All mainland (onshore) UAE legal entities are required to be licensed by the Department of Economic Development (DED) and governed by the UAE Commercial Companies Law (CCL). The main advantage for foreign investors establishing a business in mainland UAE is that, unlike the Free Zones, there is no territorial restriction on business activities or the location of offices/premises. A mainland company therefore has the freedom to trade anywhere in the UAE; including all the Free Zones and internationally.
Limited Liability Company (LLC)
The standard type of company in the UAE mainland is the Limited Liability Company (LLC). The DED is the government body authorised to issue all licences for LLCs and is responsible for classifying and regulating the types of economic activity that may be undertaken.
An LLC is not restricted on where it can trade in the UAE (unlike Free Zone companies) or GCC; furthermore, there is no restriction on real estate ownership, or on the number of visas that can be obtained. There are no minimum share capital requirements. A mainland company is not required to pay the standard 5% customs duty on imported goods.
UAE Foreign Ownership Restrictions
The principle limitation for foreign investors setting up an LLC is the UAE foreign ownership restrictions. When setting up an LLC, the CCL prescribes that at least 51% of shares must be registered to a UAE/GCC national sponsor (either a UAE/GCC national individual or a corporate entity 100% owned by UAE/GCC nationals), often referred to as a local partner.
If your business requires you to trade on the UAE mainland with local companies then you will need a DED-licensed company and this will require a local partner. Many foreign investors are concerned by the foreign ownership restrictions and uncomfortable about relinquishing control of their company to a local partner. To allay these concerns, A & A has created a “corporate shareholder” model that allows clients to effectively maintain 100% ownership control of their business while remaining in full compliance with UAE companies law.
Corporate Shareholder Model
A & A has created a number of 100% UAE-owned LLCs; that it fully manages and controls through power of attorneys and other legal agreements. These companies can act as the 51% local partner (Corporate Sponsor) and, through a suite of risk mitigation documentation, pass all management control, financial control and the day-to-day running of the business back to the 49% shareholder in return for a “Fixed Annual Sponsorship Fee”.
A & A will not take any commercial role in the new company and its annual fee will be fixed such that there will be no variation dependent on increased turnover or profitability of the business.
The primary benefit of the Corporate Sponsorship model is that the investor will not be dealing with an individual person as a shareholder but rather with an international, fully licensed and regulated company that has no emotional ties to the business and no local vested interests.