Shuraa

Author: Abdul Muqeeth

  • A detailed guide on obtaining a free zone industrial license

    A detailed guide on obtaining a free zone industrial license

    Obtaining a free zone industrial license is a great way to enter the booming industrial sector in Dubai. Dubai has adopted various innovative methods to boost its economic growth. As each day progresses, the city takes 10 steps further, breaking new grounds in its economic sector. This is just one of the few reasons why starting a business in Dubai is an exemplary choice for both, budding entrepreneurs and established ones.

    Furthermore, company formation in free zones makes for a very ingenious choice. This is because the owner not only gets 100% ownership of their business but can do so at a cost-effective amount. 

    This blog will enlighten you on everything you need to know about obtaining your free zone industrial license in Dubai.

    All you need to know about free zone industrial license

    Let us begin with what a free zone industrial license actually is. Entrepreneurs who opt for a commercial activity that is of an industrial nature can obtain this license. For instance, any company that involves the use of factory equipment such as manufacturing chocolates on a commercial level will need an industrial license.

    Another example is a company would require an industrial license is when it is involved in the production or refinement of chemicals on a large scale.

    It is also important to note that the rules and regulations for obtaining industrial license may vary depending on the emirate your factory is based in. Such as in the case of Dubai, there is a requirement to have both, a physical office as well as a warehouse facility.

    The following are some sectors that require an industrial license:

    • Manufacturing of food and beverages
    • Manufacturing of textiles
    • Oil refineries
    • Chemical facility

    There are also various prerequisites that an investor needs to accomplish in order to apply for a Dubai free zone industrial license. These are listed below:

    • Office Space: You will require to have a physical warehouse and an office space in Dubai. A virtual office will not be acceptable in this case.
    • Number of employees: In an industrial space, you will require to have a certain number of employees in your company depending on where you set up.
    • Electricity & Water: Depending on which area your facility is located in, you will have to contact Dubai Electricity and Water Authority (DEWA) to upgrade the supply of water and electricity voltage for your facility.
    • Transport: If your factory is located on the outskirts of Dubai, it may increase the amount spent on transportation of the raw materials and products. Fortunately, most free zones in the UAE are strategically located near seaports and airports, aiding in any transportation needs.

    You can always renew your industrial license as long as your company’s lease agreement is valid.

    Advantages of obtaining a free zone industrial license

    • Full ownership of business: Free zones permit foreign investors to get 100% ownership of their business. 
    • Full profit repatriation: Free zone companies can repatriate all their profits to their home country. This gives them the freedom to transfer 100% of their capital to their place of origin without any requirements. 
    • 0% corporate tax: The UAE laws state that companies do not require to pay corporate tax out of their business revenue, thereby allowing you to keep all your profits.  
    • 0% import or export tax: Unlike mainland, free zones are exempt from all customs duties.
    • Strategic location: Dubai has world-class telecommunication, trailblazing financial intercessions, ultramodern industrial infrastructure, e-governance system, and service sectors. The location of the free zones make for highly cost-effective living.
    • Global Connectivity: Dubai has a multi-national community and provides opportunities for you to connect with a global business community.
    • Range of business activities: Free zones give you the freedom to undertake a range of business activities that fall under industrial license and more.
    • Time-efficient process: The entire process of obtaining an industrial license is fairly swift and easy.
    • Convenient Registration: Dubai gives you the ability to register from the comfort of your home. You can send all the required documents to the free zone without being physically present for submission.

    Steps involved in acquiring an industrial license

    • Submission of the application with the business plan. 
    • Finalization of the preferred warehouse in line with the business activity. 
    • Environmental approval
    • Application of the license
    • Application for visa

    Documents needed to apply for Dubai free zone industrial license:

    • Business plan
    • Passport copy
    • Visa copy
    • Investor’s profile (depending on the activity)

    Obtain your free zone industrial license now with Shuraa

    Shuraa ensures that the entire process of obtaining your free zone industrial license runs smoothly. Our business setup consultants will guide you through the entire process from regulatory requirements, understanding free zone license cost, all the way up to the process of obtaining approvals from the authorities. 

    Contact our expert consultants at +97144081900 or send a WhatsApp message on +971507775554 to get started. You can also drop in an email at info@shuraa.com and get your queries answered in no time.

  • Special Purpose Vehicle: Restructuring LLC Company for Investor Protection

    Are you a foreign national entrepreneur wanting to secure complete ownership of your Dubai mainland company? How is it possible to do so when the UAE law states that you must partner with a local sponsor who will own 51% shares of your LLC company? This is where company restructuring via Special Purpose Vehicle (SPV) or Special Purpose Company (SPC) comes in the picture.

