In the United Arab Emirates (UAE), companies are classified into different categories based on their type of activities and the level of external ownership. One of these categories is the Category 3 company, which is an important classification for foreign investors looking to establish a business in the UAE.
Definition of a Category 3 company
A Category 3 company, also known as a mainland or onshore company, refers to a company that has a minimum of 51% ownership by UAE nationals or a UAE national-owned company. This means that foreign investors can own up to a maximum of 49% of the company’s shares.
Benefits of establishing a Category 3 company
There are several advantages that come with establishing a Category 3 company in the UAE:
- Access to the local market: By setting up a Category 3 company, foreign investors gain access to the UAE’s thriving local market, which offers numerous business opportunities.
- Ability to operate in multiple sectors: Category 3 companies have the flexibility to operate in various sectors, including manufacturing, trading, services, and consultancy.
- Ability to bid for government contracts: Category 3 companies can bid for government contracts in the UAE, providing potential for further business growth and development.
- Tax benefits: Category 3 companies can take advantage of the UAE’s favorable tax environment, including tax exemptions or reduced tax rates in certain areas or sectors.
- Opportunity for full local market presence: By partnering with a UAE national or a UAE national-owned company, foreign investors can establish a strong local presence and benefit from their partner’s local knowledge and expertise.
Requirements and procedures for establishing a Category 3 company
The process of establishing a Category 3 company in the UAE involves certain requirements and procedures:
1. Selection of a local sponsor:
Foreign investors need to find a reliable UAE national or a UAE national-owned company who will act as their local sponsor and hold the majority shares in the Category 3 company.
2. Obtaining necessary licenses:
Depending on the nature of the business, obtaining the relevant licenses and permits is crucial. These licenses may include a trade license, professional license, industrial license, or others, as required by the regulatory authorities in the UAE.
3. Drafting the Memorandum of Association (MOA):
The MOA outlines the purpose, activities, and shareholders’ details of the Category 3 company. It needs to be prepared and notarized with the assistance of a legal professional.
4. Renting an office space:
Category 3 companies are required to have a physical office space in the UAE. The office location and size must meet the requirements set by the authorities.
5. Registration and licensing:
The last step involves registering the company with the relevant government authorities in the UAE and obtaining the necessary licenses and permits to legally operate the business.
A Category 3 company in the UAE is a mainland or onshore company that requires at least 51% ownership by UAE nationals or a UAE national-owned company. Establishing a Category 3 company provides foreign investors with access to the local market, the ability to operate in various sectors, tax benefits, and the opportunity for full local market presence. However, it is important to carefully consider the requirements and procedures involved in setting up a Category 3 company to ensure compliance with UAE regulations and successful business operations.