Registration of a company in the UAE — what you need to know? Personal experience

REVERA law group went through the entire process of registering a company for one of the clients in Dubai: from choosing a free zone to obtaining a certificate of incorporation. Anastasia Akulich, senior lawyer of the company, spoke about what steps need to be taken and what difficulties will have to be faced.

Recently, the jurisdictions of the Middle East, especially the United Arab Emirates, have been gaining popularity among IT clients of our law firm.

There are several reasons:

• friendly position to founders from any regions,
• preferential tax regime,
• The attractiveness of the Emirates as a developed financial center for investors.

However, despite all these advantages, there are pitfalls that must be considered if you have chosen the UAE to start your business.

We decide on the founder: an individual or a legal entity

It depends on who the founder will be, what additional steps will have to be taken to register and subsequently conduct business.

If the founder is an individual

Then, in order to register a company, it will initially be necessary to provide a minimum of documents — a scanned copy of the passport and a bank statement with the required balance.

To conduct business after incorporation, the company will need to obtain a UAE resident visa:

1. to ensure economic presence;
2. without it, it will not be possible to open a company bank account in a local UAE bank. 

If the founder — legal entity

In this case, it is necessary to provide a package of constituent documents that have passed the consular legalization procedure.

The UAE has not acceded to the Hague Convention, which abolishes the requirement for legalization of foreign public documents and provides for a simplified procedure for issuing an apostille.

Consular legalization of documents is a rather complicated, lengthy and expensive procedure. And then you will still need to obtain a UAE resident visa for a representative of a legal entity.

Therefore, keep in mind, that if the term of opening a company in the UAE is important for you, it is faster and easier to start registering a company with one founder — by an individual.

Select company type

Non-residents of the UAE can register both offshore and onshore companies in the Emirates.

 1. Registration of an offshore company

Offshore company in the UAE — this is a company that does not have the right to conduct its activities within the UAE, as well as work with legal entities from the Emirates. For this reason, an offshore company is issued only a certificate of registration and is not issued a license to operate in the UAE.

Therefore, it is worth registering an offshore company in the UAE if you do not plan to work in the local market.

The cost of offshore registration in the UAE starts from 3 thousand US dollars. Registering such a company is easier than onshore.

2. Registration of an onshore company

It is necessary to register an onshore (local) company if you are going to work both outside the UAE and directly within the country.

An onshore company in the UAE is registered in one of the free zones (free zone, free economic zone) — these are business districts in the UAE that allow foreigners to incorporate and conduct business in the country without the participation of a local partner.

In total, there are 50+ free zones in the UAE, more than 20 of which are located in the emirate of Dubai. Each free zone has its own legislation.

Doing business inside the UAE is allowed only from the territory of the free zone in which your company is registered.

Free zone selection

The choice of a specific free zone depends on a number of factors.

• Type and needs of your business

It is necessary to pay attention to what licenses the free zone issues.

There are many IT-oriented free zones in the UAE. The most attractive are:

• Dubai Multi Commodities Center (DMCC),
• International Free Zone Authority (IFZA),
• Dubai International Financial Center (DIFC),
• Ajman Media City (AMC).

Here's what else can affect the choice of free zone:

• Registration fee — Thus, in the emirate of Dubai it is the most expensive to incorporate. The reputation of a particular free zone also affects the price;
• Requirements for the minimum amount of authorized capital and the submission of annual audit reports;
• The law in force in the territory of the free zone.

The procedure for registering a company in the free zone 

We helped the client to register a company in DIFC, Dubai.

Our choice was this free zone, as it had a good reputation and English law worked on its territory.

However, in most of the free zones, local UAE law applies.

In our case, the founder was an individual. The personal presence of the founder was not required to register the company, so the whole process was carried out remotely and consisted of two stages.

1. Obtaining Initial Approval from the administration of the free zone

The stage is similar to the KYC procedure. At this stage, the freezone checks the documents provided to it by the founder:

• scanned copy of passport,
• Founder's bank statement
• details of the business to be run by the registered company.

The stage ends with the issuance of a Certificate of status, which confirms that the free zone has approved your application, and you can take the following steps to register.

We are faced with the fact that the KYC procedure for the free zone chosen by the client has become more complicated. Therefore, the passage of Initial Approval was accompanied by three or four rounds of additional questions from the free zone, mainly related to:

• with planned business,
• source of income,
• founder's background.

This procedure lasted about two months.

2. Creating a legal entity in DIFC

The stage starts immediately after passing the Initial Approval. An application for registration of a company is submitted to the free zone, and then the founder is required to pass verifications on the online portal of the free zone.

The stage ends with the issuance of the company's statutory documents:

• licenses to operate,
• charter,
• certificate of registration.

Here, too, we should expect additional questions from the administration of the free zone and prepare for the fact that the deadlines may be delayed. This stage in our case lasted a little less than a month.

The license is issued to the company for a period of one year, so in the future it must be renewed on a paid basis — the cost will vary depending on the free zone.

The total cost of registering a company (excluding visas and opening an account) was about 15 thousand US dollars.

The actual registration period turned out to be about three months (initially it was expected to be within one month).

Brief

1. The fastest way to start a company in the UAE is with the founder — an individual (citizenship does not affect).
2. If your company's activities will be directed mainly outside the Emirates, but you care about your reputation, register an onshore company in one of the free zones of the UAE.
3. In any case, it will take time and attention to choose a free zone. There are many of them, they differ — there are more than 20 free zones in the emirate of Dubai alone.
4. Registration of an onshore company in the UAE is not a cheap procedure. Focus on costs around 15-20 thousand US dollars.
5. Be guided by the real term of registration of the company — from one month. If it works out faster, it will be a nice bonus.