Business Setup in Abu Dhabi – Company Formation in UAE
Abu Dhabi is the capital of the United Arab Emirates and is situated on the mainland of the Arabian Gulf of Persia. Abu Dhabi is one of the most populated Emirates of the UAE. It largely contributes to the GDP (Gross Domestic Production) of the Emirates and plays a significant role in the economy through its GDP and per capita income.
The processes around the U.A.E are very straightforward and easy for businessmen to set up their companies. Business Setup in Abu Dhabi is a simple and seamless process. The Department of Economic Development (DED) in Abu Dhabi has launched new approaches to help company owners establish and expand their business activities without excessive costs on formation and administration processes.
Company Formation in Abu Dhabi is a great opportunity for business enthusiasts. The UAE government has streamlined the company setup process, making it smoother than ever before. This is one of the reasons why business leaders are keeping an eye on Abu Dhabi.
Why Start a Business in Abu Dhabi, UAE?
Abu Dhabi was established as the administrative and political capital of the UAE due to its oil revenues. These revenues have also fostered strong relationships between the Gulf nation and foreign countries. Additionally, Abu Dhabi is known as a safe and crime-free destination to visit.
Abu Dhabi boasts the fastest-rising economy in the Middle East and is recognized for its stability. It serves as a successful business hub for various nationalities. A key factor contributing to Abu Dhabi’s development and growth is its proximity to Dubai, one of the most ultramodern Emirates of the Gulf. It takes just 45 minutes to reach Dubai from Abu Dhabi. As a result, business owners who set up their businesses in Abu Dhabi often consider establishing a branch in Dubai as well. This opportunity facilitates the selection of a suitable business plan for both Emirates.
Another noteworthy attribute of Abu Dhabi and Dubai is their reputation for offering convenient procedures for company formation and business setup.
Abu Dhabi is home to commercial and industrial enterprises, making it an ideal location for business owners to launch profitable companies. It offers international investors a wide range of business opportunities. There are various pathways for international investors to follow when establishing a new company in the UAE.
Process of Business Setup in Abu Dhabi
There are some key steps to registering a new company in Abu Dhabi:
- Determining the Activity and Legal Form
- Registration of the Trade Name and Activity
- Memorandum of Association or National Service Agency Agreement Notarization onshore
- Establish Business Location
- Obtaining Approval from Government Authorities
- Issuance of Government License(s)
Determining economic activity type
Before initiating the procedures for issuing the business license, it is essential to determine the activity/activities of the intended business. The legal requirements and fees vary according to the nature of the activity. In addition, some activities require fulfilling requirements such as the location of the business and the total area of the facility.
Determining the legal form of business
There are several legal forms and structures that are appropriate to the needs and nature of your business such as a Limited Liability Company or Limited Liability Partnership. Different rules and regulations apply to each legal form and ownership type.
Trade Name Registration
Having selected the activity and legal form of the business, a trade name that distinguishes the business from others and conforms to the nature of the activity and legal form must be selected.
Obtaining initial approval
Having obtained the trade name certificate, an investor can request an initial approval certificate, which enables him/her to proceed with applying for a business licence and permission for the required commercial venture. For foreign investors, obtaining the approval of the General Directorate of Residency and Foreigners Affairs (GDRFA) is compulsory. At this stage, the investor can also seek approval from the Commercial Protection Division for its proposed business premises.
Obtaining approvals from relevant authorities
Following initial approval, an investor can approach the relevant authority to obtain approval according to its intended corporate activities. Some activity types, however, only require the approval of the Department of Economic Development (DED).
Issuing Business Licence
Having obtained the approval of the relevant government entities, if any, the investor can apply to the Department of Economic Development (DED) and fulfill all legal requirements and pay fees for issuing the business licence. The licenses issued by various licensing authorities in Abu Dhabi include Commercial, Agricultural, Vocational, Professional, Industrial, and Tourism.
Cost of Company Formation in Abu Dhabi
There is certainly a financial cost in every stage of the process. Whether it is a free zone company or a mainland company in Abu Dhabi, there is a fee involved. The cost of setting up a company for different sectors is as follows:
Mainland Setup Cost
The cost varies depending on the market structure, business operation, office space, and the number of visas. Apart from these, there are a few costs that you need to be aware of:
- Incorporation fees (submitting the required documents)
- Arrangement of approvals/inspection (one time)
- Sponsor fees (annual)
- Legal fees (one time)
- Government and third-party taxes (trade license, notary fees, legal translation, typing centers, a mix of one-time and annual fees)
- Immigration per person (usually lasts for two years)
Free Zone Cost
Costs also vary depending on the free trade zone, business structure, number of visas, and office space. A few costs one must be aware of are:
- Registration Fee (one-time fee)
- Name reservation fee (one-time fee)
- Annual License Fee
- Share Capital
- Yearly rental for premises
- Immigration per person (lasts for three years)
Types of Abu Dhabi Company Setup
For those entrepreneurs that go down the route of 100% foreign ownership, there are six types of companies you can register in Abu Dhabi:
- Branch of a Foreign Company
- Branch of a GCC Company
- Branch of a Freezone Company
- Representative Office
- Civil Works Company
- Foreign GCC Branch (one GCC national shareholder/one foreign shareholder)
There are four other company types that can be registered in Abu Dhabi, aside from the wholly foreign-owned options:
- Limited Liability Company
- Sole Proprietorship L.L.C
- Sole Establishment
- Local Branch
There are various legal forms that a company in Abu Dhabi can take but the most common ones are a limited liability entity and a duty-free zone Abu Dhabi business.
