Corporate Structuring & Restructuring in UAE

18 Apr 2022

Corporate structuring in UAE is pretty straightforward. The most common legal structure in the UAE is the Limited Liability Company (LLC). The specificity of such corporate structuring in UAE is that the foreign entrepreneur has to give a controlling interest of 51% of the shares to a UAE national or legal person. However, thanks to side agreements, the foreign entrepreneur can gain full authority to manage the LLC as they see fit. The flexibility allowed by the LLC in UAE is such that the possibilities to pay the UAE business partner are multiple, for instance, thanks to a percentage of sales or a regular fixed fee (monthly or yearly).

When considering creating a company in the UAE, one can implement one’s activity in different areas of the country. The two main possibilities are the Mainland company and Freezone company. 

Mainland company:

A mainland company is an entity registered in the UAE territory, it is allowed to conduct its business activities in the entire UAE market. It can work with any person inside or outside the UAE. However, the presence of a UAE national shareholder holding 51% of the company’s shares is mandatory.

Freezone company:

A free zone is a defined and isolated area, with a special tax, legal, customs and import regime. The main advantage of owning a company in a free zone is that as a foreigner you are entitled to 100% of the company’s shares. The disadvantage is that a Freezone company can only do business within its specific free zone or outside the UAE. It cannot provide its services or sell its products in any UAE jurisdiction other than its Freezone. 

As for corporate restructuring in UAE, it consists of increasing the performance of the company by improving or reforming the business model. Corporate restructuring is a two-sided coin: 

Organizational restructuring consists of modifying the current business model of the company. Such restructuring has the goal to improve the results of the company. It can take multiple forms: mergers and acquisitions, legal company restructuring (for instance a company goes from a sole proprietorship to an LLC), or divestment (meaning the company wants to sell a part of the business they consider is not performant). 

Financial restructuring implies that there is a change in the financial and capital structure of the company. Such restructuring concerns subjects such as debt management or equity.