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Limited Liability Companies

 

A Limited Liability Company can be formed by a minimum of two and a maximum of fifty shareholders whose liability is limited to to the extent of their share capital.

According to the Companies Commercial Law or CCL (Federal Law No. 2 of 2015), foreign investors are permitted to hold up to 49 % equity ownership in UAE companies, whereas 51 % of the equity must be held by UAE National(s). This form of business entity offer a suitable business model for foreign individuals or organisations who are interested in developing a long term relationship with the local business community.

Limited Liability Company (L.L.C) 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 in case of which a Public Joint Stock Company is established.

Articles 71 to 104 of the CCL regulates the establishment and operation of limited liability companies in UAE.

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 eleven 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.