and the termi nology used i n the CCL.
The CCL was enacted i n 1984 and was ori gi nally i ntended to come i nto operati on a year later by
whi ch ti me exi sti ng enti ti es i n the UAE were to reconsti tute themselves so as to conform to the
CCL.
Thi s brochure has been wri tten wi th the lay reader i n mi nd. We have attempted to summari se the
sali ent features of the CCL wi th the ai m of provi di ng the reader wi th a bri ef descri pti on of the
vari ous types of enti ti es that are permi tted to be regi stered as compani es i n the UAE. Although
thi s brochure deals pri mari ly wi th Commerci al Compani es, we have also made reference to Ci vi l
Compani es and Servi ce Establi shments whi ch are not covered under the CCL but are other forms
of busi ness enti ti es that exi st i n the UAE.
Thi s brochure i s desi gned and i ntended to provi de the reader wi th a general vi ew of the CCL and
should not be reli ed upon as bei ng exhausti ve or a substi tute for proper legal advi ce on speci fi c
i ssues.
2 The UAE Commercial Companies Law
2. Salient Features of the CCL
2.1 The CCL and Ministerial Decrees
The substanti ve provi si ons relati ng to commerci al compani es are to be found i n the CCL whi le the
i mplementary or executory provi si ons relati ng to detai ls and modali ti es of i mplementi ng the CCL
are promulgated by vari ous Mi ni steri al Decrees i n the form of regulati ons. These Mi ni steri al
Decrees are a form of subordi nate legi slati on i n the UAE whi ch have the force of law.
2.2 Union Legislation
The CCL i s a federal statute appli cable i n all the emi rates compri si ng the federati on of the Uni ted
Arab Emi rates and supersedes local laws. As a federal law therefore, all commerci al compani es i n
the UAE must comply wi th i ts provi si ons. Company law i s one of the subjects i n respect of whi ch
exclusi ve legi slati ve juri sdi cti on has been vested i n the Uni on under Arti cle 121 of the UAE
Provi si onal Consti tuti on of 1971 * However, by vi rtue of Arti cle 149 of the Consti tuti on, member
emi rates are competent, i n respect of the subjects referred to i n Arti cle 121, to enact legi slati on
whi ch i s consi stent wi th federal legi slati on. Thus, relyi ng on Arti cle 149, i t i s possi ble for member
emi rates to supplement the provi si ons of the CCL by local legi slati on, provi di ng i t does not confli ct
wi th the federal legi slati on. An example of thi s i s the exerci se of the powers under Arti cle 149 by
the Emi rate of Dubai i n relati on to the mi ni mum capi tal requi rements for li mi ted li abi li ty
compani es under the CCL. Under the CCL, a mi ni mum capi tal of UAE Di rhams 150, 000 i s
prescri bed, however local li censi ng authori ti es i n the Emi rate of Dubai i nsi st on a mi ni mum capi tal
of UAE Di rhams 300, 000 for i ncorporati ng a li mi ted li abi li ty company i n the emi rate.
2.3 Exclusion from the CCL
Under the CCL as i t stood ori gi nally, compani es that have speci al agreements wi th the UAE
Government or the Government of any of the emi rates, are excluded from the CCL. Examples ar e
oi l compani es wi th concessi on agreements and forei gn banks. However, i n practi ce, forei gn
banks are requi red to comply wi th the regi strati on requi rements of the CCL for establi shi ng
branches but are exempt from havi ng to appoi nt a sponsor .
I n addi ti on, under the new Federal Law No.13 of 1998 amendi ng the CCL, certai n other
compani es are exempted from the provi si ons of the CCL. These excepti ons are:
( a) Compani es establi shed i n any of the UAEs free zones i f the free zone concerned has speci al
provi si ons regulati ng these compani es, otherwi se the CCL prevai ls;
( b) Compani es whose acti vi ti es are i n the oi l and gas i ndustry, the producti on of electri ci ty and
gas, the treatment of water and transmi ssi on, di stri buti on and other related acti vi ti es;
( c) Any company excluded from the provi si ons of the CCL by resoluti on of the Cabi net of
Mi ni sters.
The provi si ons of the CCL shall apply to compani es i n categori es b) and c) of the above, to the
extent that the Memorandum and Arti cles of Associ ati on of such compani es do not exclude the
provi si ons of the CCL.
* The Consti tuti on of the UAE i s no longer provi si onal i n accordance wi th Consti tuti onal
Amendment No. 1 of 1996
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2.4 Exhaustive Code
The CCL and the Mi ni steri al Decrees compri se an exhausti ve code on the law relati ng to
commerci al compani es i n the UAE. However, the UAE Ci vi l Transacti ons Law No. ( 5) of 1985, also
has provi si ons for compani es whi ch are Ci vi l as opposed to Commerci al Compani es.
The di chotomy between ci vi l and commerci al compani es and the larger di sti ncti on between ci vi l
and commerci al transacti ons i s yet another example of UAE law bei ng deri ved from, and adopti ng
concepts of, ci vi l juri sdi cti ons, although, i n the UAE, thi s i nfluence has come about i ndi rectly vi a
Egypt from whose laws the UAE draws heavi ly.
2.5 Only Permitted Forms Recognised
Except for the seven types of compani es enumerated i n Arti cle 5 of the CCL, any other form of
commerci al company operati ng wi thi n the UAE i s deemed to be voi d and i ndi vi duals who deal
on behalf of such compani es are held to be personally and joi ntly li able for li abi li ti es ari si ng from
such deali ngs. However, there are certai n excepti ons to thi s i n some of the i ndi vi dual emi rates.
2.6 Local Majority Shareholding
The CCL has adopted as an underlyi ng premi se common to all compani es consti tuted under the
CCL the requi rement that the forms of compani es regi sterable under i t must have a local majori ty
holdi ng ( Arti cle 22 of the CCL) . Thi s means that i t i s mandatory for all types of compani es
consti tuted under the CCL to have at least fi fty one per cent of thei r capi tal held by UAE nati onals.
