Mainland Company Formation in UAE

This guide covers everything you need to know about mainland company formation in UAE.

Benefits of Mainland Company Formation in UAE

Following are a few of the benefits of Mainland Company formation in UAE.

• Mainland Company in Dubai is exempted from corporate tax.

• There is no minimum capital requirement for the formation of Mainland Company.

• Mainland companies can trade with other mainland companies in Dubai or UAE. They have the flexibility to do their business in any part of UAE or beyond. This feature sets them apart from free zones companies because they are restricted to operate their business in their respective free zone.

• Mainland companies also have more options for business activities unlike free zone businesses e.g.

• Companies in Dubai Media City must work in the media or closely related industries. However there is no such limitation for mainland business and it can open up to wider UAE economy with much scope of diversity.

• Mainland businesses can choose their office location anywhere in Dubai. This feature allows them not only to trade with local market but can also open up multiple branches of the company thus enabling them to build a strong presence in UAE.

• Mainland companies are allowed to take on governmental work unlike free zone companies which are prohibited from undertaking government contracts and are only allowed to carry out private commercial work.

• There is no limitation on the number of visas on mainland license. However the eligibility to obtain visas depends upon office space. More office space, more number of visas you may get.

• There is no currency restriction for mainland business in Dubai.

• 100% repatriation of capital and profits are admissible.

• Registration process for mainland companies is simple and hassle free. Also there is no yearly audit requirement. 

Documents required to form a mainland business in UAE

You need to submit the  following documents for registering your company in UAE:

• Copy of the passport of the shareholders and directors

• Copy of the national identity card of the directors and shareholders

• Recent bank statements, credit card statements or utility bills containing the name and residential address of the shareholders and directors

• Initial approval receipt and all the previously-submitted documents

• Copy of the lease contract duly attested by the Real Estate Regulatory Agency (RERA) in UAE

• Duly attested memorandum of association

• Approvals from other government entities concerned, as may be required

How to start a mainland company in UAE?

To start a mainland business in UAE, you need to complete the following steps.

• Choose the business activity

• Choose the right legal form for your business

• Register the trade name

• Apply for initial approval

• Draft Memorandum of Association/Local Service Agent Agreement

• Get additional government approvals

• Apply for a Business License

We will explain each of these in detail below.

Choose the business activity

Business activity determines the type of license you can take.

There are six types of trade licenses in UAE that you can apply for, depending on your business activity.

• Industrial License

• Commercial License

• Professional License

• Tourism License

• Agricultural License

• Occupational License

The license to be obtained depend on the business you undertake. For example, if you are involved in providing services, you need a professional license. If you are involved in buying or purchasing goods, you will need a commercial license. If you are into manufacturing activities, then you need an industrial license. While applying for a trade license, you must clearly define all the activities you wish to undertake under the main company license.

We have listed all the business activities list here.

Choose the right legal form for your business

You can start your business in any of the following forms in UAE.

• General partnership - A partnership company is an arrangement between two or more partners whereby each partners is jointly and severally liable without limit for the company’s liabilities. The CCL provides that only UAE nationals are allowed to be partners in a partnership company. This form of business is therefore not appropriate for foreigners wishing to set up in Dubai.

• Limited partnership - Limited Partnership Company is a company which consists of one or more active partners who are jointly and severally liable for the obligations of the company and act in the capacity of a trader, and one or more silent partners who are not liable for the obligations of the company other than to the extent of their respective shares in the capital and do not act in the capacity of a trader 

• Limited liability company (LLC) - A LLC is often the most suitable method of establishing a business in Dubai by foreign investors. However, as mentioned earlier, where the intended business involves banking, insurance and/or investment activities conducted on
  behalf of third parties, a LLC is not legally permitted to practice such activities and a PJSC will have to be established. LLC is defined as a company “with limited liability… where the number of partners may not exceed fifty and should not be less than two. Each of the partners shall only be liable to the extent of his share in the capital.

