Doing Business In The United Arab Emirates

Harry Hsing is an Associate in our Abu Dhabi office.

The United Arab Emirates (UAE) is a federation of seven emirates located on the northeastern side of the Arabian Peninsula. Each of the seven emirates governs themselves with local laws, while federal laws govern some specific substantive areas (i.e., intellectual property, labor and employment). While the federal UAE Companies Law (Articles 218-255 of Federal Law No. 8 of 1984) technically governs corporate law in the UAE, corporate entities are registered within each emirate and are emirate-specific. To this end, a corporate entity in one emirate may not do business in another emirate without establishing a related business entity such as a branch office or representative office.

There are several business forms that foreign companies may utilize to do business in the UAE market. Below are several examples along with the criteria required for each business form.

Limited Liability Company (LLC)

LLCs provide the mechanism for private businesses to limit liability in their business ventures. LLCs in Abu Dhabi must have at least two partners and may have a maximum of 50 partners. The 51 percent majority partner must be a UAE citizen or a business entity wholly owned by UAE citizens. The minimum capitalization requirement was eliminated in 2009. In lieu of a bank letter evidencing the proper deposit of capitalization funds, the Abu Dhabi Department of Economic Development now requires an undertaking letter from the shareholders of the LLC promising to deposit funds for the company if requested to do so by the Abu Dhabi government. LLCs are banned from performing certain activities. Examples of proscribed activities include banking, insurance and the investment of money on the behalf of third parties. To modify the effects of the 51 percent local ownership requirement, the parties typically enter into a private shareholders agreement that will further define the financial and management rights and obligations of the parties. It is through this structure that foreigners are able to more securely do business in the UAE while limiting their liability to their interest in the LLC. This business form is typically used for businesses involved in trading or construction of physical things. Branch Office

Branch offices are not a separate distinct business entity like the LLC. Instead, they merely carry out the parent company's business in the parent company's name. A branch office in Abu Dhabi or...