If you are looking to Set up a holding company in Dubai, it can be a complex process. But with the right guidance, it can be done efficiently and effectively. The lesser the liabilities, the safer the business! Accounts payable, interest payable, income taxes payable, bills payable, short-term business loans, accrued expenses, bank account overdrafts and so much more, doing business, whether in Dubai or anywhere else in the world, means tons of liabilities on your head. But is there a way to do business without being responsible for so many liabilities or losses? Yes, there is! It’s none other than holding a Holding Company License in Dubai, UAE. With a Holding Company License, you can own and control other assets, such as real estate, stocks, or companies.
Understand the Concept
A Holding Company License is a financial vehicle that enables a company to hold shares in other companies without being involved in their day-to-day operations. It is a type of parent company that owns shares in other companies but does not manage them directly. This can be useful for companies looking to diversify their business holdings or for investors looking to manage a portfolio of companies. Not just shares of stock in other corporations, but a Holding company can also own private equity funds, hedge funds, public stocks, bonds, real estate, song rights, brand names, patents, trademarks, copyrights—virtually anything that has value. Some well-known examples of holding companies in the UAE are Al Futtaim Private Ltd., Sharaf Group, Goldfield Enterprises Ltd, Broxiom Group and Al Shaali Industries LLC, amongst others.
It is a safe bet as a holding company in Dubai is a separate legal entity that owns the assets of other companies, called subsidiaries. This separation provides a layer of protection for the assets and owners of the holding company, as the liabilities of the subsidiaries are distinct from those of the holding company. This can lower the risk of financial loss for the owners of the holding company in the event of financial trouble for one of the subsidiaries. In Dubai, a Holding Company License is granted by the Department of Economic Development.
Why Dubai is the Ideal Place to Invest for African investors
Benefits of Opening a Holding Company in Dubai
Tax benefits:
Protection from losses
Access to UAE banking system:
Quick, easy and affordable setup of business:
Easy to change:
Privacy can be maintained:
Holding company in Dubai gives better privacy than other legal forms as there is no obligation to disclose who owns them.
Strategic location:
Strong infrastructure:
Government support:
Multicultural workforce
Flexibility:
Freedom to conduct activities:
Solid legal system:
Disadvantages of Opening a Holding Company in Dubai
- A Holding company can give investors and creditors hard time figuring out an exact picture of the overall financial health of the holding company
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- With a Holding company formation, comes the possibility for unethical directors to hide their losses by moving debt among their subsidiaries.
- Holding companies can also manipulate their subsidiaries, by pushing them to appoint chosen directors or forcing the subsidiaries to purchase products from one another at higher-than-market prices. They may also compel subsidiaries to peddle products to one another at below-market prices.
- Parent companies can also compel their subsidiaries to appoint chosen directors or alter their policies.
Types of Holding Companies in Dubai, UAE
There are several types of holding companies in Dubai, including:
- Public Joint Stock Company (PJSC): This type of holding company is listed on the Dubai Financial Market or the Abu Dhabi Securities Exchange and has a minimum capital requirement of AED 10 million.
- Private Joint Stock Company (PJSC): This type of holding company is not listed on any exchange and has a minimum capital requirement of AED 2 million.
- Limited Liability Company (LLC): This type of holding company is popular among small and medium-sized businesses and has a minimum capital requirement of AED 300,000.
- Free Zone Company: This type of holding company is registered in one of Dubai’s free trade zones and is exempt from certain taxes and regulations.
- Offshore Company: This type of holding company is registered in a jurisdiction outside of the UAE, typically for the purpose of holding assets or conducting international business.
The Process of Holding Company Formation in Dubai
A Holding company is typically created by incorporating a new business entity, such as a corporation or limited liability company (LLC), and then using that entity to own the stock or membership interests of one or more other companies. To form a Holding company in Dubai, you simply need to file the articles of incorporation in the jurisdiction, whether mainland or free zone, where you want to register the company. You will also be required to recognise the business agents managing the holding and operating companies. This can be complex, so for companies with larger holdings, it is worth engaging a lawyer or a reputed business setup consultant in Dubai such as Adam Global. The process for incorporating a new Holding entity will vary depending on the jurisdiction chosen, but generally, it will involve the following steps:
- Choose a business name and conduct a name search to ensure that the name is available for use in the jurisdiction where the holding company will be incorporated.
- File articles of incorporation (or similar organizational documents) with the appropriate state agency, such as the Secretary of State.
- Obtain any necessary licenses and permits for the holding company to operate.
- Create bylaws for the holding company and hold an organizational meeting of the incorporators or initial members.
- Issue shares of stock (for a corporation) or membership interests (for an LLC) and elect a board of directors or managers.
- Once the holding company is formed, it can then acquire the stock or membership interests of other companies and become its parent company.
It is important to note that the actual requirements, benefits and regulations may vary depending on the company’s business activity and the free zone it is established in.
To Be Precise
A Holding company is a kind of business entity that has a single objective — holding other companies. Some holding companies are large conglomerates, with arms in various distinct sectors; others only exist to manage a single subsidiary. Holding companies can help shield their owners from losses, or they can also be used to lessen tax obligations.
Get in touch with any of our business setup advisors in Dubai with your requirements. We are happy to assist you in obtaining your holding company license in Dubai from stem to stern. Click here for a free consultation with our Holding company setup experts in Dubai.
