Legal View: Companies cannot retain passports - Khaleej Times

Legal View: Companies cannot retain passports - Khaleej Times

UAE set to approve new companies law soon

The president of the United Arab Emirates is expected soon to approve a long-awaited new law covering the operations of companies in the country, a step towards attracting fresh foreign investment, the economy minister said on Monday.

"The companies law is with the government to be ratified by the President - we are expecting that soon," Sultan bin Saeed al-Mansouri told reporters.

The new law, which has been years in the making, contains dozens of articles seeking to make limited liability and joint stock companies simpler to manage and more attractive to investors, while strengthening corporate governance in areas such as companies making loans to their directors.

The law would provide for companies' documentation to be made publicly available, a step towards a more transparent corporate environment in the UAE.

One article, contained in a version of the law given preliminary approval last year, would reduce the minimum free float in initial public offers of shares to 30 percent from 55 percent, the ratio which currently applies on theUAE's two main stock exchanges.

The minimum ratio deters some corporate founders who want to maintain majority ownership, and has been criticised as one factor encouraging UAE companies to list their shares in overseas markets such as Londonrather than domestically. Officials have not confirmed that the article lowering the ratio will be included in the final version approved by the president.

The law will certainly be less radical than some investors had hoped; last year the consultative Federal National Council rejected an article that would have eased tight controls on foreign ownership of companies, citing security fears and threats to local businesses.

The article would have given the UAE cabinet the power to let foreign parties own stakes of up to 100 percent in companies outside free zones. Currently, foreigners can generally only hold stakes of up to 49 percent in businesses located outside free zones.

Last year, the economy minister said the article liberalising foreign ownership would be included in a draft foreign investment law. That bill has now been finalised by a ministerial legal committee and is awaiting approval of the FNC, Mansouri said on Monday.

Meanwhile a law on small and medium-sized enterprises, which the cabinet hopes will boost the growth of SMEs and encourage UAE citizens to establish companies, is on its way, Mansouri said: "The SMEs law has been ratified by the President. That should be out soon."

The law is expected to include provisions encouraging government agencies to provide support to SMEs.

The UAE expects to attract 8.6 billion euros ($11.9 billion)in foreign direct investment into its non-oil sector in 2014, 20 percent more than last year, Mansouri said.

The second biggest Arab economy is investing billions of dollars in industry, tourism, real estate and infrastructure to wean its economy off its reliance on oil exports.

But after an initial increase, the share of non-oil activities has remained at around 68 percent, little changed over the last five years, the latest official data shows.

