The primary role of a holding company is to create and manage other entities known as subsidiaries, protecting the group’s shareholders and assets from possible risks while improving and simplifying the management and operations of the subsidiaries.
All legal entities in the UAE must acquire a license to perform particular activities and forming a holding company is no exception. Thus, to legally run a holding company in the UAE you need to obtain the required license.
Why establish a Holding Company in the UAE?
01
Global Financial Center
A prominent hub for commerce and finance.
02
Tax Benefits
Minimal corporate tax and absence of personal income tax.
03
Reputable Jurisdiction
A stable and supportive environment for businesses.
04
Investor-Friendly Regulations
Legal structures that support and benefit investors.
05
Market Access
Access to international businesses and capital markets.
Depending on the specific free zone, you have the option to set up various forms of holding companies, including a standard Holding, a Special Purpose Vehicle (SPV) or a Prescribed Company. Each type serves different purposes and offers unique advantages based on the specific requirements of your business.
Holding Company
01
A holding license limits activities to owning shares, providing financial support to subsidiaries, acquiring assets and intellectual property for their operations, and overseeing the management of subsidiaries.
02
Holding companies are eligible to sponsor visas.
03
Depending on the free zone, it may be possible to merge additional enterprises with holding activities under the same license.
04
Renting office space is mandatory, though the specific requirements may vary by the free zone, and in some cases, a flexi-desk may suffice.
Special Purpose Vehicles (SPV)
01
SPVs act primarily as passive holding companies.
02
SPVs are more limited in their scope and are not allowed to engage in operational activities or sponsor visas.
03
In the UAE, SPVs can only be formed within a limited number of free zones. Since they are less expensive to establish than holding companies, SPVs are particularly cost-efficient for enterprises in ADGM and DIFC and there is no requirement for office rental within these free zones.
04
Depending on the free zone, SPVs are required to appoint a registered corporate service provider.
Prescribed Company
01
Unlike SPVs, which must fully disclose detailed information during formation and on an ongoing basis to the registrar, Prescribed Companies are not obliged to file or audit financial statements, offering enhanced privacy.
02
In DIFC and ADGM, a Prescribed Company (also known as a Restricted Scope Company) is a legal structure ensuring greater confidentiality compared to other types of entities in these free zones.
03
Prescribed Companies also benefit from lower incorporation costs.
How to set up a Holding Company?
01
Choose the Type of Holding Company
Based on your goals, decide on the type of holding company to establish: a standard Holding Company, an SPV or a Restricted Scope Company.
02
Select the Jurisdiction
Based on your choice of holding company type, you will need to decide whether to establish it in
- the Mainland for a Holding company or
- one of the free zones that can license a Holding Company, an SPV or Prescribed Company (Restricted Scope Company).
When selecting a free zone, it is significant to focus on those that offer licenses for holding activities, flexible incorporation conditions (plentiful visa quotas, remote office capabilities, efficient administrative assistance etc.) and other beneficial features.
For more detailed information about various free zones, press here.
03
Acquire the Required License
To enable the business to hold shares, keep assets and manage subsidiaries, you must obtain a license for a Holding Company, an SPV or a Restricted Scope Company.
04
Open a Corporate Bank Account
After establishing the holding company, you must open a corporate bank account in a UAE bank. Since holding companies are often classified as high-risk, this can be a difficult process. UAE Banks may also be less enthusiastic about working with holding companies considering generally low transaction frequency and limited business turnover.
For more detailed information about opening of a corporate bank account in the UAE, press here.
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