Do you need to setup a Mainland company in Dubai?

Being a major trading hub in the region, Dubai has become one of the most attractive destinations for multinational companies …

Being a major trading hub in the region, Dubai has become one of the most attractive destinations for multinational companies to establish themselves in the UAE. Although Dubai offers a business-friendly environment for foreign investors, there are certain incorporation requirements that investors should pay attention in order to avoid any legal complications in the future. In this article, we focus on major considerations to be made by those thinking of setting up a limited liability company in the mainland of Dubai. This article, however, is not intended to provide legal advice or opinion, and it is for informational purposes only. If you would like to discuss how this information relates to your particular matter, we encourage you to contact a lawyer through Legalintro.

 

Can I do business without setting up a company in Dubai?  

Foreign investors can trade in Dubai through selling overseas to importers and traders or through appointing an agent or distributor based in Dubai. Such arrangements, however, are not well suited to continuous high-volume trading due to the fact that foreign investors may lose their control over marketing and brand image, compared with entering the market themselves. In order to establish a strong, lasting foothold in the UAE marketplace, a mainland setup is the most suitable option.

 

How does a mainland company differ from other forms of companies available in Dubai?

Perhaps the biggest difference is to be able to trade with other businesses on the mainland as there are no territorial restrictions on the business activity of a mainland company. Unlike free zone companies, that can only trade within territorial limits of the free zone, mainland companies conduct their activities anywhere in the UAE and beyond, with no restrictions. Secondly, free zones are industry focused and are tailored to specific industries and therefore, only license specific types of activities are allowed, such as Dubai Media City allowing business activities related to media. Mainland companies, on the contrary, have no such limitations and can open up to the wider UAE economy with much greater scope of diversity.  

 

What is the first step that I should take to set up a mainland company?   

The very first step is to obtain an initial approval to be issued by Department of Economic Development upon submission of certain documents including trade name reservation certificate. Meanwhile, you are required to select business activity(ies) under which your company will conduct business. It should be noted that some activities require external approvals from other authorities, e.g. engineering consultancy that requires an additional approval from Dubai Municipality. Therefore, businesses seeking a smooth establishment process must speak to a specialized lawyer to have an idea about incorporation requirements.

 

Do I have to have a local partner to set up a mainland company?  

The Federal Law No. 2 of 2015 on Commercial Companies (“Company Law”) prescribes that each company established in the UAE must have one or more UAE national partner(s) who hold at least 51% of the company’s capital. Companies that undertake certain activities are exempt from the 51% requirement, including oil companies with concession agreements, companies involved in the oil and gas industry, companies that produce electricity and gas, companies involved in treatment of water and transmission and distribution.

 

Is there any safeguard that can be provided to the foreign investor when setting up a mainland company?

Instead of having a UAE national as a shareholder holding 51% of the shares, in practice, you can appoint professional service providers (PSP) acting as nominee shareholders, holding the 51% of shares for and on behalf of the foreign investor. Where a PSP is appointed, the foreign investor will be entitled to 100% beneficial interest in the company and the company’s memorandum of association will be drafted in a way that it grants the foreign investor all authorities and powers to operate and manage the company, including the appointment of the board of directors and the general manager. Another possible option that can be provided to the foreign investor is contractual. The foreign investor and the PSP may enter into contracts commonly referred to as side agreements, which protects the foreign investor to the maximum extent possible by law.

 

Is there any capital requirement for mainland companies?  

The Company Law does not impose minimum capital requirements for limited liability companies. However, in practice, many businesses continue to apply the old minimum share capital requirement, i.e. AED 300,000. Distribution of share capital along with profit and losses is another important issue that business should pay attention when incorporating a mainland company. Use Legalintro to speak with a specialized business lawyer who can advise on how to distribute share capital and profit and losses.

 

Do I need to rent an office in Dubai to set up a mainland company?

All mainland companies in Dubai must have a physical address in Dubai. Foreign investors should therefore enter into a tenancy contract and register such contract with Ejari which is an online registration system initiated by Real Estate Regulatory Agency that requires all Dubai rental or lease contracts to be recorded on the portal. Although office space requirements vary from business activity to business activity, the space of location allocated for each license should not be less than 200 sq. ft pursuant to DED regulations.

 

Can I get a residency visa through my mainland company?  

Foreign investors seeking to establish their own business in Dubai can obtain investor visa that entitles the holder to live and work in the UAE for up to three years. In case foreign investors wish to employ foreign employees under their company, they are required to sponsor such employees to get employment visas. Call Legalintro to talk to a specialized lawyer who can guide you throughout the process of obtaining residency and employment visa.

 

How many days will the process take to set up a mainland company?  

Depending on business objectives and the industry, a limited liability company set up in the mainland of Dubai may take up to three weeks due to completion of the paperwork, regulatory approvals and any legislations and translation of documents. It is strongly advised that you should seek advice from a business lawyer on how to proceed with incorporation in order to avoid massive delays and unnecessary spending.