Business entities in Abu Dhabi
Healy Consultants will assist our Client engineer the optimum corporate structure. There are several entities available, the most common being a limited liability company (LLC) and a free zone Abu Dhabi business (FZ).
Limited liability company (LLC)
- This is the most common business entity used to conduct all business activities in Abu Dhabi. As always, the company is a separate legal entity or ‘person’. In particular, a company is separate from its owners, shareholders and the persons who run it, the directors;
- A limited liability company must appoint i) a minimum of one director and two shareholders and ii) a minimum issued share capital of US$41,000 iii) a 51% UAE national shareholder and iv) must rent office premises and hire staff;
- LLCs are allowed to engage in all commercial or industrial activities.
Shareholder agreement with a UAE national
- UAE company law allows foreign companies draft flexible, differential profit sharing arrangements, independent of the UAE shareholding percentage. Healy Consultants will assist with this for Clients seeking Abu Dhabi company setup;
- Through a legal shareholders’ agreement, the UAE national will be designated a silent partner who will not interfere in daily activities of the Abu Dhabi company. The foreign investor legally enjoys full power to solely operate the business activities and corporate bank account;
- The shareholders’ agreement will be signed by both the foreign investor and the UAE local partner and witnessed by two different parties from each side. The shareholders’ agreement is legally valid in the Abu Dhabi courts to arbitrate any dispute between the foreign investor and the local partner;
- While foreign companies prefer to establish LLC with a silent partner, there are advantages to having an active local shareholder. Advantages include i) introduction to potential customers and suppliers ii) preference in the allotment of government contracts iii) navigation through government bureaucracy iv) assistance with immigration and visa matters;
- The majority of company visas and licenses are sponsored by UAE nationals, giving them indirect control over the business;
- The company constitution stipulates 100% management rights in favor of the minority foreign shareholders. For example, a 75% minimum percentage rate in favor of any resolution before it is passed, thereby effectively giving both parties mutual blocking rights at shareholder level at all times;
- A separate management agreement between the LLC and the foreign partners, appointing the foreign partners (jointly) as managers of the LLC. The LLC would then pay a certain percentage of the turnover directly to the foreign partners as management fees, which in turn would reduce the pool of profit to be shared between the shareholders.
Abu Dhabi professional services company
- Foreign investor can incorporate an Abu Dhabi LLC to provide professional services without having a UAE national partner. Professional services include legal and accounting consultancy, IT and management consultancy, and marketing consultancy. This business entity type is also known as a civil business company;
- While the Abu Dhabi LLC can be 100% foreign owned, a UAE national must be appointed as a local service agent under an agency contract authenticated by a notary public. The service agent has no direct involvement in the business, and his role is limited to obtaining licenses, labor cards and sponsoring residence visas. He is paid a lump sum and/or percentage of profits or turnover.
- Compare Dubai LLC and Abu Dhabi LLC companies
Free zone companies
Incorporating a company in free zones are suitable for foreign companies intending to use UAE as a regional manufacturing or distribution base, with the bulk of their business conducted outside the UAE. Free zones are mainly for import and export oriented companies who only require an office in Abu Dhabi.
A foreign branch office and a foreign representative office
- The Commercial Companies Law regulates foreign company branches and representative offices in the UAE and stipulates they may be 100% foreign owned, provided a local agent or sponsor is appointed. Only foreign manufacturing and construction companies are allowed to establish these business entity types;
- An Abu Dhabi branch of a foreign company is allowed to invoice UAE customers, sign local sales contracts, and receive income from customers. A local UAE agent or distributor must be appointed to sponsor visas and licenses;
- While an Abu Dhabi representative office is 100% foreign-owned and controlled, it is not permitted to make direct sales within the UAE. Such an office will only engage in activities such as i) promoting the business of the parent company and ii) market research. A local UAE agent or distributor must be appointed to sell goods and provide services to local companies;
- Before the government issues a license to foreign company branches or representative offices, a bank guarantee of US$13,700 must be provided to the Ministry of Commerce;
- Abu Dhabi branch offices cannot sell or distribute goods (but can provide a service) unless they are branch offices of UAE registered companies;
- A foreign company may establish an Abu Dhabi branch provided it has been approved by the Executive Council and the Federal Ministry of Economy and Commerce, is granted an appropriate licence from the Abu Dhabi Municipality, and been accepted as a member of the Abu Dhabi Chamber of Commerce.
