Abu Dhabi is an excellent destination for businesses looking to expand into the Middle East. The city offers a business-friendly environment, strategic location, diverse workforce, and modern infrastructure.
Before we jump into the legal requirements for setting up a company in Abu Dhabi, first let’s glance through the advantages of Abu Dhabi as a business center.
Advantages of Setting Up a Company in Abu Dhabi
- Ease of Doing Business: The UAE ranks 16th in the world for ease of doing business, according to the World Bank’s Doing Business 2020 report.
- Tax Exemptions: The UAE does not have a federal income tax or a mere 9% corporate tax, which makes it an attractive destination for businesses. Additionally, Abu Dhabi offers tax exemptions for companies operating in certain sectors, such as renewable energy and technology.
- Diverse Workforce: The UAE has a diverse and skilled workforce, with over 80% of the population being expatriates.
- Strategic Location: Abu Dhabi is strategically located between Europe, Asia, and Africa, offering easy accessibility to the Middle East, Asia, Europe, and North Africa region.
- Innovation and Entrepreneurship Hub: Abu Dhabi is a hub for innovation and entrepreneurship, with several incubators and accelerators supporting startups and SMEs. The government has launched several initiatives such as the Abu Dhabi Innovation Hub and the Abu Dhabi Global Market.
- World-Class Infrastructure: Abu Dhabi has a robust infrastructure, including world-class healthcare facilities, education institutions, and telecommunication networks.
- Commitment to Sustainability: The city has implemented several initiatives to reduce its carbon footprint, including investing in renewable energy and implementing sustainable practices in all sectors of the economy.
Legal Considerations Before You Open a Company in Abu Dhabi
Though a business center is beneficial for the exponential growth of startups or new business ventures, taking care of the legal requirements makes further proceedings easier. Anyone can open a company in Dubai or Abu Dhabi due to the ease of business, but not everyone can navigate the legal systems.
Here are a few of the legal requirements to avoid pitfalls in company growth:
1. Company Registration Process
The process of setting up a company in Abu Dhabi starts with choosing a business activity and a legal structure. There are several legal structures to choose from, including an LLC, a branch office, a representative office, and a free zone company. A limited liability company (LLC) is the most common legal structure chosen by investors in Abu Dhabi.
- An LLC requires a minimum of two and a maximum of fifty shareholders, and each shareholder’s liability is limited to their share capital contribution. An LLC must also have a local Emirati sponsor, who will hold 51% of the company’s shares, while the foreign shareholder holds the remaining 49%.
- A branch office is an extension of a foreign company, and it is entirely owned by the foreign company. The branch office’s activities are limited to the activities of the parent company, and it is not considered a separate legal entity.
- A representative office, on the other hand, is not allowed to engage in any commercial activities. Its purpose is to represent the parent company and conduct market research.
- Free zone companies are 100% foreign-owned companies that operate within designated free zones in Abu Dhabi. They are not subject to UAE company law and can be set up without the need for a local sponsor.
2. Trade Name Registration
Once the legal structure has been chosen, the next step is to obtain a trade name and register the company with the Abu Dhabi Department of Economic Development (ADDED). The trade name must be unique and not similar to any existing trade name in Abu Dhabi.
The registration process requires submitting the necessary documents, including passport copies, lease agreement, and company formation documents, and paying the registration fees.
3. Business License
After obtaining the trade name and registering the company with the ADDED, the company must apply for a business license to start its operation legally in Abu Dhabi. The type of business license required depends on the company’s activities, and the process involves submitting additional documents, including a business plan, financial statements, and tenancy contracts.
4. Registration With ADCCI
Finally, after obtaining the necessary licenses and permits, the company must register with the Abu Dhabi Chamber of Commerce and Industry (ADCCI) to receive a membership certificate. The ADCCI membership certificate is required for opening a bank account and conducting business activities in Abu Dhabi.
To make sure every step in the process of setting up a business in Abu Dhabi is aligned with the standard norms, here are a few additional requirements that you need to keep in mind.
Additional Requirements Before Setting Up a Business in Abu Dhabi
Apart from the legal structure and licensing requirements, there are several other requirements that must be met for setting up a company in Abu Dhabi. These requirements include:
1. Local Sponsor
As mentioned earlier, an LLC must have a local Emirati sponsor who holds 51% of the company’s shares. The local sponsor is not involved in the company’s operations and only holds the shares to comply with UAE company law. The local sponsor must be a UAE national or a company wholly owned by UAE nationals.
2. Office Space
All companies registered in Abu Dhabi must have physical office space. The office space must be in compliance with the Abu Dhabi Municipality’s regulations and must be located in a commercial area.
3. Employment Visa
Companies in Abu Dhabi must obtain employment visas for their employees. The visa application process involves submitting the necessary documents, including passport copies, medical fitness certificate, and employment contract, and paying the visa fees.
4. Bank Account
All companies in Abu Dhabi must have a local bank account. A bank account is required for conducting business transactions and paying taxes. The process of opening a bank account requires submitting the necessary documents, including company formation documents.
Set Up a Company the Right Way
While the above process is shown in the step by step manner, many hidden challenges accompany each step. Obtaining a business bank account may not be easy as it is depicted, especially if you’re a foreigner. To aid and fasten the process, company setup consultants in Dubai or Abu Dhabi are just a call away.
A&A Associate has been serving many entrepreneurs, small business owners, and startup partners over the past 15+ years to scale their businesses in the right direction through the right legal consultations. Make your dream business a reality with the best company setup consultants in Dubai and Abu Dhabi.
