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Setting up a free zone limited liability company (FZ-LLC) in the UAE.

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Setting up a free zone limited liability company (FZ-LLC) in the UAE

Free zones, spread strategically across the emirates, are ideal options for foreign companies wanting to establish a regional presence. These designated areas offer streamlined business setup processes, significant tax benefits and a supportive regulatory environment. This comprehensive guide explores the benefits, requirements and process of establishing a free zone limited liability company in the UAE.

Key takeaways

  • FZ-LLCs allow for 100% foreign ownership.
  • Free zones provide significant cost savings through exemptions on corporate and income tax and import and export duties.
  • Setting up an FZ-LLC involves selecting a business activity, choosing a suitable free zone, selecting a trade name, arranging office space, preparing pre-approval documents and obtaining the necessary business licence.

Benefits of a UAE FZ-LLC

  • 100% foreign ownership: FZ-LLCs allow full foreign ownership, eliminating the need for a local Emirati partner.
  • Limited liability: As the name implies, FZ-LLCs provide limited liability protection. The owner’s personal assets are shielded from company debts, limiting their financial risk to their investment in the company.
  • Tax advantages: Free zones are renowned for their tax haven status. Typically, companies enjoy exemptions on corporate income tax and import and export duties (within the free zone).
  • Simplified setup: Free zones generally have streamlined procedures for company registration. The reduced paperwork and faster processing times make establishing a company easier and quicker.
  • Modern infrastructure: Free zones have state-of-the-art infrastructure, including advanced logistics facilities, business centres and high-speed connectivity.
  • Repatriation of profits: Companies operating in free zones can repatriate 100% of their profits and invested capital without restrictions.

Requirements for setting up a FZ-LLC in the United Arab Emirates

Establishing an FZ-LLC in the UAE is a gateway to the region’s growing economy. Although there may be slight variations in the specific requirements set forth by different free zone authorities, the following offers a comprehensive overview of the setup prerequisites.

Minimum registered capital

Most free zones in the UAE do not impose a minimum capital requirement for FZ-LLCs. However, some free zones may have minimum capital requirements for specific business activities. For example, in Dubai Media City, the minimum paid-up capital requirement is AED 50,000, except for when the proposed activity is within the broadcasting TV and radio segments, which have a minimum capital requirement of AED 2.5 million.

Shareholders

FZ-LLCs require a minimum of one shareholder and a maximum of 50. Shareholders can be individuals or corporate entities, with 100% foreign ownership permitted.

Directors

The company must have at least one director, with no restrictions on nationality.

Company secretary

While not compulsory, appointing a company secretary is highly recommended. The company secretary is vital in ensuring the company adheres to corporate governance regulations. They maintain essential company records, facilitate communication between directors, shareholders and the free zone authority and ensure documents are filed.

The UAE FZ-LLC set-up process

The process of establishing an FZ-LLC includes the following steps:

Choosing a business activity

The UAE free zones provide investors with many business licences tailored to the nature of their business activities. Some include:

  • Commercial trade
  • Consultancy services
  • Educational
  • Industrial
  • eCommerce
  • Warehousing
  • Innovation
  • Manufacturing

Selecting an ideal free zone

Each free zone specialises in specific industries or offers unique benefits. Some of the most popular options are:

  • Dubai Multi Commodities Centre (DMCC): This centre offers a sophisticated ecosystem for businesses involved in precious metals, diamonds, and other commodities.
  • Abu Dhabi Global Market (ADGM): Caters to financial institutions, including banks, asset management firms and investment companies.
  • Ajman Free Zone (AFZ): Provides cost-effective solutions for logistics, warehousing and trading companies.
  • Dubai Airport Free Zone (DAFZ): This is adjacent to Dubai International Airport and is popular with aviation, travel and logistics companies.

Trade name approval

Most free zones require pre-approval of the chosen name to avoid conflicts with existing companies. To register a trade name, applicants can apply through the relevant departments of economic development using their website or application.

A company name must meet the following requirements:

  • The trade name must include suffix abbreviations (LLC), denoting the company’s legal structure.
  • It should not use inappropriate language or be offensive to the general public.
  • The trade name should align with the company’s economic activities.
  • Avoid using names of rules, government entities or logos of external government bodies.

For both the trade name and trademark, approval is required from the Department of Economic Development and the Ministry of Economy. Additionally, name certificates must be renewed to remain valid.

Securing office space

All FZ-LLCs must maintain a registered office address within the designated free zone. This address serves as the company’s official contact point.

Free zones in the UAE offer various options for office ownership or rental and purchasing land for establishing factories or office buildings. The choice of office size will be determined by the number of employees and the specific commercial activities of the company.

Submitting the pre-approval documentation

The specific documents required may vary depending on the chosen free zone. The first step involves obtaining initial approval, for which the following documents are typically required:

  • Completed application forms.
  • Passport copies of shareholders and directors.
  • Business plan outlining the company’s activities.
  • Proof of residence for shareholders and directors.
  • Copy of existing trade licence and registration certificate (if any).
  • Title deeds (if applicable).
  • Letter of intent.
  • Two years of audited financial reports or reference certificates from a bank.
  • Registry Identification Code form (RIC) for the manager or director.

Company registration

Following initial approval, the following steps involve the payment of registration and licence fees, which can vary depending on the chosen free zone and the type of licence needed. The following documents must be submitted:

  • Completed registration application.
  • Board resolution appointing the manager/director.
  • Power of attorney granted to the manager/director.
  • Memorandum and articles of association.
  • Specimen signature of the manager/director.
  • Passport-sized photograph of the manager/director against a white background.
  • Information on the share capital.

Obtaining the business licence

The official business licence will be issued once the registration process is complete and fees are settled.

Compliance requirements for UAE’s FZ-LLCs

Operating within a free zone necessitates adherence to specific regulations and ongoing compliance requirements. The following are some key aspects to consider:

  • Annual general meeting: The general meeting must be convened at least once every calendar year unless the company has only one shareholder. Resolutions are passed by a simple majority of votes or as specified in the company’s memorandum and articles of association.
  • Audits: FZ-LLZs must have their financial statements audited by a chartered accountant. The audited statements must be submitted within 90 days after the conclusion of the licence renewal period or the calendar year, whichever comes first.
  • Ultimate beneficial owner (UBO) regulations: An annual register containing details of the UBO must be maintained and filed with competent authorities (only applicable for non-financial free zones). If the UBO details change, the registrar must be notified within 15 days.
  • Annual renewals: FZ-LLCs must renew their trade licence annually.

How Acclime can help

The UAE’s free zones are an excellent opportunity for foreign companies looking to grow internationally. Opting for an FZ-LLC structure offers advantages such as full ownership, limited liability and simplified regulations, providing greater flexibility and control over business ventures. Furthermore, the wide range of free zones across the UAE caters to various industries, offering specialised infrastructure and support services tailored to specific business requirements.

With a team of experts well-versed in UAE’s business regulations and free zone requirements, Acclime guides the setup process, streamlining administrative procedures and ensuring compliance—our customised approach and comprehensive support help businesses navigate regulatory complexities efficiently, saving time and resources. Contact us for more information.