An LLC is the corporate entity which is commonly established to carry on commercial and/or trading activities in the UAE. It is governed by Law No. 2 of 2015 relating to commercial companies (Commercial Companies Law), has UAE domicile and may be owned by one or up to 50 shareholders who may hold their shares in the personal capacity or through another corporate entity.
In accordance with the Commercial Companies Law, at least 51% of the LLC must be held by a UAE national, or company wholly owned by UAE nationals such as a CBD Group Company. Despite having a minority shareholding, effective management control, distribution of profits and ownership of valuable assets can remain with the foreign investor by entering into a specialized suite of agreements (more commonly known as Nominee Agreements).
An LLC does not need to have a minimum share capital but its share capital must be adequate for its purposes. There is currently no requirement for the share capital to be paid up, but the shareholders will be liable up to the extent of their unpaid share capital for any third party claims against the LLC which cannot otherwise be settled out of its cash reserves and/or assets.
An LLC can be managed by a manager (also referred to as a Director), or a board of managers who are appointed by the shareholders pursuant to the LLC’s memorandum of association or at general assembly. As there is no concept of ultra vires under the Commercial Companies Law, the manager’s acts will bind the LLC. Sanctions may, however, be imposed upon a manager for improper use of power.
How to incorporate an LLC
The registration and licensing of an LLC is administered by the local licensing authority of each Emirate. In Dubai, this is the Dubai Economy (more commonly known as the DED).
An initial application must be submitted to the DED, in Arabic, to reserve the LLC’s trade name and its commercial and/or trading activities which must be selected from a list of business activities published by the DED. The LLC’s trade name must reflect the name of one of the shareholders and/or the activities to be carried out. Given the number of companies operating in Dubai, the preferred choice of trade name is likely to have been taken, so applicants are advised to provide at least 3 different options.
If the foreign investor is a corporate entity, the application must be supported by notarized, attested and translated copies of its corporate documents, including its memorandum and articles of association (or other byelaws), a board resolution resolving to incorporate the LLC and a power of attorney authorizing someone in Dubai to handle the incorporation formalities on its behalf.
Once the DED initial approvals are obtained, and the corporate documents prepared (if applicable), the shareholders may sign the LLC’s memorandum of association. This can either be a standard document which is generated by the DED at the time of signing, or a bespoke document prepared by your lawyer in English/Arabic for signature by the shareholders before a Dubai court-notary public.
In support of the application to incorporate the LLC, the foreign investor must enter a lease of suitable commercial premises from which the LLC’s business may be operated and obtain an Ejari certificate from the Landlord (an official summary of the lease terms issued by the Real Estate Regulatory Authority in Dubai).
A payment voucher (invoice) will be generated by the DED on receipt of the signed memorandum of association, the Ejari and foreign investor’s corporate documents (if applicable). The licence, which is valid for one year, will be issued on settlement of the payment voucher. An LLC will automatically become a member of the Dubai Chamber.
The incorporation process can take anywhere between 2 to 8 weeks, depending upon the identity of the foreign investor and the time required to prepare the corporate documents (if applicable).
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