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 business entity operating under limited liability principles must:
- Appoint a minimum of one director and two shareholders
- Have a 51% Emirati shareholder
- Rent office premises and hire staff
These companies are allowed to engage in all commercial or industrial activities.
Shareholder Agreement with a UAE National
UAE company law allows foreign companies to draft flexible, differential profit-sharing arrangements, independent of the UAE shareholding percentage. Through a legal shareholders’ agreement, the UAE national will be designated a silent partner who will not interfere in the 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 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 incorporate limited liability with a silent partner, there are advantages to having an active local shareholder. Advantages include:
- Introduction to potential customers and suppliers.
- Preference in the allotment of government contracts.
- Navigation through the government bureaucracy.
- Assistance with immigration and entry permits.
Abu Dhabi Professional Services Company
Foreign investors can incorporate an Abu Dhabi LLC to provide professional services without having a 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 Professional Services company can be 100% foreign-owned, an Emirati must be appointed as a local service agent under an agency contract authenticated by a notary public. The agent has no direct involvement in the business, and his role is limited to obtaining licenses, labor cards and sponsoring residence permits. He is paid a lump sum and/or a percentage of profits or turnover.
Free Zone Companies
Incorporating a company in a special economic area is suitable for foreign companies intending to use the UAE as a regional manufacturing or distribution base, with the bulk of their business conducted outside the U.A.E territory. Free zones are mainly for import and export-oriented companies that only require an office in Abu Dhabi.
Foreigners are allowed to invest in Abu Dhabi as sole traders, in their personal name. Under this establishment, a minimum capital 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.
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.
If 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 promoting the business of the parent company or market research. A local UAE agent or distributor must be appointed to sell goods and provide services to local companies.
A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired commercial operations. 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 upon.
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.
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;
A PSC requires:
- A minimum of 10 founders of which at least 51% are owned by UAE nationals
- 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.
Abu Dhabi Partnerships
Foreign nationals are not allowed to form Abu Dhabi partnerships. These entities are limited to UAE nationals only.
Doing Business 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 to sell its goods and services directly to UAE customers.
- Foreign companies can also sell their franchise to commercial agents or distributors, eliminating the need to hire local staff and incorporate a local company. Examples include Hertz, Baskin Robbins, and Pizza Hut.
Types of Business Licenses for Company Registration in Abu Dhabi
To secure the license, our team will prepare the application form. We will also submit several documents including a company incorporation certificate, director & shareholder documents, a notarized AOA, a lease agreement of office space and industrial space (if required), a detailed business plan, and other necessary documents.
Different types of business licenses that can be obtained while company registration in Abu Dhabi is as below:
- Commercial License
- Occupational License
- Professional (or Craft) License
- Industrial License
- Tourism License
This license will be issued to companies engaged in general business activities; these activities are defined under 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.
This license will be issued for businesses that 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 the 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 that wish to set up manufacturing operations in Abu Dhabi. To avail of this license, our clients will need to secure a lease agreement for industrial space. Furthermore, unlike the aforementioned licenses, this license will be issued by the Higher Corporation for Specialized Economic Zones (ZonesCorp).
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.
Benefits of Starting Your Business in Abu Dhabi
A few of the advantages of setting up a business in the capital of the U.A.E are as follows:
- The availability of the entire required infrastructure – land, premises, roads, energy supply, connections and etc
- Clear rights of foreign business owners
- Possibility of 100% foreign participation in the share capital of the company and no need of involving the local citizen as a mandatory participant of the company (in economic zones)
- Opportunities for the repatriation of the invested capital and gained profits
- Ease of running the business without the day-to-day interference of the local, national partner
- Competitive real estate costs
- Easy to open global corporate bank accounts
Business Setup Services in Abu Dhabi, UAE
If you want to set up a business in the UAE specially in the Emirati capital, it is highly recommended to have a business setup consultant by your side. They will assist you throughout your business setup journey, ensuring a smooth process. They will help you with processing your documents and papers, simplifying the administrative procedures.
Having a business consultant is especially beneficial when obtaining your Abu Dhabi trade license. They possess knowledge of where to apply for the license and can guide you on the required documents to submit with the application.
RIZ & MONA CONSULTANCY offers its clients a seamless process of business registration across the UAE. Contact us and book a free appointment to set up a new business in the Abu Dhabi mainland or Abu Dhabi free zone.