Share capital in UAE Free Zone Companies

Share capital in UAE Free Zone Companies

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.

UAE launches 10-year residency visas and 100% ownership for investors

UAE launches 10-year residency visas and 100% ownership for investors

In order to shore up the UAE’s position as a primary destination for international investors, specialists (doctors, engineers, ….) and global talented students, a new system of entry visas for investors and professionals has been approved, with a long-term visa for up to 10 years.

In particular the system will grant investors and talents up to 10-year residency visas for specialists in medical, scientific, research and technical fields, as well as for all scientists and innovators, entrepreneurs and innovators as well as five-year residency visas for students studying in the UAE, and 10-year visas for exceptional students. This will give them the opportunity to study their practical options in the future.

The decision has been taken made during a council chaired by HH Sheikh Mohammad Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai at the Presidential Place in Abu Dhabi on Sunday; HH Lt. General Shaikh Saif Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Interior, and HH Sheikh Mansour Bin Zayed Al Nahyan, Deputy Prime Minister and Minister of Presidential Affairs, were also present.

HH Sheikh Mohammad also directed the Ministry of Economy, in coordination with the concerned parties, to implement the resolution and follow up on its developments, and to submit a detailed study in the third quarter of this year.

The new visa system will increase the chances of attracting investors and competencies to the UAE and thus, further boost the country’s economic competitiveness globally. The global investors’ ownership of UAE-based businesses is expected to reach 100% by the end of the year.

EChannel system Dubai UAE

What is the E-Channel Immigration System and how will it affect your company?

The country’s rapid expansion from a population of just one million in 1980 to around nine and a half million today has been largely underpinned by rising numbers of expatriate workers. Such is the influx of foreign workers in recent years that today approximately 90% of the UAE’s population is non-Emirati, according to the CIA’s World Factbook.

The UAE economy has also been bolstered by a huge rise in the number of overseas travellers visiting the UAE on tourist visas. Dubai alone attracted 14.3 million visitors in 2015, making it the fourth most visited city in the world, behind only London, Paris and Bangkok. This is up five million since 2010 when 9.3 million overseas arrivals came to the city.

The UAE has adjusted its immigration policies and procedures over the years to cope with this increase in demand for visas and to ensure a smooth application and issuing process. The latest changes – in the form of E-Channel immigration – look set to make the process even easier, cutting down admin time and paperwork for both businesses and individuals.

What is the E-Channel immigration system? 

Launched as part of the UAE 2021 vision under the slogan ‘Smart Services with Future Vision’ – the E-Channel Immigration System is a new, unified immigration system that has been implemented in six out of the seven Emirates. Dubai and Abu Dhabi continue to use their own independent immigration systems for the time being.

The most noticeable change to the current procedure is that now both businesses and individuals can apply for visas, residence permits, and entry permits through a single online portal – instead of visiting a typing centre or immigration office.

The new system – known in Arabic as the ‘Tahaluf’ system – removes the need for hard copy documents and aims to ensure that all applications are processed more efficiently with improved integration across the Emirates.

Once registered on the E-Channel portal, individuals and businesses can apply for their visas, or entry permits (residence, visit and tourist) – and for those of employees or relatives. The whole process, including payment can be carried out online and where applicable permits can be printed at home.

Registration fees vary depending on the Emirate you are in but are in the region of AED 7,500 with a refundable deposit component of approximately AED 5,000. Registration must be renewed annually at a cost of around AED 1,000.

How to register in the E-Channel portal

The online E-Channel immigration portal has been designed to be incredibly easy to use.

If you are a free zone incorporated entity, it is the free zone’s details which must be used for log in purposes. In this case, you must register to the E-Channel portal via your agent and/or free zone appointed and authorised typing centres.

Otherwise, to get started, visit the E-Channel website and select either individual or establishment services.

Next click on the ‘Registration’ button. You will be asked to input your email address – instructions on how to set up your account will be sent here. Once you have received your confirmation message from the Ministry of Interior (MOI), simply select the ‘Complete Registration’ link to continue creating your profile.

Once set up on the E-Channel immigration system portal, you can start using online services right away.

Benefits of the E-Channel system

The biggest benefit of the new E-Channel immigration system is its efficiency. The MOI calls the new system ‘…a pioneering step to ensure speedy process and accuracy in the visa and residency services.’ And it’s difficult to see how this won’t be the case. For the first time, license applications, visas, amendments, upgrades, renewals, and most other associated activities can now be managed from a single portal – with the whole process entirely online. The MOI is naturally confident that this will result in faster, more efficient processing. As well as freeing up your time, the E-Channel system is also designed to lower your administrative burden – removing the need to visit immigration centres to fill out excessive paperwork. Any required documents such as passport copies or ID cards can be simply scanned and uploaded to the portal with no need to produce hard copies. By the end of 2018, the E-Channel system is expected to have reduced the need for in-person visits to government centres by up to 80%.

