Dubai: Why is it the place for global business expansion?

According to the recent report from Alliance Business Centres Network, Dubai tops Singapore , Hong Kong, New York and even London  as the place for global business expansion. The basic reason why Dubai has command such an attention and interest from firms willing to expand their business internationally is basically due to the fact that Dubai has been developing a business friendly environment – the ease doing business, numerous type of business that can be set up,  sophisticated business infrastructure  – over the years. Firms in all type of industry ranging from manufacturing, technology, logistics, management consultancy, financial services etc can easily choose amongst the 30 plus free zones that the UAE has to set up a company, a branch or a representative office.

Type of Entities

When deciding to have a presence in the Dubai,  companies has a number of choices  as to where to incorporate and how to set up their companies operation. Companies can choose between the following types of entities based on their business  activities and whether they want to do business within UAE

1. Mainland/ Onshore 

Foreign investors/companies wishing to establish a presence in mainland UAE can do so by setting  an LLC, a branch or a representative office as per the new Commercial Companies Laws of 2015 which came into effect on 1July 2015 and superseded the Commercial Companies Laws of 1984.

(a) Limited Liability Companies (LLC)

An LLC is allow to do business and trade within the UAE.  An LLC is required to have  a local shareholder who will hold 51% of the shares of the LLC and the remaining 49% can be hold by the foreign investors.

However, the day to day management can be vested in a manager who is normally appointed by the foreign shareholder and also profit /loss sharing ratio can also be different from the share capital ratios.

(b) Branch of Foreign Company

As per the new Commercial Companies Law, a foreign company can establish a branch in the UAE. The UAE onshore branch is not a separate legal entity from its  parent and as such there is no legal protection to the parent in the form of limited liability.  An onshore branch will normally be restricted to carry only the activity of the parent company.

Generally establishing these types of entities could take like  four to six weeks given the number of steps to  follows and supporting documents that need to be legalised.

2.   Free Trade Zones Companies

Another alternative for having a presence in the UAE is to establish a company in one of the many free zones across Dubai and the UAE.  Free zones are basically industry focused  and tailored to specific industries, thus each free zone will only license specific types of activities. The most popular free zone in the UAE are:

DIFC – Dubai International Financial Centre : This is ideally for company and businesses providing financial services, such as bank,  wealth management firms, fund managers, etc.  The DIFC also issues several categories of licences based of the type of activities

JAFZA – Jebel Ali Free Zone : Ideal for the holding of properties/real estate in the UAE

DMCC – Dubai Multi Commodities Centre

DAFZ – Dubai Airport Free zone

DCC – Dubai Creative Centre, otherwise known as TECOM and includes Dubai Internet  City, Dubai Media City

KIZAD – Khalifa Industrial Zone Abu Dhabi

Masdar City

In setting a company on one of the free zones, the investors can choose between  having an Free Zone Establishment (FZE) of a Free Zone Company (FZC). The major difference between these two are the number of shareholders and the share capital requirement.

Free Zone companies allow for 100% foreign ownership, however companies established in a free zone is not allow to carry out activities in the mainland UAE.

3. International Business Companies/ Offshore Establishment

Companies and individuals can also establish International Business Companies (IBC) in the UAE if they are not going to engage in any business  activities within the UAE ( onshore or free zones). These IBC is most commonly use for investment holding, portfolio investment, invoicing etc and do not carry any commercial activities.

Setting up and establishing a company in the Dubai is like to provide a number of advantages to foreign companies especially with the coming up of the EXPO 2020. It should however bear in mind that the process and establishing and registering company is normally longer compared to other jurisdictions due to the fact that a number of documents need to be notarised and legalised in the country of issue.

Source: https://www.linkedin.com/pulse/dubai-why-place-global-business-expansion-joseph-margéot-jolicoeur/

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