    Dubai is renowned globally as the business hub of the Middle East. Entrepreneurs from all around the world turn to Dubai to either start their entrepreneurial journey or to expand their existing business to a new region. With the freedom to set up your business in either the mainland or one of the many free zones in Dubai, there is no dearth of opportunities for you to explore the UAE market and to capitalise on its favourable international reputation.

    Based on the legal business structures outlined by the UAE government, a foreign national can form a Limited Liability Company (LLC) in mainland Dubai, albeit as a partnership. Mainland company incorporation in Dubai mandates you to partner with a local sponsor. A local sponsor, by definition, can only be either a UAE national individual (Emirati) or a company fully owned by an Emirati. As per UAE commercial law, the local sponsor must hold 51% shares in your company while you, along with any other foreign national partners in your business, will own the remaining 49%. In most cases, the UAE national is a silent partner without any operational authority in your company. However, legally, both the parties are liable up to the declared share capital of the company owned by each shareholder.

    Oftentimes, a foreign investor and a local sponsor get into a side agreement. This agreement acts as a written consent whereby the UAE national declares himself/herself as a silent partner who holds no shares in the company. However, this is not a notarised agreement. The legality of the agreement is of a civil suit. It will not supersede the legally notarised Memorandum of Association (MoA), which is as per the UAE company law.

    While a side agreement is based on trust and goodwill, should a situation arise where a dispute requires the intervention of the judicial system, the government will only take into consideration the terms stipulated by the law of the land. Thus, to safeguard the ownership of the foreign investor, there is a need to restructure the company by establishing the presence of Special Purpose Vehicle (SPV).

    What are Special Purpose Vehicles (SPV)

    Special Purpose Vehicles are subsidiary companies established to help you gain complete ownership of your mainland LLC company. High net-worth entities or companies with substantial investment and high-risk operations may have reservations about registering their company with a 51% local shareholding structure. Therefore, the creation of SPV is best suited for their needs as it will allow them complete control of their business, without having to conform to a shareholding structure.

    Recent changes made to the Foreign Direct Investment (FDI) law by the UAE Federal Government has widened the scope of activities through which foreign nationals can have 100% ownership in an LLC structure. Though they have included more than 122 activities to the list, a majority of these are related to service, construction, or project-oriented businesses. Since the initial investment required for these activities is very high, it is not a viable option for SMEs. Company restructuring via SPV will be a more economical solution.

    Special purpose companies can only be registered in a free zone governed by the English Common Law. Currently, there are only two free zones in the UAE that offer company registration under Common Law – Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM).

    What is the process of Company Restructuring via Special Purpose Vehicle?

    Restructuring the LLC is a 2-stage process and includes the involvement of both parties – UAE national sponsor and expat partner(s).

    Stage 1 – Company restructuring in free zone

    This stage involves registering either one or two separate entities as Special Purpose Vehicles (SPV) or Special Purpose Companies (SPC).

    When incorporating 1 SPV

    • The SPV will be registered as a 100% UAE national-owned entity.
    • The registered SPV can then pledge all its shares to any individual(s) who will directly become the shareholder(s) of the mainland LLC company. This transfer of shares is carried out under the Call Option Agreement, as per the English Common Law.

    When incorporating 2 SPVs

    • The first company, known as SPV A, will be registered as a 100% UAE national-owned entity.
    • The second company, known as SPV B, will be registered as a 100% expat partner(s)-owned entity.
    • Once the two entities are registered, SPV A will pledge all its shares to SPV B under the Call Option.

    Stage 2 – New company registration in UAE mainland

    The final step of completing your company restructuring process is to incorporate a new LLC company in the mainland. As per the UAE Commercial Law, this company will have two shareholders: the Emirati-owned SPV and the foreign national individual or the expat-owned SPV. Since the Emirati-owned shares were pledged off in Stage 1, the expat investor(s)thus becomes the 100% owner of the LLC.

    What are the requirements for incorporating a Special Purpose Vehicle?

    The documents required are dependent on the purpose for which the company is undergoing restructuring. However, the basic requirements are as follows:

    • Business plan of the company, including the objective of the company
    • Copy of passport information of each shareholder
    • UAE visa page copy of shareholders who are residents of the UAE
    • Copy of UAE visit visa page of non-resident shareholders
    • Copy of Emirates ID of shareholders who are residents of the UAE

    For in-depth information about Special Purpose Vehicles, or to discuss how Shuraa Business Setup can help you restructure your LLC company and secure your ownership, book your FREE consultation with our corporate legal advisors today.

    Connect with them on +97144081900 or WhatsApp them on +971507775554. You can also drop us an email at info@shuraa.com with your enquiry about business setup in Dubai or anywhere across the UAE.

    Abdul Muqeeth, Corporate Legal Advisor/Company Restructuring Specialist, Shuraa Business Setup