However, as a rare excepti on to the CCL and subject to speci al permi ssi on bei ng obtai ned from
the Ruler, compani es may be establi shed i n the UAE wi thout the necessi ty to appoi nt a local
partner or a local sponsor .
Si mi larly, some compani es are granted a concessi on, whi ch exempts them from certai n rules and
requi rements under UAE law such as customs and tari ffs and the exempti on from the requi rement
to obtai n a local sponsor. Such compani es are parti cularly those whi ch have speci al contracts wi th
the government e.g. oi l compani es that carry out certai n acti vi ti es.
2.7 Domicile & Nationality
Every company constituted under the CCL isdeemed to have UAE domicile and nationality by vi rtue
of Articles2 and 3 of the CCL. These provisions, i t appears, were i ncluded for the purposesof enabli ng
compani esto carry out some acti viti eswhi ch, under UAE law, were restricted to UAE nationals. While
this wasso, i t wasthought prudent to expressly provi de, i n Arti cle 3 of the CCL, that a company having
UAE nati onality would not, i pso facto, be enti tled to all privi legesreserved for UAE nati onals.
A consequence of thi s safeguard i s to be found i n the fact that a company not wholly owned by
UAE nati onals cannot purchase i mmovable property i n i ts name even though 51% of i ts capi tal i s
held by one or more UAE nati onals. I n addi ti on, there are certai n acti vi ti es, whi ch are exclusi ve to
UAE nati onals such as regi stered commerci al agenci es and the purchase of real estate i n the UAE.
4 The UAE Commercial Companies Law
2.8 Incorporation & Commencement of Business
The Memorandum of Associ ati on of all compani es i ncorporated under the CCL, except joi nt
ventures, must be wri tten i n Arabi c and notari sed.
I n the absence of notari sati on the memorandum i s deemed to be voi d. However, fai lure to notari se
the memorandum cannot be pleaded agai nst thi rd parti es agai nst whom the partners remai n
personally li able. I f a company i s held to be voi d because of i ts fai lure to notari se i ts Memorandum
of Associ ati on i n a sui t fi led by a thi rd party, the partners are held personally li able. However, i f
the company i s deemed voi d at the i nsi stence of a partner, the company i s only deemed to be
voi d from the date of the judgement.
I n all cases, where a company i s deemed to be voi d, the li qui dati on and di stri buti on of i ts assets,
amongst i ts partners i nter se i s carri ed out i n accordance wi th the companys Memorandum of
Associ ati on.
The CCL requi res compani es consti tuted under i t to have thei r names entered i nto the Commerci al
Regi ster, except joi nt parti ci pati ng ( venture) compani es mai ntai ned by the local li censi ng
authori ti es, under Federal Law No ( 5) of 1975. Unti l such regi strati on i s made, a company does
not acqui re corporate personali ty and i s not enti tled to commence busi ness.
Fai lure to regi ster i n the Commerci al Regi ster renders the Memorandum of Associ ati on voi d as
agai nst thi rd parti es but i f the fai lure to regi ster relates only to one or more parti culars requi red
to be regi stered, only those parti culars are voi d as agai nst thi rd parti es.
I n addi ti on to the formali ti es under the CCL, a company i s requi red to obtai n a trade li cence from
the local li censi ng authori ty i n the emi rate concerned before i t can commence i ts operati ons i n
that emi rate.
Wi th the excepti on of the provi si ons relati ng to i ncorporati on, the CCL i s appli cable to forei gn
compani es whi ch have a presence i n the UAE, however, forei gn compani es li censed i n the free
zones and forei gn compani es doi ng busi ness i n the UAE from outsi de the UAE, are not subject to
the CCL. Arti cle 314 of the CCL prohi bi ts any forei gn company from establi shi ng offi ces or branch
offi ces i n the UAE or carryi ng on busi ness wi thout fi rst bei ng li censed by the Mi ni stry of Economy
& Commerce and by the Competent Authori ty i n the emi rate concerned.
3. Foreign Companies
Arti cles 313 to 316 ( i nclusi ve) of the CCL relate to the regulati on of forei gn compani es carryi ng on
thei r mai n acti vi ti es or establi shi ng branch offi ces i n the UAE. These arti cles are wi thout prejudi ce
to speci al agreements entered i nto between forei gn compani es, whi ch mai ntai n agreements wi th
federal and local governments.
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4. The Permitted Forms of Business Entities under the CCL
The CCL sets out seven types of compani es, whi ch may be regi stered under i ts provi si ons as
di scussed below. I t i s mandatory for a company under the CCL to adopt one of these forms. The
CCL expressly provi des that, any company whi ch does not adopt one of the seven forms wi ll be
deemed voi d.
The i mportant attri butes of the seven types of compani es permi tted to be consti tuted under the
CCL are dealt wi th below.
4.1 General Partnerships
General partnershi ps are between two or more partners who are joi ntly or severally li able to the
extent of thei r personal assets for all of the li abi li ti es of the company. The name of a general
partnershi p should consi st of the names of all of i ts partners or may be restri cted to the name of
one of i ts partners wi th words to i ndi cate the exi stence of a company, or i t may have a speci al
trade name.
There i s no prescri bed mi ni mum capi tal requi rement for general partnershi ps and no negoti able
shares are permi tted to be i ssued due to the personal nature of the company. Si mi larly, assi gnment
of a partners share wi thout the consent of all partners i s not permi ssi ble and any contract to the
contrary i s deemed to be voi d. The names of the person( s) who wi ll manage the company i s
requi red to be set out i n the companys Memorandum of Associ ati on and deci si ons i n a general
partnershi p have to be unani mous unless the memorandum provi des otherwi se, i n whi ch case,
the management i s carri ed out i n accordance wi th such provi si ons. All the partners of a general
partnershi p have to be UAE nati onals.
