There are at the moment 5 types of UAE IBC available throughout the country. This list is not exhaustive and may change in the future. At the time this website was created, this information are true.
Type 1 – Company Limited By Shares
This type of company limits the liability of the shareholders to the capital originally invested in the company i.e. the nominal value of the shares and any premium paid in return for the issue of the shares by the company.
The company’s memorandum will contains all the information such as:
- The maximum number of shares that the company is allowed to issue or if the company is allowed to issued unlimited number of shares.
- The classes of shares that the company is allowed to issue or if the company is allowed to issue two or more classes of shares
- The rights, privileges, restrictions and conditions attaching to each class of shares.
The company at all times shall have at least one shareholder and one director. The company may issue other types of shares such as bonus shares, partly paid shares or nil paid shares. The shares may be jointly held by more than one person. Name of each joint owners will be entered into the register of members as holders of aforesaid shares. The company article should state how the share certificates shall be issued. Share shall be signed by at least one company director.
Type 2 – Company Limited By Guarantee
This type of company can be set up as a company that is authorised to issue shares or as a company that is not authorised to issue shares. The company name must be using either of the following endings “Limited”, “Incorporated” or its abbreviation “Ltd”, “Inc”.
In this type of company, at least one of the member will be a guarantee member. If the company is authorised to issue shares, then the guarantee member may also be a shareholder. As a guarantor (guarantee member), a nominal amount will be undertaken by you to contribute to the company in the event of winding up.
The liability of the guarantee member is limited to:
- The nominal amount as specified in the memorandum and article of association
- Any other liability as stated in the memorandum and article of association
In the event of winding up, any former member of who was a guarantee member within the period of 1 year prior to the commencement of the winding up, shall be liable to contribute to the company, in regards to the payments of its debts and liabilities, and the expenses of winding up, and for the adjustment of the contribution of the company’s present guarantee member such that the former guarantee member would have been liable to contribute had the winding up happen on the last day of their membership of the company.
Type 3 – Restricted Purpose Companies
This type of company is considered special in the sense that it has very limited corporate capacity to undertake certain specific purpose only. In the company’s memorandum, there will state that the company is a restricted purpose company and its purpose.
This type of company is used mainly as a special purpose vehicle, such as to issue debt instrument. A person acquiring a securities issued by the restricted purpose company have an extra layer of security and comfort, knowing that the company will not be able to engage in any transactions not prescribed by its constitutional documents. Such transaction will be absolutely void.
A restricted purposes company shall be registered as such during its incorporation, continuation, or re-registration. Otherwise, it shall not be registered as a restricted purposes company.
Type 4 – Segregated Portfolio Companies (SPC)
It is also known as protected cell company. This type of company segregate the assets and liabilities of different classes (or series) of shares from one another and also from the company’s general assets.
The segregated portfolio assets would be comprised of:
- Share Capital
- Retained earnings
- Capital reserves
- Share premiums
- Other assets attributable to or held by the segregated portfolio
Separation of liability:
Assets of each segregated portfolio are only available to meet liabilities to creditors in respect of its segregated portfolio, where the liabilities arises from matter related to the particular segregated portfolio only. In short, Creditors may only claim from the assets attributable to the specific segregated portfolio that arises from liabilities related to that particular segregated portfolio. In the event where the assets of a particular segregated portfolio is inadequate, creditors may assess the general assets of the SPC, but not those assets belonging to a different segregated portfolio. While SPC are considered as a single entity and the same goes to the segregated portfolio under the SPC, for bankruptcy purposes, they are treated as such.
Type 5 – Unlimited companies
This is a type of a hybrid company incorporated without a share capital but the legal liability of its shareholder/member are not limited: joint, several and non-limited obligation to meet any inadequate assets of the company to settle any outstanding financial liability in the event of the company winding up.
This unlimited liability applies only upon formal winding up of the company whereby without such exercise taking place, the creditors only have access to the company assets and not those of the shareholder/member.