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Limited Liability Company

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A Limited Liability Company can be formed by a minimum of two and a maximum of fifty shareholders whose liability is limited to their shares in the company's capital.

 

Under the Commercial Companies Law or CCL (Federal Law No. 8 of 1984 Concerning Commercial Companies as amended by Federal Law No 1 of 1984 and Federal Law No 13 of 1988, Federal Law No. 15 of 1998), foreign investors are permitted to hold up to 49 % equity ownership in UAE companies, whereas 51 % of the equity must be owned by UAE National(s).  Such companies are recognised as offering a suitable structure for foreign individuals or organisations interested in developing a long term relationship with the local business community.

 

The Limited Liability Company or LLC is the most popular method of establishing a commercial company in the UAE, unless the business involves banking, insurance and investment activities conducted on behalf of third parties where a Public Joint Stock Company is required. Articles 218 to 255 of the CCL (inclusive) regulate the establishment of limited liability companies. While Article 227 of the Companies Law (which applies throughout the UAE) stipulates that the minimum share capital of the company is AED 150,000; the minimum share capital required by the Dubai authorities for the Limited Liability Company engaged in business activity other than general trading is currently Dirhams 300,000. For general trading activity, the minimum capital requirement is Dirhams 3,000,000. Individual shares should have a minimum face value of AED 1,000. The shares need to be “equal shares”.

 

An LLC may not conduct the business of insurance, banking or the investment of money on behalf of third parties.

 

Management of the LLC is vested in the ‘managers’ (up to five natural persons) who may or may not be UAE nationals.

 

Although the maximum foreign equity participation in a Limited Liability Company is 49%, profits can be distributed in different proportions as agreed by the promoters/shareholders of the company. With the approval of the UAE National Shareholder(s), the entire business operations of the company may be entrusted to the foreign shareholder(s). The foreign shareholder(s) can, therefore, claim a higher share of profit in case such shareholder(s) provides exclusive management and/or any special services or facilities to the company. As far as the protection of the minority shareholder(s) interest is concerned, this can be done by way of shareholders resolutions and certain related security documents.

 

Although the rules and regulations for establishing the Limited Liability Companies are generally similar in all the seven Emirates of UAE, the requirement of minimum capital and costs involved for registering the company may vary from one Emirate to the other.