4.2 Limited Partnerships
Thi s type of enti ty i s consti tuted by general or acti ve partners and li mi ted, or dormant ( sleepi ng)
partners. The former take an acti ve part i n the management of the company and are joi ntly and
severally li able to thi rd parti es to the extent of the partnershi p assets, whi le the latter do not
i nterfere i n the management of the company vi s--vi s thi rd parti es and thei r li abi li ty i s li mi ted to
the extent of thei r share capi tal i n the partnershi p. Li mi ted partners may, however, take part i n the
i nternal admi ni strati on of the company to the extent permi tted by the Memorandum of
Associ ati on. Provi si ons regardi ng the name of a li mi ted partnershi p are the same as those for a
general partnershi p wi th the addi ti on that a li mi ted partners name cannot be menti oned as part
of the name of the company.
A li mi ted partner may be held li able personally to thi rd parti es i f he holds hi mself out as a general
partner and thi rd parti es are i nduced to beli eve so.
I nternal deci si ons i n a li mi ted partnershi p are vali d only by unani mous consent unless otherwi se
provi ded i n the Memorandum of Associ ati on. O nly UAE nati onals may be acti ve partners, however
li mi ted partners may be non UAE nati onals. Li mi ted partnershi ps are prohi bi ted to i ssue negoti able
shares i n the form of i nstruments. There i s no mi ni mum capi tal requi rement.
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4.3 Joint Participation (Ventures)
A joi nt parti ci pati on i s a type of company where two or more partners agree by contract to shar e
the profi ts or losses of one or more commerci al enterpri ses whi ch wi ll be carri ed on i n the name
of one or more of the partners whi le the other partners remai n undi sclosed to thi rd parti es deali ng
wi th the joi nt venture. The contract consti tuti ng the joi nt venture may be wri tten or oral. The
contract i s not expected to be di sclosed to thi rd parti es deali ng wi th the venture. The statutory
provi si ons deali ng thi s type of company are few ( ei ght i n all) and provi de, essenti ally, that the
ri ghts and obli gati ons of the partners, i nter se, shall be governed by the contract between the
partners. Thi s type of company i s prohi bi ted from i ssui ng negoti able shares.
O nly the partner( s) who personally performs the ventures busi ness i s deemed a trader( s) . The
i mpli cati on of thi s provi si on i s that the acti ve partner( s) wi ll have to enter hi s name i n the
Commerci al Regi ster and obtai n a trade li cence after complyi ng wi th the li censi ng formali ti es.
Thi rd parti es only have recourse agai nst the partner( s) wi th whom they have dealt wi th but i f the
exi stence of the joi nt venture i s di sclosed to thi rd parti es by acts of the partners, the partners
become joi ntly li able to thi rd parti es and the partnershi p wi ll be deemed to be a general
partnershi p.
I t i s not mandatory to have a wri tten contract between the partners or to notari se or regi ster i t, i f
there i s one. The exi stence of a joi nt venture may be proved by any method of proof. Deci si ons
of the joi nt venture have to be made by the consent of all partners, unless otherwi se provi ded i n
the joi nt venture agreement, i n whi ch case deci si ons are made i n accordance thereof.
4.4 Public Joint Stock Companies
The mai n characteri sti cs of a Publi c Joi nt Stock Company are as follows:
a) The capi tal i s represented by negoti able shares publi cly subscri bed to wi th provi si on for
ri ghts i ssues;
b) The mi ni mum capi tal requi rement i s UAE Di rhams 10, 000, 000 and a mi ni mum of ten
foundi ng members ( unless the Federal Government or the Governments of the Emi rates ar e
i ncorporati ng the company) are requi red to subscri be to a mi ni mum of 20% and a
maxi mum of 45% of the share capi tal of the company;
c) The management vests i n a Board of Di rectors consi sti ng of a mi ni mum of three and a
maxi mum of 15 persons, the Chai rman bei ng a UAE nati onal;
d) The li abi li ty of i ts members i s li mi ted to the extent of thei r respecti ve share value.
e) There i s i ndefi ni te durati on and separate legal personali ty;
f) The founders shares and/or preference shares are not permi tted to be i ssued;
g) The value of debentures, i f any, can not exceed the equi ty capi tal;
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h) The shares are freely transferable provi ded always that 51% of the shares are held by UAE
nati onals;
i ) At least 10% of i ts net profi ts must be retai ned as a statutory reserve, unti l the poi nt when
the reserve amounts to at least half the equi ty; and
j) I t i s mandatory to appoi nt an accredi ted audi tor on an annual basi s.
Thi s type of company i s not preferred by the expatri ate i nvestor as the managi ng body of the
company i s the Board of Di rectors whose chai rman must be a UAE nati onal and the majori ty of
the di rectors of the company must be UAE nati onals.
Notwi thstandi ng that, the publi c joi nt stock company has become i ncreasi ngly popular i n recent
years vi s a vi s the pri vati sati on sector, wi th a substanci al number of publi c joi nt stock compani es
now establi shed i n the UAE - a fi gure that i s ri si ng steadi ly. Thi s populari ty has ari sen due to the
fact that i t i s the only busi ness vehi cle whi ch allows shares to be offered to the publi c and i t
enables busi nesses to rai se substanti al amounts of capi tal, whi ch i s parti cularly the case when
large scale projects are concerned. Small forei gn and local i nvestors are consequently able to
parti ci pate i n such projects.
I t should also be noted that where one i s contemplati ng a busi ness venture that i nvolves
i nsurance, banki ng or the i nvestment of funds on behalf of thi rd parti es, the establi shment of a
publi c joi nt stock company i s a legal necessi ty, as no other type of company may be establi shed
for such acti vi ti es.
4.5 Private Joint Stock Companies
Thi s type of company i s consti tuted by at least three foundi ng members who fully subscri be to
the companys capi tal between themselves, the capi tal bei ng not less than two mi lli on UAE
Di rhams. I t follows that the shares of thi s type of company cannot be offered for publi c
subscri pti on. Wi th the excepti on of provi si ons i n respect of publi c subscri pti on, all the provi si ons
i n the CCL appli cable to publi c joi nt stock compani es are appli cable to pri vate joi nt stock
compani es.
