The United Arab Emirates (UAE) has become a hub for entrepreneurs and businesses looking to expand their operations to the Middle East. With its strategic location, world-class infrastructure, and favorable business environment, the UAE has emerged as a top destination for foreign investors. One of the most popular options for setting up a business in the UAE is through a free zone company formation.
Free zones are special economic zones that are established to attract foreign investment and promote economic activity in the country. These free zones offer a range of benefits to businesses, including 100% foreign ownership, tax exemptions, and simplified regulatory procedures. However, setting up a free zone company in the UAE requires compliance with various legal and regulatory requirements. In this blog post, we will discuss some of the legal considerations for free zone company formation in the UAE.
Type of Free Zone Entity
Before starting the process of setting up a free zone company in the UAE, it is essential to decide the type of entity that is most suitable for your business. The most common types of entities in the free zones include Free Zone Establishment (FZE) and Free Zone Company (FZCO).
An FZE is a limited liability company that is owned by a single shareholder, while an FZCO is a limited liability company that is owned by two or more shareholders. Both entities offer similar benefits and are subject to the same legal requirements.
Legal Structure and Shareholding
The legal structure and shareholding of a free zone company are crucial considerations when setting up a business in the UAE. The Memorandum and Articles of Association (MOA) of the company outline the legal structure, activities, and shareholding of the company.
The MOA should clearly state the activities that the company is permitted to undertake within the free zone. Additionally, the shareholding structure must comply with the regulations of the free zone authority. For instance, in some free zones, a minimum of 51% of the company’s shares must be owned by UAE nationals or companies owned by UAE nationals.
Trade Name Registration
The trade name of the company is a crucial aspect of the company’s identity and must be registered with the relevant free zone authority. The trade name should be unique and should not violate any existing trademarks or copyrights. The free zone authority will conduct a name search and provide approval for the company’s trade name.
Licenses and Permits
Free zone companies in the UAE require various licenses and permits to operate legally. The most important license is the trade license, which permits the company to carry out its activities within the free zone. Additionally, depending on the nature of the business, the company may require other licenses, such as an industrial license, a service license, or a commercial license.
Bank Account and Capital Requirements
Free zone companies in the UAE are required to have a local bank account to operate legally. The bank account should be opened in a bank that is approved by the free zone authority. Additionally, the company must meet the minimum capital requirements specified by the free zone authority.
Visas and Residency
Free zone companies in the UAE can apply for visas and residency for their employees and shareholders. The number of visas that a company can apply for depends on the size of the company and the free zone authority. Additionally, the company must meet specific salary requirements to apply for residency visas.
Setting up a free zone company in the UAE offers various benefits to businesses looking to expand their operations to the Middle East. However, the process of free zone company formation in the UAE requires compliance with various legal and regulatory requirements. It is essential to seek the guidance of experts to ensure compliance with the relevant laws and regulations. To set up your company in the free zone in UAE, get in touch with SRTIP Accelerator today!