UAE Free Zones Company: Classification Based on Share Capital Requirements

It is not only cost of set-up that everyone is looking at. Another financial aspect that raises questions among entrepreneurs is share capital or how much one needs to deposit into company’s bank account to create share capital. We have discussed share capital in detail in our first module. We will be also discussing share capital transactions in the future chapters. But in this chapter we will solely focus on comparing various free zones and requirements of its authorities in connection with share capital.

Before you choose a particular free zone for setup, you need to ask two questions: first, what is the share capital requirement of this specific free zone you are considering for set-up? Second, would you be requested to deposit these funds into company’s bank account?

We already mentioned before, that the amount of required share capital may range from as little as AED 1,000 to as much as AED 1,000,000 for specific types of licenses and business activities (say, General Trading License). This share capital you might need to deposit or you might not. You may ask, how should one know it?

First of all, you may want to address the question to a representative of that free zone that you are considering for company registration. But at the same time, this information is also often available online on the web-site of a free zone authority in the section Q&A.

It is often the case that well-established free zones, especially in Dubai and Abu Dhabi, have a requirement for depositing of share capital. Usually, the minimum amount is set at AED 50,000 and its an average share capital requirement among free zones in Dubai and Abu Dhabi. Dubai Multi Commodities Center, Dubai Internet City and all other clusters in Tecom Group, Masdar Free Zone, they all have a requirement for depositing of share capital into company’s bank account at a minimum of AED 50,000.

There are also free zones in Dubai that require higher share capital deposits. Dubai Silicon Oasis would be such example. There you would require to deposit AED 100,000 into your corporate bank account.

All free zones we just mentioned, both with AED 50,000 and AED 100,000 share capital requirement would request you, as a company owner, to deposit share capital during the set-up process or within a certain period of time after company registration completion, usually within 1 month.

Dubai South, a free zone in Dubai, requires a share capital of the company registered in this free zone to be a minimum of AED 300,000. While this amount is relatively high, still many entrepreneurs decide in favor of this free zone. Why? Because the free zone has lowest set-up and renewal fees in Dubai and there is no requirement for immediate depositing of share capital. In other words, you do not need to deposit this amount straight away. What about auditing you might ask? How does one reflect this amount later in the books? We recommend you to seek advice from accounting professional, who might advise you to declare your accumulated profit as a share capital. In other words, as soon as you receive payments from your customers and clients in amount of AED 300,000, you can declare the said amount as a share capital.

But very often start-up entrepreneurs do not have savings of AED 100,000 or even AED 50,000. Does it mean that someone’s dream cannot come true? No worries, you would still have options. This is when entrepreneurs start considering free zones outside of Abu Dhabi and Dubai in the northern emirates.

In the Northern Emirates a whole range of free zones offers hassle free set-up with no need to deposit share capital at the time of registration. Additionally, many free zones did not start implementing auditing requirement, therefore, companies registered there are currently not burdened with extra administrative work. As such, though Umm Al Quwain Free Trade Zone companies have a share capital of AED 300,000, Fujairah Creative City Free Zone and Sharjah Media City (SHAMS) AED 100,000 and RAKEZ as little as AED 1,000, all of them are frequently used by start-ups as a base for their registration, as this share capital is not deposited into company’s bank account most of the time.

If you are not familiar with the rules in the UAE, we would also like to remind you that unlike some jurisdictions, there is no practice of blocking or freezing of company’s share capital for the whole life of your business in the UAE. In case you are registering a company in Dubai and you deposit the share capital during the process of company formation, the amount of deposited share capital will be blocked for the time of company formation process only, until the license of the company is issued. In the event you deposit share capital after the company is formed, block on the deposited amount will not apply at all. You can always use these funds immediately for your business needs.

As you can see from the examples we just shared, there is a wide spectrum of possibilities in the UAE. If you are serial entrepreneur, having knowledge and finances, you might want to establish your business in Dubai in a reputable free zone and the share capital requirement will have no restriction on you. In case you are, however, a start-up entrepreneur, looking to save on company registration costs and minimize your overall expenses, a free zone in the Northern Emirates can be a good option in your case. Now that you know all the aspects related to share capital of companies in the UAE, you will be able to easily determine the option, which would suit your needs most.

If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.

Disclaimer: Business Boutique UAE-Consultants.com is not affiliated with any particular government or legal entity. Business Boutique does not give professional legal advice nor any other professional advice subject to a public office in the government. This article merely sets out a simple and basic idea as to the reasons of Dubai freezone company setup and Dubai free zone company formation cost. Business Boutique in no way holds nor imposes any official governmental or legal authority and the article herein is only to be taken as a guide. All further governmental or legal issues should be addressed to the corresponding authorities.

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