Vithul V Murali
Dubai Mobile : +971 50 55 73 538

Skype : Vithul.murali

Offshore Company formation, a complete guide

Expanding and shifting your business activity through a UAE Offshore Company set up The Emirate of Ras Al Khaimah (RAK) has launched an offshore facility - The second in the UAE. The International Business Companies (IBC) Registry allows foreign investors to register offshore companies as RAK Offshore, a division of RAK Investment Authority (RAKIA) without the need to establish a physical presence in the UAE. Companies are usually incorporated within 24 hours. Any non-resident individual or corporate entity can register a company. Many jurisdictions are considered only as tax havens. The United Arab Emirates is a 'real' country with a 'real economy' with a population of approximately 4 million. It has an established history of international trade, finance and business, and today it is one of the fastest growing countries in the world with one of the highest standards of living. The choice of a suitable jurisdiction is an important decision and requires careful considerations. Important aspects to be examined and which RAK offers may be outlined as follows: Political and economic stability of the jurisdiction • The availability of a modern and flexible legislative framework • Simple incorporation and filing requirements • The availability of Double Taxation Avoidance Agreement (DTAA) • State of the art banking system • State of the art telecommunication facilities Uniqueness UAE is not a dependent or 'overseas' territory of another country Pressure has been put on traditional low tax jurisdictions by the Commission of the European Community (EU) in conjunction with the Organization for Economic Cooperation and Development (OECD). The UK parliament has converted British Dependent Territories to British 'Overseas' Territories (in 1998). The UK government may apply greater control over its tax haven progeny (ie Bermuda, BVI, Caymans, Gibraltar, Turks & Caicos) UAE has Double Taxation Avoidance Agreements (DTAA) with a number of countries Double taxation agreements prevent individuals and corporations from being susceptible to paying tax on the same item during the same time period. These agreements determine which of the two states concerned should levy tax in a particular situation: Austria, Belarus, Belgium, Canada, China, Czech Rep., Egypt, Finland, France, Germany, India, Indonesia, Italy, Lebanon, Malaysia, Malta, Morocco, New Zealand, Pakistan, Poland, Romania, Singapore, Sudan, Thailand, Tunisia, Turkey, Ukraine. UAE is not a member of the Organization for Economic Cooperation and Development (OECD) No foreign exchange of information. UAE is not on the OECD 'blacklist' of tax havens (nor the FATF blacklist) UAE is not a member of the EU, and is not subject to EU regulation Main activities of UAE OFFSHORE COMPANY • General Trading • Consulting and Advisory Services • Holding Company (Buy/Hold/Sell stakes of companies) • Investments and Joint Investments Company • Property Owning • International services • Professional Services • Shipping and ship management companies • Commission Agents Company – Intermediary Brokers (IB's) Fiscal & Regulatory benefits of UAE OFFSHORE COMPANY • 100% income tax exemption • 100% corporate tax exemption • 100% capital and profit repatriation • 100% ownership in Free Zones • No Import or Export taxes • No capital gains tax • No Value-added tax • No Withholding tax • Proximity to entire Gulf and global markets Main features of UAE OFFSHORE COMPANY • It does not need to have physical offices in the UAE. • It may not carry on business within the UAE. • It may not obtain UAE Residency Visa. • It may have non UAE resident as director or shareholder. • It may have UAE resident as director or shareholder. • It may have corporate shareholder/corporate director • It does not require the shareholder/director to be physically present in the UAE for incorporation • It may own real estate in the UAE, with prior authorization from RAK Investment Authority. • It may not do banking and insurance business without special license. • It may maintain bank accounts and deposits in the UAE or worldwide. • It is not obliged to maintain its books and records. • It may hold shares in other UAE and worldwide companies. • It may own yachts registered in the UAE. In Brief  Location Gulf RAK Offshore is the first comprehensive offshore centre in the Gulf region. Time Zone GMT+4 Between Europe and Asia. Open on Sundays. International Business Companies Yes First centre in the Middle East to offer IBC registration. Trusts No Not offered yet. Offshore Banking Yes Authorized to open bank account with UAE banks. You can register International Business Companies bearing the status of 'Limited' or 'Ltd.' at RAK Offshore. Middle East and the Gulf Thanks to geographical proximity and cultural similarities, RAK Offshore is an attractive location for businesses from countries in the Gulf and the Middle East. These countries already have strong business links with the United Arab Emirates. RAK Offshore is also likely to benefit from the fact that some countries in the region suffer from political unrest and/or asset protection issues. Russia & CIS Countries Confidentiality and financial privacy coupled with issues such as political uncertainty, weak currencies, taxes, severe foreign exchange controls and asset protection in Russia and CIS countries make RAK Offshore a viable option for businesses from these regions who seek an offshore location. Europe, India & Other Countries Companies in this region have a favorable image of the UAE as a business centre. Add to that their interest in investing in the booming economies and financial markets of the GCC and it is not hard to see why RAK Offshore is a perfect offshore location for these companies.  Statutory description of private limited company International Business Company (IBC). Governing corporate legislation RAK Investment Authority (RAKIA) is the governing body and the companies is regulated under RAK Offshore Regulations 2006. Time-scale for incorporation 24 hours. There is a time difference of +4 hours to GMT. Availability of ready-made companies No. The regulations governing availability of names Generally the nature of the company has to be indicated through the words "Limited" or "Ltd.". Minimum and maximum number of shareholders A company may be formed with minimum of one shareholder and there is no limitation as of maximum. Statutory minimum paid-up capital requirements Capital is required for the incorporation of an offshore company but there is no minimum capital requirement. Classes of share available Share capital may be divided into different classes. Bearer shares are not allowed. Shares may be issued fully, partly or nil paid. Denomination of share capital AE Dirham and US Dollar can be used as the denomination for the capital. Any foreign currency is acceptable but prior consent has to be approved by the RAK Authority. Annual Costs As per request. Residency requirement on shareholders or shareholders' meetings No requirement for a local resident to be a Shareholder, only proof of residence is required to be submitted. Information published relating to shares and shareholders The company must keep a copy of the share register at the registered office address. This is available for inspection by the members and is not publicly available. The company may voluntarily file at the Registrar the copies of the register of members. Minimum and maximum number of directors Sole directors are permissible. There is no statutory limitation for maximum number of directors permitted, although the articles may impose a limit. Are corporate directors or corporate shareholders permitted? Yes. Corporate entities are even permitted to hold shares in a RAK Offshore companies. Nationality and residency requirements of directors The director can be a resident or any foreign citizen but is required to submit the proof of residence and other relevant documents. Nature of the powers of the directors The directors have all the powers of the company that are not reserved to the members under the Regulation or in the memorandum and articles. Directors' meetings The directors may meet at such times and places within or outside the UAE as the directors may determine to be necessary or desirable. Telephone and other electronic meetings are allowed. Subject to a requirement in the memorandum and articles the director shall be given reasonable notice of meetings of directors, although this rule is subject to a waiver of notice. The presence of a director at a meeting shall be deemed to constitute a waiver on his part. The quorum of a meeting of directors is fixed by the memorandum and articles but where no quorum is fixed, a meeting of directors is properly constituted if one half of the total number of directors is present in person or by alternate. Information published relating to directors There is no public register of directors, although the company may voluntarily file its register of directors with the Registrar. Must accounts be prepared by the directors? A company incorporated under the Regulation shall keep such accounts and records as the directors consider necessary or desirable in order to reflect the financial position of the company. Must such accounts be filed with the financial authorities? No. Must such accounts be audited, and if so by whom? No. They may be audited by persons approved by the directors. Must the company have a registered presence in the territory of incorporation? Yes. The company must at all times have a registered office and registered agent within Ras Al Khaimah. The registered office must be maintained either by the company or its registered agent. What records must be maintained in the territory and are they available for public inspection? A copy of the share register and the register of directors and an imprint of the common seal must be kept at the registered agent's address. Other records such as minutes of meetings of directors, members and copies of all resolutions may be kept at such places as the directors determine, but copies must be kept at the registered agent's address. These are not available for public inspection, other than by members or directors. If copies of these registers and documents are kept other than by the registered agent, the registered agent must be notified of the location of the original. If the company fails to comply with these provisions it is liable to a fine. Can the company make secured loans? Yes. Can the company make unsecured loans? Yes. What are the limits placed on the company's borrowing powers? None. There are no debt/equity ratios under the law. Is there a register of company charges? A company may maintain at its registered office a register charges and other encumbrances. This is not mandatory. Similarly, a public register may be maintained at the option of the company. Company seal A company must have a common seal. Re-domiciliation provisions A company incorporated under the laws of a foreign jurisdiction may continue its existence as a company registered under the Act. Similarly, RAK Offshore business companies may transfer their domicile to foreign territories that permit such procedures.

Vithul V Murali
Dubai Mobile : +971 50 55 73 538
Email : Vithul@a2zconsultus.com

Skype : Vithul.murali