Opening up the Market in the United Arab Emirates – Legal System and General Business Vehicles
10th September, 2018
This is the first in a series of 6 articles with regards to establishing a business in the United Arab Emirates.
Legal System and General Business Vehicles
When considering doing business within the United Arab Emirates, it must be noted that the UAE is an Islamic State and is governed mainly by Islamic Sharia Law.
The UAE is a federal system and laws are passed by the individual states but federal law overrides state law in most instances.
In order to attract more international business the UAE agreed to the creation of certain free zones within the seven Emirates and the laws for these free zones are passed by the relevant Emirate but only apply to the area within the specific free zone.
There are a number of free zones established throughout the UAE and most have their own international financial exchange legislation based upon common law principles, their own financial services regulator and in some instances their own Court. The companies through the rest of the UAE are governed by different regulators and this normally depends upon the particular type of business.
The general types of business structures used within the UAE are a limited liability company (LLC), partnerships, joint participation arrangements, public joint stock companies, private joint stock companies and partnership limited with shares.
A key point to note is that foreign investors are only permitted to hold up to 49 per cent equity ownership, meaning 51 per cent of the shares must be held at all times by one of more UAE nationals.
The LLC is probably the most commonly used structure within the UAE. The LLC will have a minimum of two and a maximum of 50 members and a minimum capitalisation figure which depends on the business activity.
The board of directors within such organisations are known as managers and there can be up to five managers who may or may not be UAE nationals.
In addition to the corporate entities, foreign companies may also consider opening up what is known as a “branch”, but there is a registration procedure in relation to the opening of a branch, which will be dealt with in a later article.
As members of IAG Global, Aarons International is able to provide assistance and advice on legal matters across numerous jurisdictions.
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