In UAE, most corporate entities are regulated by Federal Law Number 2 of 2015 on Commercial Companies Law (the Companies Law). This law has the provisions for type of companies, shareholding position, obligations of the parties, the free zones, etc. However, the Companies Law does not apply to companies and entities in free zones and (for) offshore companies. In this article, our Corporate Lawyers in Dubai have discussed the JAFZA Offshore Companies Regulations (JOCR-the Regulation) that replaced the JOCR of 2003, issued by the Jebel Ali Free Zone Authority (JAFZA).
Anyone can apply for the formation of an Offshore Company with limited liability. The application must be submitted with the signature of the incorporators, the name of the Offshore Company and added at the end the word “limited”, the amount of share capital, the nature of the business to be conducted, the offshore company’s memorandum, the full name and address of each of the incorporators. The article of association, it must contain provisions for the transfer of shares, a general meeting of the offshore company at least once each year, an audit of the account, and the number of members required to constitute a quorum. Once the registration is made, the Registrar must give an incorporation certificate to the Company and allocate a number to the Offshore Company.
Same as a natural person, an Offshore Company has capacity and rights. Still, it has some restrictions according to the JOCR, such as directly performing any commercial activity in the UAE, holding a lease of a property in UAE, other than a lease referred in the Regulation, carrying out banking business, and doing other business which the Authority may ban from time to time. However, activities such as holding meetings of its Director or member in UAE, engaging with legal consultants, holding a lease property or own property for use as a registered office in any designated freehold area in UAE approved by the Authority, preparing and maintaining books and records in UAE, and other activities, are allowable for the Offshore Company.
Each share of the Offshore Company must transfer the right to vote at a meeting, be a proportionate interest in the Company, and rank in all respects equally with each other share in the Company. However, the shares can purchase it by the Company with two conditions:
Every offshore company must keep accounting records for disclosure with reasonable accuracy, the company’s financial position, and enable the director to ensure that any account prepared by the company complies with the Regulation requirements. If the Company does not have the accounting records, the fine will be AED 2,000. The offshore company director must prepare accounts for a period, not more than 18 months, beginning when the company was incorporated. The funds must be audited. The auditor must make a report of them: the auditor will give his/her opinion if the Company’s account is in agreement with the accounting records.
Chapter 1 of the JOCR applies only to offshore Company, which has no liabilities or can discharge its liabilities in full within six (6) months after the winding-up’s commencement. it is possible to wind up an offshore company making a statement of solvency:
I. By passing, within twenty eights (28) days after the statement has been signed by each Director of the Company, a Resolution that the Company be wound up summarily
II. By delivering to the Registrar, within twenty-one (21) days after the Resolution has been passed, a copy of it together with the statement.
Finally, in the next frame, it is possible to find some fees to be paid to the Registrar for the JAFZA Offshore Company according to the Regulation:
|Filing of application for a certificate of incorporation||AED 10,000|
|Good standing certificate||AED 200|
|Application for appointment an inspector||AED 1,000|
|Register agent registration fee||AED 10,000|
|Transfer of Foreign Offshore to JAFZA offshore||AED 1,000|
Additionally, in case of breach of the Regulation, these are some of the punishments:
|Offshore Company failing to change the name on direction of registrar||AED 1,000|
|Offshore Company engaging in business otherwise than in compliance with the Regulation||AED 50,000|
|Failing to keep a register of members||AED 1,000|
|Failing to comply with keeping accounting records||AED 2,000|
|Failing to comply retaining accounting records||AED 2,000|
|Failing to appoint auditors when required to do so||AED 2,000|
|A person who acts as an auditor in contravention of the regulation||AED 2,000|
|Liquidator failing to give notice of appointment||AED 2,000|