Legal Aspects of Company Incorporations in the UAE

The United Arab Emirates is one of the world’s most dynamic economies. Its investment friendly laws, international standard infrastructure, strategic geo-location and 0% taxation on personal and corporate incomes make it the emerging commercial hub of the world. To avoid future legal implications, investors establishing their businesses in the UAE should consider various legal aspects before any investment decisions.

Establishment of companies in the UAE free zones is very attractive for investors due to 100% foreign ownership and less bureaucratic hurdles to incorporate. But it is important to know that technically speaking, free zones are considered as out of the UAE as there is no application of the local laws there. Free zone companies cannot operate from the mainland of the UAE until they open branch offices there or work only through local distributors.

If investors are interested in doing business with international markets through foreign trade and are not concerned to do business with a local market of the UAE, they may establish a company in any of dedicated UAE free zones.

They may also consider the option of establishing offshore companies in two special jurisdictions of the UAE:

- JAFZA (Jebel Ali Free Zone Authority);
- RAKICC (Ras Al Khaimah International Corporate Centre).

Such offshore companies cannot have physical offices in the UAE and their investors are not entitled to have UAE residence visas.

Operating from the UAE mainland is beneficial for investors as, according to UAE laws and regulations, local companies are more entitled to win public tenders and contracts. But in this case, foreign investors should be careful while drafting the Memorandum of Association (MOA). Investors have to make sure that all management, executive, statutory, and financial powers are dedicated to expatriate partners leaving very small room for the local partner to run the company. The so-called Side Agreement (although not enforceable technically) should also be signed to protect the interests of foreign investors.

Written by:

Shakeel A. Mian | Prudential Middle East Attorneys & Legal Consultants​