Mitigating risk with the new UAE Commercial Companies Law

Before the UAE Government introduced the new UAE Commercial Companies Law (Law No. 2 of 2015), the only option an entrepreneur had was an unlimited liability sole partnership. As such, the inherent risk factors associated with running a small business were much higher due to the non-separation of personal and financial liability.

The new Act has introduced the concept of a sole founder to UAE commercial law. An individual can now establish a private or Limited Liability Company (LLC), which will help them protect their personal assets from creditors due to the seclusion of their personal assets to the business.

Although the initial cost of set up for an LLC can be more burdening than a sole partnership, these costs are offset over the long-term as company owners are sheltered from liability. At Links Group, we recommend that entrepreneurs operating in the UAE engage with a commercial facilitation and advisory service to help them mitigate risk for their company as the UAE’s commercial licensing is somewhat complex and distinctive in its makeup.

Mitigating risk and maximising protection of assets should be the priority of the entrepreneur’s legal counsel. They need to understand where the business intends to operate, its expansion plans and ultimately exit plans to guide them through the best structure and statutory requirements needed for company incorporation. The most common structure in the region is a Limited Liability Company (LLC), which requires a local individual or company to hold a minimum of 51% shares of the equity.

Links Group’s corporate nominee model allows international companies full financial, operational and management control over the entity, normally via a Power of Attorney granted to the General Manager. By navigating and mastering the region’s laws, legal counsel can help businesses retain beneficial ownership and control with the ability to terminate arrangements without penalty.

Another option is the Links Group’s beneficial ownership protection services Global Solutions. This offshore fiduciary service allows foreign companies registered in the UAE or Qatar to protect their 49% business interest through incorporation of a holding company in the British Virgin Islands.

Article by Leandri Lambert on Mar 31st 2016

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