- A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired business activity. Joint ventures in the UAE are established in the form of an LLC where 51% is owned by a UAE national, but the profit and loss distribution ratio can be mutually agreed;
- The foreign company deals with customers under the name of the local partner, the latter bears all liability. In practice, joint ventures are seen as offering a suitable structure for companies working together on specific projects.
Foreigners are allowed to invest in Abu Dhabi as sole traders, in their personal name. Under this establishment, a minimum capital of US$37,000 is required and the sole proprietorship must appoint a UAE national as his service agent. This kind of business entity is used by doctors, engineers, and lawyers.
Public shareholding company (PSC)
- This business entity type is also known as a public joint stock company and is suitable for large projects or operations, involving a large investment of funds or raising private or public capital;
- If our Client plans to offer shares to the general public to raise capital, we recommend forming a public joint stock company. This entity type is similar to a UK public limited company or German aktiengesellschaft (AG);
- A PSC requires i) a minimum share capital of US$2.7 million ii) a minimum of 10 founders of which at least 51% owned by UAE nationals iii) a board of directors consisting of a minimum of three to a maximum of fifteen persons. The chairman and a majority of directors must be UAE nationals;
- The law stipulates that companies engaging in banking, insurance, or financial activities should be run as public shareholding companies.
Doing business in Abu Dhabi without a local company
To minimize business costs, our Clients sometimes implement the following strategies:
- Through a local agent or distributor, a foreign company is allowed sell its goods and services directly to UAE customers;
- Foreign companies can also sell their franchise to commercial agent or distributor, eliminating the need to hire local staff and incorporate a local company. Examples include Hertz, Baskin Robbins, and Pizza Hut.
Abu Dhabi partnerships
Foreign nationals are not allowed to form Abu Dhabi partnerships. These entities are limited to UAE nationals only.
Table of comparison between Abu Dhabi entities
Abu Dhabi Business Licenses
After company setup, an Abu Dhabi company must secure a business license before commencing operations. Most of the licenses are issued by the Department of Economic Development (DED). For more information, refer to the points below:
- To secure the license, Healy Consultants’ team will prepare the application form. We will also submit several documents including i) company incorporation certificate ii) director & shareholder documents iii) notarized AOA iv) lease agreement of office space and industrial space (if required) v) detailed business plan;
- The license applied will depend on the proposed business activities of our Client’s company. Furthermore, it is likely more documents will be requested in addition to the aforementioned ones in order to obtain license approval. For a list of licenses available in Abu Dhabi, refer to the information below.
This license will be issued to companies engaged in general business activities; these activities are defined under the Federal Law No. 18, 1993. Examples of commercial businesses include i) general trading companies ii) construction & real estate companies iii) transportation companies iv) business contractors and v) hospitals and clinics. For further details, please refer to this webpage;
This license will be issued for businesses which involve individuals using their mental and intellectual capabilities; talents; and abilities to serve their Clients. Examples of such businesses include i) accounting and audit firms ii) law firms iii) consulting firms and iv) research and development companies;
This license will be issued to artisans and other professionals who personally engage in practice of a particular craft. These individuals may work alone or work with up to 5 people. Examples of such crafts include i) carpentry ii) smithery and iii) steelwork;
This license will be issued to businesses which wish to setup manufacturing operations in Abu Dhabi. To avail this license, our Clients will need to secure lease agreement for industrial space. Furthermore, unlike the aforementioned licenses, this license will be issued by the Higher Corporation for Specialized Economic Zones (ZonesCorp). For details about the requisite documents and requirements, please refer to this webpage;
This license is issued by the Abu Dhabi Tourism and Cultural Authority (TCA). Businesses that offer tourism related services like hotels, travel agencies, boat rentals etc. will need to secure this license. For details about the requisite documents and requirements, please refer to this webpage.
Frequently asked questions
What are the types of business entities a foreign entrepreneur can setup in Abu Dhabi?There are different forms of Abu Dhabi business entities including i) LLC ii) free zone company iii) branch office and iv) representative office. Foreigners are allowed only 49% ownership of an LLC.
What is the minimum number of shareholders required for the different business entities in Abu Dhabi?Only 1 shareholder is required for an Abu Dhabi LLC and free zone company.
What business structure should I setup in Abu Dhabi?Healy Consultants recommends our Clients to setup a free zone company, because there are no local shareholder requirements.
What is the most common type of company used in Abu Dhabi?The business structure most commonly used in Abu Dhabi is the LLC.
Will I be able to setup a corporate bank account with any corporate entity in Abu Dhabi?Yes, all types of business entities can open a corporate bank account. However, it is generally easier to open an account with an LLC or free zone company, rather than a branch office or representative office.