• Public joint stock company (PJSC) - PJSC is a company whose capital is divided into equal value negotiable shares. According to the CCL, the shareholders of a PJSC are liable only to the extent of contributing the value of their shares in the capital of the company. The nominal value of each share of a PJSC should not be less than AED 1 and not more than AED 100, and the minimum share capital requirement is AED 30 million for a general company, AED 40 million for a banking entity and AED 250 million for an insurance company.
  

• Private joint stock company (PrJSC) -  A private joint stock company is essentially the same as a PJSC, with the following differences:
  1. The minimum capital requirement is AED 5 million;
  2. The shares of a private joint stock company may only be offered to the public after two financial years have been completed and upon conversion to a PJSC (and other requirements are met); and
  3. It is supervised by the Ministry of Economy (as opposed to regulated by the Security and Commodities Authority);
  4. Only 2 founder members are required. 

Considering the lower capital requirement of AED 5 million, private joint stock companies are more popular with foreign investors than PJSC’s

• Civil company - The UAE Civil Transactions Law, Federal Law No. 5 of 1985 (Civil Code) provides for the formation of three forms of civil or professional entities, namely:
  1. Companies to perform work (service/ professional companies);
  2 Speculative venture partnerships;
  3 Mudaraba companies.

  The main difference between entities under the CCL and those under the Civil Code is that the activities which may be practised in the former are of a commercial nature, whereas in the latter, the activities that may be practised involve the use or investment of intellectual faculties, acquired information or the use of skills, for example, carpentry. The fact that civil companies do not practise activities of a ‘commercial’ nature does not denote that they are non-profit making organizations. It is simply a distinction made in the UAE’s legal system in terms of the ‘types’ of activities a business practices.

• Sole establishment - A sole proprietorship is a simple business method whereby an individual trades on his own account pursuant to a trade licence issued in his own name. This form of business entity is referred to as an ‘establishment’ rather than a company  and the sole proprietor is personally liable to the full extent of his assets for the liabilities of the business. The establishment will not have an independent legal entity from that of the owner. 

• Local company branch

• GCC company branch

• Foreign company branch

• Free zone company branch

• Holding companies 

Register the trade name

A trade name distinguishes one business from another. It also reflects the nature and the form of the business. 

You should prepare a list of 3 to 4 names that you wish to have as your legal name and present it to the concerned department. 

Once you have presented your request, the department would analyze it and sanction all the eligible business names. Therefore, you have the freedom to choose the one that you like most.

Here are some guidelines you must follow while creating a trade name.

The trade name must:

• not violate the public morals or the public order of the country

• be compatible with the required type of activity and the legal status of the company or business entity

• not contain names of any religion, or governing authority, nor names or logos of any external bodies

• not have been previously registered.

• not have a name starting with words like "Universal", "Middle East", "International" and/or translate them into Arabic.

Apply for initial approval

Initial approval is a preliminary approval granted by the UAE Government to allow a foreign investor to proceed with setting up a business in the country.

It indicates that the government has no objection to the establishment of the business, but it does not give the business owner the authority to run or practice the business activity. 

Drafting a Memorandum of Association (MOA) / Local Service Agent Agreement (LSA)

Memorandum of Association is considered as the constitution of the business organization and is a mandatory document for company formation in UAE.

It will contain the details of the shareholders, board of members, regulations regarding the operation of the company, policies, safety and security aspects, and so on. MOA has to be submitted along with other documents for business formation in the UAE.

Kindly note that businesses owned completely by non-GCC residents require a Local Service Agent from the UAE. Appointing the local service agent will be under an agreement attested by the notary public or the court.

Get additional government approvals

Based on the specific type of your business you might require additional government approvals as well. 

It is better to have an experienced consultant by your side at this stage as they will help you in getting all the government approvals required for your business.

Apply for Business License

Once you have completed all the above steps it is now time to apply for the business license. The type of business license you will apply for depends on the primary activity of your business.

Once you have the business licence, you can start practicing business activities legally in UAE.

You can collect the business licence from service centres of the economic departments or through their websites.