I n accordance wi th the requi rements set out i n the CCL a pri vate joi nt stock company can be
converted i nto a publi c joi nt stock company.
4.6 Limited Liability Companies
Li mi ted li abi li ty compani es must have at least two and not more than fi fty partners. Each partner
i s li able to the extent of hi s share capi tal. The company i s prohi bi ted from i ssui ng negoti able shar e
certi fi cates; carryi ng on the busi ness of i nsurance, banki ng and i nvestment of funds; resorti ng to
publi c subscri pti on for rai si ng i ts capi tal and accepti ng deposi ts or taki ng loans from the publi c.
The shares of the company should be of a mi ni mum value of UAE Di rhams one thousand each.
At the ti me of i ncorporati on the value of all the shares must be fully pai d up. Partners enjoy a
ri ght of pre-empti on i n respect of shares to be transferred by any partner of the company to thi r d
8 The UAE Commercial Companies Law
parti es. I f any partner wi shes to transfer hi s shares to a thi rd party the exi sti ng partners have the
ri ght, wi thi n thi rty days of recei vi ng noti ce, to purchase the shares offered for sale at a mutually
agreed pri ce. I f no pri ce can be agreed, the companys audi tor must value the shares and exi sti ng
partners may purchase the shares at that pri ce. Shares offered for sale are requi red to be
di stri buted amongst the exi sti ng partners i n the rati o of thei r respecti ve share holdi ngs, unless the
partners agree otherwi se. I f the exi sti ng partners do not elect to purchase the shares offered for
sale wi thi n the peri od of thi rty days from recei pt of noti ce, the partner offeri ng to sell the shares
i s free to sell them to thi rd parti es.
The words company wi th li mi ted li abi li ty must be added to the company name and the amount
of the capi tal of the company must be stated.
To form a li mi ted li abi li ty company a wri tten Memorandum of Associ ati on i s requi red whi ch must
be notari sed. The capi tal of the company must not be less than UAE Di rhams 150, 000 ( I n Dubai ,
not less than UAE Di rhams 300, 000) .
The management of the company vests i n a manager( s) , not exceedi ng fi ve i n number, who may
be appoi nted under the Memorandum of Associ ati on or by a separate agreement or by the General
Assembly of the company compri si ng all of the partners. The manager may be an expatri ate and
may mai ntai n full authori ty to manage the affai rs of the company.
I f there i s more than one manager the Memorandum of Associ ati on may provi de for the formati on
of a Board of Managers and may speci fy the method of operati on of the board and the majori ty
requi red for passi ng i ts resoluti ons. I f the number of the partners i n the company exceeds seven,
supervi si on of the company must be entrusted to a Board of Supervi sors formed from at least three
of the partners. The board should be appoi nted under the Memorandum of Associ ati on for a
speci fi c peri od.
I t i s mandatory to appoi nt audi tors on an annual basi s. The audi tors are appoi nted by the General
Assembly, usually at the Annual General Meeti ng. O n all deci si ons of the General Assembly, each
partner has a number of votes equal to the number of shares owned or represented by hi m i n the
capi tal of the company.
The company must allocate 10% of i ts net profi ts each year to a statutory reserve. Such deposi ts
may be suspended when the reserve reaches an amount equal to 50% or more of the companys
capi tal.
The Li mi ted Li abi li ty Company i s the preferred choi ce of expatri ate i nvestors, as i t allows the
expatri ate partner to mai ntai n control of the management of the company.
I n addi ti on, the shareholders can agree i n the Companys Memorandum of Associ ati on that profi ts
and losses be shared i n di fferent proporti ons to thei r share holdi ngs.
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4.7 Partnership Limited With Shares
A partnershi p li mi ted wi th shares i s a company formed by general partners who are joi ntly li able
to the extent of thei r personal assets and parti ci pati ng partners who only parti ci pate i n the capi tal
and are joi ntly li able wi th the general partners only to the extent of thei r shares i n the capi tal of
the company. All general partners must be UAE nati onals whereas parti ci pati ng partners may be
non-UAE nati onals. The capi tal of a partnershi p li mi ted wi th shares must be di vi ded i nto
negoti able shares of equal value.
The names of the general partners must be part of the name of the partnershi p. I f the name of a
parti ci pati ng partner i s menti oned, wi th hi s knowledge, as a part of the partnershi p name, such a
partner becomes li able towards thi rd parti es.
The provi si ons relati ng to the i ncorporati on of a joi nt stock company apply to partnershi ps li mi ted
wi th shares, the li abi li ty of founder members bei ng the same as the founder members of joi nt
stock compani es. The capi tal of the company must not be less than UAE Di rhams 500, 000.
Provi si ons relati ng to i nstruments i ssued by joi nt stock compani es are appli cable to the shares
i ssued by the partnershi p.
The management of the partnershi p i s entrusted to one or more general partners under the
Memorandum of Associ ati on. A parti ci pati ng partner may not, even wi th consent of the general
partners, deal wi th thi rd parti es. He may however, be acti vely i nvolved i n the i nternal management
of the company wi thi n the li mi ts lai d down i n the Memorandum of Associ ati on. A parti ci pati ng
partner who performs any management functi ons agai nst the prohi bi ti on lai d down i n the CCL i s
personally li able for all li abi li ti es ari si ng out of hi s acts. Every partnershi p li mi ted wi th shares must
have a Board of Supervi sors consi sti ng of at least three members appoi nted by the General
Assembly from amongst the parti ci pati ng partners or others appoi nted for peri ods of one year. The
general partners are not enti tled to vote for the electi on of the members of the Board of
Supervi sors. The Board of Supervi sors does not take part i n the day to day management of the
company but performs a supervi sory functi on and may request the manager( s) to present a report
of thei r management and exami ne the companys books and documents.
5. Branch & Representative/ Liaison Offices of Foreign Companies
The establi shment of branch offi ces of forei gn compani es i n the UAE i s regulated by the CCL and
Mi ni steri al Deci si on No. ( 69) of 1989. A branch offi ce, on regi strati on, carri es on busi ness under
the name and form of the parent company. The branch offi ce does not have a separate legal
i denti ty of i ts own but i s consi dered as part of i ts parent company.
