An international business company or international business corporation (IBC) is a corporation formed under the laws of some jurisdictions as a tax-free company which is not permitted to engage in business within the jurisdiction it is incorporated in. IBCs are offshore companies that are most commonly used for offshore banking, to conduct international trade, investment activities, to offer professional services and for asset protection.
Name and company activities
The company name must not contain the following words and must not pursue with listed business activities: BANKING, INSURANCE and REINSURANCE. The name of the Dubai company must end with "LTD" only.
Local requirements
The IBC company must maintain a local registered agents approved by the local authorities and a locale registered office which the registered agent provide.
Legal framework
Private Shareholding Company
A Private Shareholding Company is incorporated by a number of persons not less than three. Unlike public shareholding company, a private shareholding company cannot invite the public for subscribing in its shares. The minimum share capital to form a private shareholding company is AED 2 million.(US$ 540,000). The Chairman and majority of the Directors in a private shareholding company must be UAE nationals.
Joint Venture (Consortium Company)
A Joint Venture is a type of company where two or more partners agree by contract to share the profits or losses of one or more commercial enterprises, which will be carried on in the name of one of the partners. Contract of Joint Ventures may be written or oral and not required to be notarized. Third parties can recourse only to the partners with whom they deal. However, should the Joint Venture is disclosed to the third parties, all the partners are liable to the third parties. Existence of Joint Venture may be proved by any method of proof.
Limited Liability Company (LLC)
A Limited Liability Company (L.L.C) can be formed with 49% shareholding of expatriates whereas 51% shareholding shall be in favour of local U.A.E. national. Nominee arrangement is normally available with U.A.E. national to hold these mandatory shares in his name in favour of the expatriate partner. We provide such U.A.E. national for holding 51% shares as a nominee. This would provide effective total control to manage the company and enjoy all profits. The minimum capital required to form an L.L.C. in Dubai is US$ 81,800, which has to be deposited in a bank, and shall be blocked for approximately 2 weeks time. The L.L.C shall have specific activities as per classification made by the Department of Economic Development, Dubai. In this regard, please note that only one category of activities are being given to one company. The company cannot have multiple activities except in General Trading where minimum capital requirement is US$ 818,000. The increase capital requirement is waived upon the payment of additional fee of AGN US$ 4,100 to the licensing authorities. L.L.C. is perhaps the only type of entity available to foreign investors for trading and manufacturing concerns.
Opening a branch or representative office of the foreign company
The Companies Law, in article (313) allows a foreign company to exercise its main activity in the UAE by opening a branch or a representative office. The difference between the two is that the foreign company that opens a branch in the UAE may exercise freely the activities for which it is licensed whereas a representative office may practice only promotional business for the products and services provided by the parent company. Unlike a foreign branch, a representative office cannot conduct business operation or market directly its product. In order to engage a foreign branch to conduct its operation in UAE it should obtain a license from the Ministry of Economy & Commerce prior to obtaining the license from the concerned authority in the respective Emirate. Foreign companies licensed to operate in UAE may not start their activities before being inscribed in the Ministry's Register of Foreign Companies. The main stipulation for opening a representative office or a branch of a foreign company in the UAE is to appoint a Service Agent who should be a UAE national or a company fully owned by a UAE national. A service agent is not an empowered agent who can bind his principal as explained in the definition of the term "agent" in the Commercial Companies Law. A service agent is not responsible to undertake any financial obligations concerning the activities of the company's branch or office within the UAE or abroad. He should not interfere in the matters related to the company's management or activities. His duties towards the company and others are confined to providing such services as required by the principal. These services usually include the obtaining of entry or residence permits, acquiring of the necessary Licenses or facilitating the processing of its transactions with the government authorities. The service agent is remunerated in lump sum for the services rendered to the foreign company that sum shall be the subject of an agreement between him and the company.
Shareholders
Minimum one. No public register, but the registered agent must retain a shareholder register at the registered office.
Directors
Minimum one director (corporate director's allowed). There is no public register of directors, but the registered agent must retain a register of directors at the registered office
Registered office
Local registered office address is required.
Minimum Capital
Arbitrarily determined by the company owners. Recommended – 1000 AED. However, there is no requirement to pay in the capital. The documents could be notarized by a Notary Public Solicitor ("N") or could be legalized or attested by a Ministry of Foreign Affairs in the country of the applicant and further stamped by the UAE OR Arab Embassy
Financial statements
Accounts must be audited and must be distributed to shareholders (but not filed). The accounting records may be retain wherever the directors choose.
Tax
There are NO corporate tax, personal tax, capital gains tax or VAT in the UAE with exception of oil producing companies and branches of foreign banks.No taxation information exchange agreements with other countries.
To read this article in full, please click here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
