Holding companies are well known across the globe as a popular way to manage assets such as property or investments in subsidiary businesses, while being protected from any liabilities.
Often, holding companies are associated with large businesses, but this doesn’t necessarily have to be the case – single entrepreneurs can start them too.
For those who want to establish a company to buy domestic or commercial property or to invest in other businesses in Dubai, a holding company could be the best structure for you. If you want to set one of these up in Dubai, our guide shows you how, including:
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- • Advantages of opening a holding company in Dubai, UAE
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- • Holding company options in Dubai, UAE
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- • Activities allowed for holding companies in Dubai
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- • Steps to open a holding company in Dubai
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- • Cost of opening a holding company in Dubai
- • How can Creative Zone help
Advantages of opening a holding company in Dubai, UAE
There are numerous benefits to opening a holding company in Dubai. One primary advantage is the tax regime. There is low 9% corporate tax in Dubai on income exceeding AED 375,000.
In addition, holding companies are a good way to reduce the risk you are exposed to in terms of liabilities. The holding company isn’t liable for debts the subsidiary businesses may make.
Dubai holding companies also give an entrepreneur entry into the local banking system, which means they can open a corporate account with a local bank and apply for loans, which can be used to invest in assets.
There are other benefits, such as the speed with which a holding company enables you to start a business: there is no need for paid-up share capital, and the licences required tend to be cheaper than other options. Holding companies also offer more privacy than other structures because there is no obligation to disclose who owns them.
Holding company options in Dubai, UAE
In Dubai, there is a choice of two types of holding company. A free zone holding company, often favoured by investors from outside the UAE, allows owners to retain complete control of their business.
The other option is a mainland investment company, which is operated on the mainland and requires a commercial licence.
Dubai holding companies must have a board of shareholders appointed. Their primary function is to decide how ownership of any subsidiary business is organised and to make key choices for it, including any sales or acquisitions. The board also monitors the subsidiaries’ performance, including their ongoing financial viability.
If the Dubai holding company has more than one subsidiary, it must ensure the subsidiaries’ effects and operational activities are kept separate.
Activities allowed for holding companies in Dubai
Understandably, holding companies can only undertake certain activities – namely owning assets such as physical property (commercial and residential), intellectual property and subsidiary businesses.
This means they cannot directly manufacture products, sell goods or services, or directly manage any of the assets held in the holding company.
Steps to open a holding company in Dubai
There are steps that must be taken to set up a holding company in Dubai, but these are largely the same as those needed for forming any company in Dubai. On average, it takes a few weeks to complete the setup and registration process to form a holding company.
For instance, a company name has to be chosen and registered. While there aren’t too many rules regarding this, there are some that entrepreneurs need to be aware of. Firstly, a business cannot have the same name as an existing business – it has to be unique. So it is worth researching company names in Dubai before deciding – if the authorities reject a proposed name, it can hold up the formation process.
In addition, company names cannot be blasphemous or contain any profanity. Finally, if you intend to use your own name in the business, it has to be a full name – it is not permitted to use just a surname or initials.
Applications for the formation of the holding company should be made to the managing authority of whichever free zone you are planning to be based in.
It is also worth noting that Dubai holding companies are bound by company law, so they must comply with the usual regulations overseeing business and have specific details in place.
This includes a management board, which is appointed and sets out the policies for the organisation of subsidiary businesses. This board also supervises what activities the subsidiary businesses undertake.
In addition, directors must be appointed to every subsidiary business. Finally, they need to oversee how measures are taken to verify that any subsidiary businesses have the funds they require to trade solvently and that any risks they take on have been scrutinised to ensure they are minimised as far as possible.
When forming a Dubai holding company, it is advisable to seek the advice of a company formation specialist such as Creative Zone, which can help with the details of forming a business and ensure that all steps of the process are followed at the outset.
How can Creative Zone help
As this article has shown, setting up a holding company in Dubai has many advantages for entrepreneurs. But the Dubai business setup process does have elements that can be confusing for entrepreneurs, especially those who are from outside the UAE and may not be conversant with local business laws.
As a result, it is recommended to work with company formation specialists such as Creative Zone, who can make sure the holding company is established as quickly and smoothly as possible – and the costs of doing so are kept to a minimum.
For more information and a personalised quote, please contact Creative Zone www.creativezone.ae/contact-us/