Under the CCL, no forei gn company may open a branch offi ce wi thi n the UAE, wi thout fi rst
obtai ni ng a li cence i ssued by the Mi ni stry of Economy & Commerce and enteri ng i ts name i n the
Forei gn Compani es Regi stry at the Mi ni stry ( and i n Dubai , i n the Commerci al Regi ster at the Dubai
Department of Economi c Development) . However, as di scussed under secti on 3, there ar e
excepti ons to thi s where forei gn compani es have entered i nto speci al agreements wi th the federal
or local governments i n the UAE.
10 The UAE Commercial Companies Law
A branch offi ce i s not permi tted to carry on commerci al acti vi ti es and cannot physi cally deal i n or
trade i n goods wi thi n the UAE. I t i s, however, permi tted to render mai ntenance and repai r servi ces
to customers of i ts parent company. A branch offi ce can promote, adverti se and market i ts parent
companys goods and servi ces and even enter i nto contracts for sales, however, because of the
prohi bi ti on agai nst physi cally deali ng i n goods, the goods, when suppli ed to customers, must be
i mported i nto the UAE i n the name of the customers as consi gnees.
As a prerequi si te to obtai ni ng a li cence, the parent company must appoi nt a UAE nati onal as the
Nati onal Agent of the branch offi ce under a wri tten agreement. I f the nati onal agent i s a company,
all of i ts partners must be UAE nati onals. The nati onal agent i s, i n common parlance, referred to
as a sponsor. The nati onal agents obli gati ons towards the company are restri cted expressly by the
CCL to renderi ng the necessary servi ces to the company wi thout assumi ng any fi nanci al
responsi bi li ty or li abi li ty relati ng to the busi ness or acti vi ty of the parent company. The nati onal
agent i s not enti tled to represent the branch offi ce nor take part or i nterfere i n the runni ng or
management of the busi ness. The servi ces the nati onal agent provi des basi cally i nvolve obtai ni ng
li cences, vi sas and permi ts necessary for the runni ng of the busi ness of the branch offi ce. I n
consi derati on of hi s servi ces as nati onal agent, the agent i s pai d a fi xed annual sum as sponsorshi p
fees and i s not enti tled to a share i n any of the profi ts or other compensati on.
6. Civil Companies & Service Establishments
6.1 Civil Companies
Besi des the compani es permi tted under the CCL, the UAE Ci vi l Transacti ons Law, ( Federal Law
No. ( 5) of 1985) provi des for the formati on of ci vi l compani es. These compani es can be formed
for any object or acti vi ty that i s not consi dered to be commerci al by the li censi ng authori ti es and
rather, i nvolve the exploi tati on of the personal experti se or ski lls of the propri etor. Further, Arti cles
5 to 10 ( i nclusi ve) of the Commerci al Transacti ons Law set out the acti vi ti es whi ch wi ll be deemed
as commerci al. Thi s states as follows:
Article 5- The followi ng acti vi ti esshall be deemed to be commerci al acti vi ti esby vi rtue of thei r nature:
( 1) The purchase of commodi ti es and other materi al and non-materi al moveable property
wi ththe i ntenti on of selli ng these for profi t, whether they are sold as i s or followi ng
modi fi cati on or fabri cati on.
( 2) The purchase or hi re of commodi ti es and other materi al and non-materi al moveable property
wi th the i ntenti on of hi ri ng them out.
( 3) The sale or hi ri ng out of commodi ti es purchased or hi red i n the manner descri bed above.
( 4) The operati ons of banks and money changers, the stock market, i nvestment compani es, safe
deposi ts and fi nanci al i nsti tuti ons, and all other operati ons of fi nanci al medi ati on.
( 5) All operati ons i n connecti on wi th commerci al documents, whatever the capaci ty therei n of
the persons concerned and whatever the nature of the operati ons establi shed thereby.
The UAE Commercial Companies Law 11
( 6) All acti vi ty i n connecti on wi th shi ppi ng and avi ati on, i ncludi ng:
( a) The constructi on of shi ps and ai rcraft and thei r sale or purchase, thei r leasi ng out or
repai r or mai ntenance, and mari ne or ai r consi gnments i ncludi ng mari ne and ai r
transportati on.
( b) The sale or purchase of suppli es, tools and materi als for shi ps and ai rcraft or thei r
provi si oni ng.
( c) The acti ons of loadi ng and unloadi ng
( d) Mari ne and avi ati on loans.
( e) Contracts of employment of captai ns and crew of commerci al shi ps and ai rcraft.
( 7) Establi shment of compani es
( 8) Current accounts
( 9) I nsurance i n i ts vari ous forms wi th the excepti on of co-operati ve i nsurance.
( 10) Places of sale and publi c aucti on.
( 11) The acti vi ty of hotels, restaurants, ci nemas, theatres, sports faci li ti es and places of
entertai nment.
( 12) Di stri buti on of water, electri ci ty and gas.
( 13) The publi cati on of newspapers and magazi nes where the purpose of thei r
publi cati on i s profi t from the publi shi ng of adverti sements, news and arti cles.
( 14) The acti vi ty of post, telegraph and telephone.
( 15) The acti vi ty of radi o and televi si on and recordi ng and fi lm studi os.
( 16) The acti vi ty of publi c deposi tori es and the securi ty resulti ng from the property
lodged therei n.
Article 6- The followi ng shall be deemed commerci al acti vi ti es i f they are pursued as a professi on:
( 1) Brokerage
( 2) Commerci al agency
( 3) Agency for commi ssi on
( 4) Commerci al representati on
( 5) Contracts of supply
( 6) The purchase or sale of land or i mmovable property for the purpose of maki ng a
profi t from thei r sale i n thei r ori gi nal form or after thei r conversi on or di vi si on.
