What is Corporate Structure & What Corporate Structure is Followed in Dubai?

If you did business before in a different country or you still have business outside of the UAE, but you never owned a company in the UAE, you may want to project the rules and regulations with respect to your previous or current companies, on your new company in the Emirates. This is natural. In light of this, one of the most frequent questions we receive is a question regarding the company’s corporate structure. One says: “in Europe, OR in China, OR in India it is like this. Is it the same in the UAE?” You start comparing. There is nothing to worry about. We will provide you with all the answers you require. In this chapter, we will look at a typical structure of the company in the UAE, we will discuss the roles of a shareholder, a director, a manager and a secretary. Additionally, we will share with you, how requirements with respect to company’s corporate structure may vary from one registration authority to another. Let’s begin.

As soon as you decide to proceed with company formation, you need to complete application, where you state the future corporate structure of the company. In other words, you mention the owner – shareholder, or shareholders, you state the full name of the company’s director or several directors and, finally, someone also needs to be appointed as a manager of the company. Position of a secretary is optional today and you do not need to appoint anyone, if you do not want to. Let’s have a closer look at each of these corporate layers. Layers, because, each of them has a certain degree of authority: first come shareholder and shareholders, who may appoint or dismiss director or directors, and directors, in turn, have authority over company’s manager and can appoint or dismiss him. We suggest we discuss each of the roles one by one.

When you start a company, you have an option to be a shareholder as an individual, or you can appoint another company, that you own. In case your other company becomes a shareholder, your UAE company legally becomes its subsidiary. In this case you need to be aware of several practical aspects: firstly, if a shareholder would be a foreign company, you would always need to produce its legalized corporate documents to the registration authority in the UAE. So you will first need to furnish several legalized corporate documents at the time of set-up, from next year onwards annually you will need to provide legalized document, confirming that mother company still exists and is in good standing. Additionally, for any corporate change, legalized board resolution of the mother company would be required. Such legalizations are associated with high attestation fees. Nevertheless, even if your budget is not limited, still you need to remember, that legalization process takes time and you may require from 2 to 4 weeks, depending on the location of the mother company, to receive back legalized documents of a mother company. As such, being an individual shareholder gives you you a greater flexibility. Also appointing a UAE corporate entity as a shareholder in a UAE company would give you a certain flexibility too, just because you would avoid any legalizations and it would become more efficient to get necessary corporate documents from the relevant authorities in the UAE for the sake of registration or corporate amendments.

Sometimes you build your new company with partners, where all of you must be mentioned as shareholders. Sometimes the number of shareholders exceeds 3 or 4 and you plan to bring on board even more partners. Here you must remember that some registration authorities have limits on the number of shareholders. This is typical of the northern emirates. There most of the time you cannot add more than 4 partners. Some free zones recently updated their rules and allowed up to 50 shareholders, however, on a condition that you rent a standard office. There are also free zones in the northern emirates which allow up to 50 shareholders, however, to add that many you would require a special approval from a free zone authority itself. As such, if you are starting a business, which initially presupposes a high number of stakeholders and you have already decided, where you want to register, double check with the relevant registration authority, what the maximum number of shareholders would be, that they would allow to add. If there are certain limitations and you learn it, once your company is already established, you may need to restructure the whole business and introduce a corporate shareholder, where there would be those 50 or less shareholders.

When it comes to the appointment of directors in a company, there are also certain things that you need to know. In many jurisdictions director is a person, who actually operates a company. In the UAE director devises strategy with respect to company’s growth and executes plans with the help of the company’s manager. Company may have one director or several, where in the latter case they form a Board of Directors. What we noticed working with various authorities, is that most of the time one director is sufficient for company set-up. However, for example, certain free zones (Masdar in Abu Dhabi, for example), request from you to appoint at least two directors.

And finally, any company needs a manager. The name of the company’s manager is always mentioned on the license of the company. The role of the manager is to manage day-to-day operations of the company. The manager hires staff, executes commercial agreements, operates corporate bank account, in the later case if such power was given to him. It is also important to know that there cannot be more than one manager in a company.

If you are wondering where to take that many people to appoint as a director and a manager, there is nothing to worry about. You can be a shareholder, a director and a manager at the same time. You shall also remember, that if in the future you decide to change the structure, there will be certain fees associated with the same and you may also need to provide certain documents. We will speak about corporate amendments in the future chapters.

In this specific chapter we wanted to draw your attention to a regular corporate structure: shareholder/s>director/s>manager and secretary – optional. Let’s now move on to the next chapter and discuss other aspects, you definitely need to be aware of, before you proceed with company registration.

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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