Blog posted on : 27-04-2021
Minimum Capital Required To Start A Company In Dubai
Starting a company in Dubai is onea of the most futuristic investments you can make, thanks largely to the prosperity and business-friendly laws and regulations. Be it a local investor or a foreigner, Dubai's corporate laws offer innumerable opportunities to everyone alike.
Having said that, it is not an easy task to set up a company in Dubai, especially if you do not know the legalities and company formation laws here. It is essential to have a clear understanding of the various types of businesses, the minimum costs required to start a business, the process of approvals that need to be taken, the different government departments that the forms and other documents need to be submitted.
Any step missed or any other error can lead to unwarranted delays and eventual losses.
Here are the main outlines of the corporate laws that help you understand the minimum capital required to start a company in Dubai.
1. Five Company Formation Options For Foreign Investors In Dubai
Setting up a company, including the minimum capital required to start such companies, differs from one type to another.
These Companies In Dubai Require A Minimum Share Capital
- Partnerships limited by shares
- Public joint-stock companies
- Private joint-stock companies
- Limited Liability Companies
3. In The Case Of An LLC or Limited Liability Company -
- The minimum share capital for an LLC in Dubai till recently was about AED 100,000. However, it is not a mandatory amount because LLCs have started with lower capital than this. Officially, there is no minimum share capital for an LLC.
- The unit should have adequate capital to get incorporated as an LLC.
- The capital is in the form of shares that is equal in value.
- An LLP in Dubai mandatorily needs to have two shareholders.
- The details of the share capital need to be mentioned in the MoA (Memorandum of Association). The UAE notary public should then notarise it.
- It is not mandatory by law that the share capital must be deposited into a registered bank in Dubai.
Public Joint Stock Companies In Dubai
- In Dubai, the Public Joint Stock Company has mandatorily required to have a minimum of 10 shareholders.
- The start-up capital has to be 10,000,000 AED.
- The capital can be in the form of shares, and the company can be listed on the National Stock Exchange.
- In case foreign shareholders become a part of the entity, there need to be obligator changes required to be made in the Articles of Association.
5. Private Joint Stock Companies In Dubai
- In Dubai, a Private Joint Stock Company is mandatorily required to have minimum 3 shareholders.
- The start-up capital has to be 3,000,000 AED.
- The capital has to be deposited in the bank on company registration.
- Listing shares on the Stock Exchange is not mandatory.
- There are certain conditions under which the private joint-stock company can be changed to a public joint-stock company.
Partnership Limited By Shares
- A partnership limited by shares is a form of business entity that needs to have a minimum of two partners.
- There is one general partner who is accountable for the debts and other legal complications of the partnership.
- The other partner is called the limited partner. This partner is liable only to the extent of his monetary or capital contribution in the partnership.
- The minimum capital in this case - required to start a partnership limited by shares in Dubai is 500,000 AED.
Free-Zone Companies Obligatory Regulations & Minimum Capital Required To Start Companies
One of the best aspects of Dubai is its numerous free zones. An FZ or a free zone also called a trade-free zone, is an earmarked area for business where commercial entities get plenty of benefits from the government.
For example, companies here are exempted from the Value Added Tax or VAT. They are also not required to pay corporate tax, custom duties, or income tax. The other interesting point to note here is that companies in the Dubai Free Zone are owned 100% by the owners and shareholders - the government has no shares in such businesses.
Things To Know To Operate Or Start A Business In Dubai FZ
- It is mandatory to deposit the minimum share capital in a bank on registration.
- The most chosen type of company formed in the FZ is the Private Limited Liability Company/ Free Zone Company.
- Different Free Zones have different rules - some make it mandatory for a minimum capital while some do not. In case the minimum share capital clause is there, it is mostly less than the amount required to open an onshore company here.
The minimum capital of an LLC in the FZ depends on the activity proposed. It also depends on the specific FZ where the company is registered. For example, in the Free Zone Called Dubai Creative Clusters (DCC) in Dubai Media City, the minimum paid-up capital for a business is about AED 50,000 while the activities in the Broadcasting TV and Radio Segment, the minimum paid-up capital is about AED 2.5 million.
So, when considering starting a company in the Free Zone in Dubai, the one-time cost would include the following and be roughly about -
- Company formation charges in FZ 17,500 AED
- Notarization and company registration 4,995 AED
- Clearances and compliances 590 AED
Besides the one-time costs, there are recurring annual charges like -
- FZ visa-free charges
- ICT charges
- Running costs
- Minimum bank balance required
Foreign investors can either open a branch or a subsidiary. The minimum capital required for a subsidiary is dependent on the company structure. The structure is usually either a joint-stock company or a Private Limited Liability. Branch offices have no requirement of minimum capital.
As mentioned earlier, if you are not well conversant with the laws of Dubai, you could end up making costly mistakes. It is in your best interest that you seek professional assistance from a reputed and well-established auditing firm.