( 7) Transportati on by land
( 8) Real estate development provi ded the contractor undertakes to supply materi als and labour .
( 9) I ndustri es extracti ng natural resources.
( 10) Travel, touri sm, export, i mport and customs clearance agenci es, servi ces and employment
agenci es.
( 11) Pri nti ng, publi shi ng, photography, recordi ng and adverti si ng.
( 12) I ndustry.
( 13) Acti vi ty regardi ng ani mal and fi sh resources.
( 14) The hi ri ng out of the labour to a thi rd party, or the hi ri ng of labour for the purpose of
hi ri ng out.
( 15) Letti ng or renti ng of houses, flats and rooms, furni shed or unfurni shed, wi th the
i ntenti on of re-letti ng.
12 The UAE Commercial Companies Law
Article 7- Acti vi ti es whi ch may be consi dered to be si mi lar to those speci fi ed i n Arti cles 5 and 6
on the grounds of resemblance of thei r characteri sti cs and ai ms, shall be deemed to be commerci al
acti vi ty.
Article 8 - The producti on by an arti st of a work of art, ei ther by hi mself or by the employment
of labour, and the sale thereof, and li kewi se an authors publi cati on and sale of hi s li terary work,
shall not be deemed to be commerci al acti vi ty.
Article 9 -
( 1) The sale by farmers of agri cultural product whi ch they own or whi ch they culti vate shall not
be deemed commerci al acti vi ty, even after processi ng by the means he normally employs.
( 2) I f the farmer establi shes a busi ness or factory on a permanent basi s for the sale of hi s products
as i t i s or after processi ng then the sale i n thi s case shall be deemed commerci al acti vi ty.
Article 10 - I f the acti vi ty i s commerci al i n respect of one of the contracti ng parti es and ci vi l i n
respect of the other, the provi si ons of thi s law shall apply to the li abi li ti es of both parti es, provi ded
the law does not speci fy, and that the parti es have not agreed otherwi se.
Typi cal examples sui table for the formati on of ci vi l compani es are compani es engaged i n the
busi ness of offeri ng some ki nd of servi ce such as consultancy.
A ci vi l company i s formed by a contract, i n wri ti ng, whi ch i s the consti tuti ve document that sets
out the ri ghts of the partners i nter se. However, even i f there i s no wri tten contract between the
partners, i t does not affect the ri ghts of thi rd parti es who contract wi th the company.
The Ci vi l Transacti ons Law provi des for the followi ng three types of ci vi l compani es.
7. Service Establishments
Under the local laws of the vari ous emi rates, non-UAE nati onals are permi tted to open
establi shments i n thei r own name to practi ce a vocati on or a professi on such as legal consultancy,
medi ci ne, accountancy or research. For professi onals wi shi ng to conti nue thei r vocati on i n the
UAE, thi s type of an establi shment i s the i deal, as i t does not requi re a local partner. Such
establi shments, however, are requi red to appoi nt a servi ce agent who must be a UAE nati onal.
The servi ce agent i s usually pai d a fi xed fee or an agreed percentage of the profi ts annually. The
servi ce agent i s not enti tled to any remunerati on besi des the fee or agreed percentage and i s not
li able for the debts or li abi li ti es of the establi shment. Such establi shments are li censed under a
servi ce li cence.
I n Dubai the relevant local law for formi ng servi ce establi shments i s Local O rder No. ( 63) of 1991,
whereas i n Sharjah the relevant law i s Local O rder No. ( 1) of 1991.
These ki nd of compani es can now be formed by the Dubai Economi c Department, the Sharjah
Muni ci pali ty ( or Economi c Department) and the Abu Dhabi Muni ci pali ty.
8. Companies in the Free Zones
There are several free zones across the Emi rates, these are:
( a) The Jebel Ali Free Zone;
( b) The Dubai Ai rport Free Zone;
( c) The Hamri ya Port Free Zone;
( d) The Sharjah I nternati onal Ai rport Free Zone;
( e) The Fujai rah Free Zone;
( f) The Ras Al K hai mah Free Zone;
( g) The Ajman Free Zone; and
( h) The Saadi yat Free Zone ( Abu Dhabi )
Compani es establi shed i n the free zones are outsi de the ambi t of the CCL and have been expressly
excluded from i ts operati on.
The free zones have pri mari ly been establi shed for the purpose of attracti ng forei gn i nvestment i n
the UAE. Establi shi ng a company i n one of the free zones rather than elsewhere i n the Emi rates
under the CCL, i s consi dered a favourable alternati ve for forei gn i nvestors due to a number of
benefi ci al i ncenti ves. For i nstance, i t i s possi ble for a 100% forei gn owned company to operate i n
the free zone ( wi thout a local sponsor or partner) as a branch of a forei gn company, or as a Free
Zone Establi shment ( whi ch i s essenti ally a li mi ted li abi li ty company as di scussed below) under a
li cence i ssued by the free zone. Further, compani es i n the free zones benefi t from a tax exempti on
of both corporate and i ncome tax for a guaranteed number of years ( normally 15 years) wi th a
renewable opti on.
Due to the li mi tati ons of space, a bri ef overvi ew has been provi ded below regardi ng the free
zones i n Dubai alone, namely, the Jebel Ali Free Zone and the Dubai Ai rport Free Zone.
Notwi thstandi ng, the procedures for establi shi ng busi nesses i n the remai ni ng free zones and the
i ncenti ves offered to i nvestors are very si mi lar to the free zones i n Dubai . However, i t i s worth
noti ng that the Executi ve Counci l i n Abu Dhabi has i ssued a deci si on to regulate the establi shment
of compani es i n the newly establi shed Saadi yat I sland Free Zone. I n Dubai , Sharjah, Fujai rah, Ras
Al K hai mah and Ajman, thi s has not yet happened. Therefore, the only form of busi ness enti ti es
one may establi sh i n the free zones are ( a) the Free Zone Establi shment and ( b) branches of
forei gn compani es ( except for the Saadi yat Free Zone) .
