The Brass Tax
Legal Business Structures
A civil company is one that undertakes directly a specific profession, as its target and partners depend, for their earnings, on the practicing of activities that involve the use or investment of intellectual faculties. Under Dubai Local Order No. 63 of 1991 on the licensing of professionals and tradesmen in the Emirate of Dubai, it is permitted for a number of individuals to practice a service or a professional activity as a distinct form, whereby the business takes the form of a “Business Partnership” in accordance with the provisions of the rules (from 683 to 690) of the Federal Civil Dealings Law. Professional companies may be 100% foreign owned; however, it is necessary to appoint a “local service agent.” The obligations of the local service agent toward his or her principal and third parties shall be restricted to rendering the usual experience in order to enable him or her to practice the professional or craftsmanship work without holding any responsibility or financial commitment in respect of his or her principal’s business or activity within the Emirate or abroad. The relations between the two parties shall be regulated by any agency agreement.
A general partnership is an arrangement between two or more partners from the UAE, whereby each of the partners is jointly and severally liable to the extent of all their assets for the company’s liabilities. The name of the company shall be made up of the name of all partners, and its name might be limited to the name of one or more partners, adding a word to modify the presence of the company. In addition to that, the company may have a special commercial name, and if the name of a person other than the partners was mentioned in the name while he was aware of it, the said person shall be responsible in the partnership for the company’s obligations. All partners shall be considered a dealer, and the bankruptcy of any partner leads to the bankruptcy of all partners. The company’s shares may not be represented in negotiable certificates. Partners are separately responsible for the company’s obligations and no agreement to the contrary may be made against third parties. All partners shall undertake the company’s administration, unless the company contract or an independent contract assigns the administration to a partner or to a non-partner party.
SIMPLE LIMITED PARTNERSHIP
A simple limited partnership is a company formed by one or more general partners liable for the company liabilities to the extent of all their assets, and one or more limited partners liable for the company liabilities to the extent of their respective shares in capital only. Only UAE nationals are allowed to be general partners. The name of the company shall be made up of the name of one or more of the limited partners, adding a word to modify the presence of the company. In addition to that, the company may have a special commercial name. The name of the limited partner may not be mentioned in the company name—if it is mentioned with his or her knowledge of that, he or she shall be considered a partner for third parties in good faith.
PRIVATE JOINT STOCK COMPANY
A number of founders, not less than three, may establish a private joint stock company. The shares of a private joint stock company cannot be offered to the public or for public subscription. The founders must subscribe all capital, and the minimum requirement for such capital is AED2 million. A private joint stock company is subject to all rules and regulations pertaining to private joint stock companies, except for rules and regulations of public subscription. A private joint stock company may be converted into a public joint stock company.
LIMITED LIABILITY COMPANY (LLC)
A limited liability company is one with limited liability, where the number of partners may not exceed 50 and should not be less than two. Each of the partners shall only be liable to the extent of his or her share in the capital. The partners’ participation should not be represented by negotiable certificates. The name of the limited liability company shall be taken from its purpose, or from one or more of the names of partners. The statement limited liability company shall be added to the company’s name, stating the company’s capital. Other than the insurance, banking, and investment businesses for others, limited liability companies shall be entitled to practice any legal business. The company may not resort to public subscription to make up or increase its capital, or to obtain any necessary loans. Also, it may not issue any negotiable stocks or shares. The minimum share capital shall be AED300,000, divided into equal shares with a minimum face value of AED1,000 per share. Shares may not be divided. If several people own a share, then they shall select one to be an individual owner against the company. It may be suitable for the share owners to make such a selection, provided that beyond that date, the share may be sold to its owners, in which case partners shall enjoy priority purchase. Losses and profits shall be divided equally among shares unless otherwise stated. The share of each partner shall be transferred to his or her heirs, and those mentioned in a will shall be treated as heirs. A limited liability company can be managed by a manager/managers that may be selected from among the partners, or any other parties provided that they do not exceed a total of five people. The manager/managers shall be appointed by memorandum of association (MoA), or by a separate management contract for limited/unlimited terms. If the manager/managers are not appointed as stated above, then the General Assembly of the partners will appoint them. Unless otherwise stated in the MoA, the company manager shall enjoy full powers of administration, and his or her acts shall be binding in the company, provided that it is supported within the capacity he enjoys. The manager’s resolution shall be as valid as that of the company board, and all conditions in the company contract contrary to that shall be invalid.
PARTNERSHIP LIMITED WITH SHARES (PLS)
A partnership limited by shares is one formed by general partners who are jointly liable to the extent of all their shares for the company liabilities, and participating partners that are liable only to the extent of their shares in the capital. For general partners, the company shall be a general partnership, and the general partner shall be a dealer even if he or she did not enjoy such a capacity prior to entering the company. All general partners must be nationals. The capital of partnerships limited by shares shall be divided into negotiable equal shares. The company shall be named after one or more of the general partners. Its name may be added to another innovative name, or else a name derived from its purpose.
Excluding the foreign countries licensed to practice their business in the country’s free zones, foreign companies may not practice their main business in the state, and may not establish branches unless licensed to do so by the Ministry of Economy after obtaining the approval of the concerned authorities, which will specify the business they are licensed to practice, provided that such a license may not be issued unless the company has a national agent. If the agent is a company, it shall hold the state’s nationality and all its partners shall be nationals. The obligations of the agent toward his or her company and third parties shall be limited to rendering the services required for the company without holding any responsibility or financial commitment in respect of his or her company’s branch office business, or activity within the Emirate or abroad. Foreign companies licensed to work in the state based on the provisions of the above may not start their business in the state unless they are registered in the Foreign Companies Register at the Ministry of Economy. The offices and branches of foreign companies shall be the headquarters of its business, and its business shall be subject to the provisions of the law. Foreign companies, and their offices and branches, shall have an independent budget, independent profit/loss accounts, and shall have an auditor. Should these foreign companies, their offices, or branches practice their business within the country without carrying out the abovementioned provisions, the persons practicing such business shall be personally and severally responsible for this.
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