The flourishing economy of the UAE has positioned the country as one of the fastest-growing business attractions in the country. Besides business formation in Dubai, the cosmopolitan climate is an inviting hotspot for starting entrepreneurs and business owners to set up their business in Abu Dhabi. The following sections outline a comprehensive guide of the legal and commercial mechanism for foreign investors to start and grow their business activities in Abu Dhabi’s mainland or its main freezone Abu Dhabi Global Market (ADGM). For more information on business setup in Abu Dhabi see our article:
Advantages of business setup in Abu Dhabi
There is a wide scope for business opportunities in Abu Dhabi. Ranging from the activity type to the legal form of the business entity, business owners have a large gamut of options to choose from. Setting up a business in Abu Dhabi grants investors the following advantages:
- The ability to apply for multiple visas
- Flexibility to conduct business activities in multiple regions
- Fewer nationality restrictions
- Most importantly; the strategic geographic location connecting Europe, Asia and Africa
Foreign businesses can utilize the full advantage of the aforementioned leverages in several ways.
Methods to establish a business presence in Abu Dhabi
Similar to business formation in Dubai, there are a number of ways foreign investors can set up their business in Abu Dhabi, the following sections highlight the three most common mechanisms:
Appointing an agent or a distributor
On occasions, foreign businesses operating in the private sector prefer to appoint an agent who can source and market to customers instead of direct supply within the UAE mainland. Foreign agents handle logistics, sponsor employees for UAE residency, and generally coordinate the sales process on behalf of the parent entity.
It is always advisable to opt for a Registered Commercial Agency since such agreement is substantially protected by the UAE Commercial Agencies Law. These include the agent’s exclusive right to market and sell a particular product in one or more of the Emirates. The agent is also entitled to a commission payable on any sales of products regardless of whether the registered agent contributed to the sales. Registered agents enjoy the privilege of being able to prevent parallel imports of the same product into their territory, which is a substantial competitive advantage.
Incorporating an LLC entity
Limited liability companies are one of the popular methods of setting up business in Abu Dhabi. LLC entities can operate throughout all business sectors excluding banking, financial services and insurance. LLC are conditioned that a UAE national holds no less than 51% of the company’s share. An LLC management can be vested to the foreign partner or a third party responsibility.
In principle, LLCs are required to possess a share capital of at least AED150,000. However, in practice, the minimum share capital imposed is at the discretion of the licensing body.
Establishing an entity in a freezone
Abu Dhabi free trade zones allow foreign investors to establish their business with 100% ownership. Unlike LLC freezone entities do not require a UAE national partner or agent. However, if a foreign entity based in the freezone wishes to sell products within the UAE, it may only do so through a distributor or an agent appropriately licensed in the UAE or by obtaining a suitable licence of its own through the Department of Economic Development and the respective licensing body.
Freezone entities are classified under two broad categories. Single shareholder entities, known as freezone establishment, and freezone companies with two to five shareholders. Both freezone establishments and freezone companies have limited liability.
Minimum capital requirements for freezones vary significantly. There are generally no minimum capital requirements imposed on foreign branch offices operating in freezones.
Abu Dhabi Global Market ADGM
Abu Dhabi Global Market (ADGM) is an award-winning international financial centre (IFC) located in Abu Dhabi. It constitutes three independent authorities: ADGM Courts, the Financial Services Regulatory Authority and the Registration Authority, ADGM.
Setting up your business within ADGM grants business owners the advantage of operating in a tax-friendly environment, under the English Common law, with an entitlement of dual licensing and an independent jurisdiction.
As an International Financial Centre strategically positioned to service growing economies, ADGM provides a wide spectrum of services covering banking, insurance, wealth management, asset management and capital market activities.
Irrespective of the aforementioned setup mechanisms there are some common steps for starting a business in Abu Dhabi.
Steps for setting up a business in Abu Dhabi
Starting a business in Abu Dhabi involves a series of steps:
Identify business activity
Business activity is the basis for selecting the legal form and type of licence. Depending on the activity, there are six types of licences to choose from. Commercial, professional, tourism, agricultural and occupational. It is important to note that a single business or investment can have more than one activity.
Select the legal form
The entity’s legal form depends mainly on the business requirements. Additionally, the legal form is the basis for identifying applicable laws and regulations. Within Abu Dhabi investors can select from one of the following legal forms:
- General partnership
- Limited partnership
- Limited liability company (LLC)
- Public joint-stock company (PJSC)
- Private joint-stock company (PrJSC)
- Civil company
- Local company branch
- GCC company branch
- Foreign company branch
- Free zone company branch
- Sole establishment and holding companies
Registering the trade name
A company’s trade name sets it apart from other entities. It also reflects the nature and the form of the business. In Abu Dhabi, an investor can apply for the trade name through the Department of Economic Development (DED).
Selecting a trade name is carried out under the following provisions:
- The name must be followed by the business structure acronym
- The name should not violate the public morals or the public order of the company
- Be compatible with the type of business activity and the legal status of the entity
- Not contain the names of any religion, or governing authority, nor names or logos of any external bodies
- Not have been previously registered
Initial approval allows investors to proceed with the next steps in setting up a business. It does not, however, grant the authority to run or practice the business activity. Foreign investors must obtain the approval of the General Directorate of Residency and Foreigners’ Affairs before getting the initial approval.
Some activities require additional approvals from government entities related to that particular business before applying for the initial approval. These include activities related to legal affairs, security affairs and financial securities and commodities.
MoA and LSA
Depending on their legal form, business entities are required to submit a completed and signed Memorandum of Association (MoA) or a Local Service Agent Agreement (LSA).
UAE-based law firms, courts and notary public prepare and attest MoAs and agreements. In the case of businesses owned completely by non-GCC residents, a UAE-based agent is appointed under an agreement attested by the notary public or the court.
Select a business location
All businesses in Abu Dhabi must have a physical address to operate. The business premises and location must comply with the requirements defined by the DED. Office and warehouse rental agreement must be provided and attested as well.
Additional government approval
For certain activities, additional approval from government authorities. They include the Ministry of Interior, Ministry of Justice, Abu Dhabi Municipal Department and Abu Dhabi Health Department.
All business legal forms are required to submit the following documents:
- Initial approval receipt
- Copy of the lease contract duly attested
- Duly attested memorandum of association
- Approvals from other government entities concerned, as may be required
- Duly attested service agent contract
After completing the above steps, investors can collect the business licence from the DED service centre or through its website. Payment for the trade licence must be made within 30 days of receiving the payment voucher.