I n order to establi sh a busi ness i n the free zones, i t i s necessary to obtai n a li cence from the free
zone authori ti es. The li cence relates to the acti vi ti es the busi ness wi ll undertake. The free zone
authori ty i n the respecti ve free zones mai nly i ssue four ki nds of li cences to compani es; a Tradi ng
Li cence, a Servi ce Li cence, a Manufacturi ng Li cence or a Nati onal I ndustri al Li cence.
( a) Tradi ng Li cence
Thi s li cence i s appli cable to compani es ( i ncorporated wi thi n or outsi de of the Free Zone)
who wi sh to i mport, export, sell, di stri bute and store i tems sti pulated under the li cence.
The UAE Commercial Companies Law 13
However, i f the company wi shes to make sales wi thi n the UAE, i t may only do so through
a di stri butor or an agent i n the UAE. Compani es operati ng i n the Free Zone under a trade
li cence need not obtai n a li cence from the Dubai Economi c Department.
( b) I ndustri al Li cence
The i ndustri al li cence i s necessary where the busi ness venture i nvolves the i mportati on of
raw materi als, the manufacture of certai n products and the export of the fi ni shed products
abroad. Agai n, should the company wi sh to sell the products i n the UAE, i t can only do so
vi a a di stri butor or an agent. Compani es i ncorporated wi thi n or outsi de of the UAE may
obtai n an i ndustri al li cence.
( c) Servi ce Li cence
As the name suggests, a servi ce li cence i s used i n cases where the busi ness acti vi ty i nvolves
the provi si on of a servi ce or servi ces wi thi n the Free Zone. There i s an addi ti onal condi ti on
concerni ng the servi ce( s) whi ch may be practi sed, i n that i t must be the same as the
servi ce( s) sti pulated i n the parent companys li cence i n the UAE or abroad.
However, i n our practi cal experi ence i n establi shi ng busi nesses i n the JAFZ, we have found
that the JAFZA are reluctant to i ssue servi ce li cences.
( d) Nati onal I ndustri al Li cence
The nati onal i ndustri al li cence i s desi gned for manufacturi ng compani es regi stered ei ther i nsi de or
outsi de of the UAE. I t allows the holder to i mport raw materi als, manufacture the speci fi ed
product( s) and export the fi ni shed product( s) worldwi de.
I n order to quali fy for such a li cence, the companys share holdi ng must be at least 51% owned
by GCC state nati onals. I n addi ti on, the value added to the product that i s produced i n the free
zone must amount to at least 40% . I ts acti vi ty i s confi ned to the acti vi ty stated i n the Nati onal
I ndustri al Producti on Certi fi cate whi ch i s i ssued by the Mi ni stry of Fi nance & I ndustry.
O nce a company i s granted such a li cence i t i s treated as a local company wi thi n the UAE and i s
enti tled to customs duty exempti ons on the product( s) exported to GCC countri es. Also, i f the
condi ti ons outli ned above are sati sfi ed and i f the li cence holder i s at least 25% UAE owned,
products manufactured i n the free zone wi ll quali fy for a UAE certi fi cate of ori gi n.
The goods and servi ces of forei gn compani es operati ng i n the free zones are currently not enti tled
to exempti on from AGCC customs tari ffs on export to AGCC countri es.
Products manufactured wi thi n the free zones may quali fy for a Certi fi cate of O ri gi n of the UAE
provi ded certai n condi ti ons are fulfi lled. That i s, the UAE added value component attri butable to
the manufacturi ng and or fi ni shi ng process must be at least 40% of the total value of the product.
14 The UAE Commercial Companies Law
8.1 Free Zone Establishments (FZE)
A uni que enti ty known as a Free Zone Establi shment may be formed i n the free zones under the
local laws of each emi rate. Thi s i s a one-shareholder company wi th separate legal personali ty and
li mi ted li abi li ty. The owner of a FZE i s a si ngle i ndi vi dual or company. The li abi li ty of the owner
i s li mi ted to the extent of the pai d up share capi tal. The ri ght of formati on and regulati on of the
FZE vests i n the free zone authori ty. Whi le the FZE i s exempt from the documentati on and fi li ng
requi rements of local authori ti es i n Dubai , the FZE i s subject to the laws i n force i n the Emi rate
of Dubai and the laws and regulati ons of the free zone.
The capi tal of a FZE i s requi red to be at least UAE Di rhams 1 mi lli on or such other amount as the
Authori ty may requi re from ti me to ti me. The capi tal of a FZE must be di vi ded i nto numbered
shares each share bei ng of the face value of UAE Di rhams 1 mi lli on or multi ples thereof unless
otherwi se permi tted by the Authori ty. Each share shall be represented by a share certi fi cate i n such
form as the authori ty may prescri be. The share capi tal of a FZE must be fully pai d up i n cash at
the ti me of i ncorporati on unless otherwi se permi tted by the authori ty. The name of a FZE must
end wi th the letters FZE and such name shall be approved by the Authori ty. A FZE must at all
ti mes have an offi ce i n the free zone to whi ch all communi cati ons and noti ces may be addressed.
A FZE must have at least one di rector and one secretary, although the offi ces of di rector and
secretary may be held joi ntly by a si ngle person. The di rector and secretary must be i ndi vi duals
and at least one of the di rectors and the secretary must be resi dent i n the Emi rate of Dubai . The
busi ness of the FZE i s managed by the di rectors who may exerci se all the powers of the FZE. A
FZE i s requi red to appoi nt an audi tor from among those approved by the free zone authori ty. The
audi tors are requi red to make a report to the owner of the FZE on all annual accounts of the FZE.
The FZE i s requi red to provi de a copy of the audi tors report to the FZE Department together wi th
the annual accounts.
The detai led procedure and documentati on requi rements for establi shi ng an FZE are to be found
i n I mplementary Regulati on No. ( 1) of 1992, whi ch has been publi shed pursuant to Law No. ( 9)
of 1992.