Company setup in Dubai and UAE

Company setup in Dubai and UAE

There are three main ways you can set up a company in the UAE. This can be in mainland (in conjunction with a local partner who would own 51 per cent of the company), known as an LLC – limited liability company;  via one of the many UAE free zones, particularly popular with foreign entrepreneurs cause they offer are 0% corporation and personal tax, 100% company ownership, 100% repatriation of capital and profits, no currency restrictions and 100% import and export tax exemption; with an offshore company. The costs can vary: for an LLC, for example, they can start from AED 30,000 / AED 60,000. The free zone options also vary: the costs can start from Dh20,000. Even less for an offshore company, but with some restrictions as well: for example no visa resident allowed and also some States / companies don’t accept them for fiscal reasons.

So why to setup a business in UAE now?

According to the IMF, the UAE is expected to lead economic growth in the Arabian Gulf in 2017, increasing by 2.5%, significantly ahead of the region’s biggest economy, Saudi Arabia, which is forecast to grow at 0.4%.

While the technical, administrative and financial aspects of company formation in Dubai can seem daunting, by following a simple step-by-step process with the right support, it is far more straightforward and affordable than you might think. We have helped numerous companies establish themselves in various free zones and can break the process down into the following six steps.

1. Choose your business activity

The nature of your business can have a bearing on which free zones you can or should set up in. For example, some free zones only allow certain types of activity, such as media, medical or transport, and aside from the restrictions, it often makes sense to set up in close proximity to businesses in the same sector. Look at transport links too. If your business relies heavily on import and export, you will probably want to choose one of the free zones situated near an airport or port.

The final decision can be taken later in the preparation process, but establishing your business activity will certainly give you a steer and can help to eliminate some options early on. However, there is no need to pigeon-hole your business, as it is possible to have multiple business activities listed under one trade licence.

2. Choose your company name

The UAE has some strict naming conventions, so before you commit to a company name, make sure it conforms. Any names that include offensive language are forbidden, as are any company names that refer to Allah, Him or indeed any other religious, sectarian or political groups such as the FBI or Mafia. If you choose to name your business after a person, that person must be a partner or owner of the company and their full name must be used – no initials or abbreviations.
A business set-up expert will be able to give you chapter and verse on all the naming conventions. You can save a lot of time and effort by running your proposed name past them to check whether it passes and if it doesn’t they can help you come up with something that does.

3. Finalise all incorporation paperwork

You will be required to complete an application for your chosen company name and activity, to be provided along with copies of shareholders’ passports to the relevant government authorities. Some free zones will require additional documentation, such as a business plan or Non-Objection Certificate (NOC) – a letter from a current sponsor confirming that you are allowed to set up another business in the UAE. While perhaps the most arduous of all these steps, the paperwork does not have to be too taxing providing it is undertaken with expert help. Your business set-up partner can advise you on the paperwork required and help you complete it.

Some free zones will require additional documentation, such as a business plan or Non-Objection Certificate (NOC) – a letter from a current sponsor confirming that you are allowed to set up another business in the UAE.

4. Receive your license notification

This is the easiest step of all. Once your application has been processed, the government will issue you with your company licence. At Virtuzone we notify our clients when their documents are ready to be collected.
5. Process your visa (if needed)

And so to the final step of company formation in Dubai. As well as applying for your own visa, many free zones allow you to put in applications for staff and dependants – the exact number you can submit will depend on which free zone you choose to set up in. So, if you are looking to obtain visas for a spouse, child, maid or driver, it is best to seek expert advice to ensure that firstly, it is possible to do so in your chosen free zone, and secondly, that both you and anyone you are hoping to sponsor for a visa meet all of the entry criteria. Assuming this all checks out, the process is made up of four simple stages: entry permit, status adjustment, medical fitness test, then Emirates ID registration and visa stamping.

For some free zones / activities you may not be required to apply for a visa (NO visa package) saving money and time.

6. Open a bank account

Once your paperwork has been returned, you will have all the documentation you need to open your corporate bank account. The UAE is home to many banks, both local and international, including Emirates NBD, Abu Dhabi Commercial Bank and the Commercial Bank of Dubai, along with global names such as HSBC, Citibank and Barclays. You can either approach the bank of your choice or ask your business set-up partner to arrange meetings with a number of institutions to help you choose the most suitable option.

With some banks you can open a corporate bank account also without having the resident visa.