The term ‘share capital’ (or capital stock in US English) refers to the amount of money that has been put into the business by investors and the business owner; in a strict accounting sense, share capital is the nominal value of issued shares. Each free zone can set its own laws pertaining to how companies can be formed within its jurisdiction – and one topic that causes a lot of uncertainty is share capital.
UAE free zones have different share capital requirements during the application process. There may be no requirement at all to declare share capital in some free zones, while in other cases you may have to provide evidence of share capital worth up to AED 1m. As well as in same cases you need to fully deposit share capital or at least to show you have the availability (Jebel Ali Free Zone, for instance, requires applicants to provide proof that they have AED 1m in share capital as a minimum), in same other cases you just need to declare it (Shams in Sharjah, Creative City in Fujairah and TwoFour54 in Abu Dhabi, for instance, have no requirement to show the share capital).
Here’s why some free zones demand to see evidence of share capital:
- Free zones want to ensure new businesses launching on their premises are built on solid foundations and will become profitable – they do not want to take the risk of letting office space to companies that will fold in a few months. Share capital shows that the business has access to enough cash to pay for rent, salaries and business development.
- It demonstrates that investors are confident that the business will work.
If you are planning on setting up a business in a UAE free zone, an essential part of your research will be to find out the share capital requirements of your chosen free zone. This information can be easily found on the website of your preferred location.
If you have chosen to launch your business in a free zone which requires evidence of your share capital, you will need to include this in your application process. In order to do this, you would need to:
- Open a UAE business bank account
- Deposit your share capital in this account
- Create a copy of your bank statement
- List shareholders and the amount of your business they own
- Enclose a copy of your bank statement
Every UAE free zone aims to attract different kinds of businesses and so share capital requirements make up an important part of the application process in some jurisdictions. But this doesn’t have to be a headache. Working with a company formation specialist will help make the process seamless and straightforward, ensuring your application conforms with all the requirements of your preferred free zone.