The free zone authori ty has desi gnated a department known as the FZE Department for the
smooth functi oni ng and i mplementati on of Law No. ( 9) of 1992, and the I mplementary
Regulati ons. Thi s department handles regi strati on of the Free Zone Establi shments and related
matters.
The UAE Commercial Companies Law 15
APPENDIX A
COMMERCIAL REGISTRATION
Under the CCL, commerci al regi strati on i s a condi ti on precedent to the commencement of the
busi ness of a company. A regi ster called the Commerci al Regi ster i s mai ntai ned by the Competent
Authori ty i n each emi rate pursuant to Federal Law No. ( 5) of 1975. The purpose of thi s Regi ster
i s to record the names of both nati onal and forei gn merchants, i ndi vi duals and compani es whi ch
have agenci es or branches i n the UAE. Every merchant or manager of a branch or agency must,
wi thi n two months from the date of establi shi ng hi s place of busi ness, fi le an appli cati on i n
dupli cate, si gned by the appli cant to the competent authori ty to regi ster hi s name i n the
Commerci al Regi ster.
I n the appendi ces below, the requi rements and procedures prevai li ng i n the emi rate of Dubai
have been descri bed. Although the detai ls may di ffer from emi rate to emi rate the basi c
requi rements and procedures i n all the emi rates remai n largely the same.
Pursuant to an appli cati on and after sati sfyi ng i tself that all the necessary documentati on has been
furni shed, the competent authori ty regi sters the appli cant i n the Commerci al Regi ster. All
subsequent changes to the parti culars suppli ed wi th the appli cati on must be recorded i n the
Commerci al Regi ster by an appli cati on.
Under Law No. ( 5) of 1975, every person responsi ble for the management of a company has to
i ndi cate i n all correspondence and pri nted materi al related to the company the regi strati on number
i n the Commerci al Regi ster and affi x hi s trade name i n a promi nent place i n hi s place of busi ness
i n the Arabi c language showi ng the regi strati on number .
APPENDIX B
LOCAL LICENSING
1. Types of Licences
The Trade Li cence and Commerci al Regi strati on Secti on of the Dubai Economi c Department
mai ntai ns the Commerci al Regi ster and i ssues the di fferent types of li cences to busi nesses i n
Dubai .
There are three major types of li cences that are i ssued by the Dubai Department of Economi c
Development as follows:
( a) I ndustri al li cences, whi ch are i ssued for manufacturi ng, processi ng or assembly operati ons.
( b) Professi onal li cences, whi ch are i ssued for professi onal acti vi ti es to accountants, archi tects,
lawyers etc.
16 The UAE Commercial Companies Law
( c) Trade li cences, whi ch are generally i ssued for commerci al and tradi ng acti vi ti es of all ki nds
- trade i n goods and merchandi se, shi ppi ng, banki ng and i nsurance and other commerci al
acti vi ti es.
Besi des the above li cences, servi ce compani es i nvolved i n vocati onal busi nesses are i ssued
( servi ce) li cences under local laws.
I t should be noted that i n addi ti on to the requi rement of obtai ni ng a li cence from the Dubai
Economi c Department i n order to establi sh a new busi ness enti ty, i t i s at ti mes also necessary to
obtai n what i s known as a no-objecti on letter or speci al approval from certai n bodi es whi ch wi ll
depend on the acti vi ty or the i ndustry the busi ness wi ll be i nvolved i n. For i nstance, i t i s necessary
to obtai n such a letter from the Port Authori ty i n the case of a shi ppi ng busi ness. I f a no-objecti on
letter i s requi red, i t wi ll be necessary to obtai n i t i n order to obtai n a li cence for the new busi ness
from the Dubai Economi c Department.
The UAE Commercial Companies Law 17
Commercial Companies Liabilities CCL
General Partnerships Limited Partnerships Joint Participation Ventures Public Joint Stock Private Joint Stock Limited Liability Companies
Partnership With
Limited Shares
100% UAE National
UAE Nationals 51%
Foreigner 49%
UAE Nationals/Foreigner Majority UAE National 51% UAE Nationals 51%
UAE Nationals 51%
Foreigners 49%
UAE Nationals or
Foreign Shareholders
Joint Liability
Unlimited Liability-Nationals
Limited Liability-Foreigners
Joint Liability Limited Liability Limited Liability Joint Liability
Joint Liability for Nationals
Limited Liability for Foreigners
No Minimum
Capital
No Minimum
Capital
No Minimum
Capital
Minimum Capital
Requirement
Dhs. 10,000,000
Dhs. 2 Million
Minimum Capital
Minimum Capital
Dhs. 150,000
Dhs. 300,000 in Dubai
Minimum Capital
Dhs. 500,000
2 or more partners 2 or more partners 2 or more partners 3 to 15 Founders at least 3 Founders 2 or 50 Shareholders at least 3
Federal & Local
Registration
Federal & Local
Registration
Management
UAE Nationals Only
No Registration
Federal & Local
Registration
51% of Shares
to UAE Nationals
Management
Majority Nationals
Federal & Local
Registration
Federal & Local
Registration
Federal & Local
Registration
Management
Majority Nationals
Management
National or Foreigners
Management
Majority Nationals
Civil Companies
Establishments Service Establishments Partnerships
100% UAE National
100% Foreign Owned
Companies
2 or More Owners or
Partners
1 Owner
Local Sponsor
Establishment
80% Foreign
20% UAE National
or vice versa
Management
National or Foreigner
Foreign or Local
Management
To carry out simple
service activities
To carry out
non-trading activities
Free Zone
Free Zone
Establishment
Branch of
Foreign Entity
No Sponsor
or Local Partner
No Sponsor
or Local Partner
1 Shareholder
No Minimum
Capital Required
Locally Formed
No Customs
Duty w/in the
Free Zone
Minimum Capital of
Dhs. 1,000,000
Industrial or
Trading License
Branch Office
100% UAE National
Licence required from
Ministry of Economy
Local Sponsorship
May render services
to Customs of
Parent Company
Can promote, advertise
and market parent
company's goods
No Commercial
Activities
Cannot physically
deal in or trade goods