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What is the Process of Public Shareholding Company Formation in Dubai?

By Sakshi Srivastava - 30 Dec 2021 Last Updated: 10 May 2022
What is the Process of Public Shareholding Company Formation in Dubai?

A public company, also known as a publicly traded firm, is one in which the shareholders own a portion of the company's assets and income. The ownership of a public corporation is dispersed among broad public shareholders through the free trade of stock-on-stock exchanges or over the counter (OTC) marketplaces.

Many Emiratis invest directly in public firms, and if you have a pension plan or own a mutual fund, your plan or fund is likely to own some shares in public corporations.

  • A public company, also known as a publicly traded firm, is one in which the shareholders own a portion of the company's assets and income.
  • The free trade of shares of stock-on-stock exchanges or over the counter (OTC) markets is how a public company's ownership is allocated to broad public shareholders.
  • A public corporation is expected to publish its financial and business information to the public on a regular basis, in addition to trading its securities on public exchanges.

A public corporation is expected to publish its financial and business information to the public on a regular basis, in addition to trading its securities on public exchanges. The Securities and Commodities Authority considers a corporation to be public if it has public reporting requirements

An Overview of a Public Shareholding Company

The majority of public corporations started out as private businesses. The founders, management, or a group of private investors own private firms. Private businesses are likewise exempt from public reporting requirements. Once a corporation meets any of the following conditions, it is compelled to comply with public reporting requirements:

  • In an initial public offering, you can sell securities (IPO)
  • When their investment base reaches a particular level, they are ready to expand.
  • Register with the SCA on your own time.

The process by which a private firm begins to offer shares to the public in a new stock issuance is referred to as an IPO. A corporation is deemed private before it goes public. An IPO allows a firm to begin issuing shares to the general public, which provides them with a source of funds to fund growth.

A firm must meet certain conditions to accomplish an IPO, including those set down by the authorities of the stock exchange where they seek to list their shares, as well as those laid forth by the SCA. An investment bank is usually hired by a company to market its initial public offering, decide the price of its shares, and set the date of its stock issuance.

Dubai provides its entrepreneurs with a variety of corporate structures to choose from when starting a firm, one of which is a Public Shareholding Company (PSC). A PSC is a business in which the capital is divided into equal shares and the liability of the shareholders is restricted to the number of shares in the business. In Dubai, a Public Joint Stock Company is commonly referred to as a Public Shareholding Company (PJSC).

Characteristics of a Dubai Public Shareholding Company

  • At least ten founding members are required for a PJSC to be formed.
  • A board of directors with a minimum of three and a maximum of fifteen members, whose term of office should not exceed three years, should be in charge of management.
  • In a public shareholding firm, the chairman and the majority of the directors must be UAE nationals, and they must own at least 35% of the business's shares.
  • AED 10 million is the minimum capital requirement for forming a shareholding company in Dubai.
  • A local banking, financial, or insurance business must, in most situations, be conducted as a PJSC, although multinational companies engaged in similar operations can create a branch or a representative office in Dubai.

 Procedure for forming a Public Shareholding Company

If you're new to the Dubai business scene, it's critical that you grasp the basics, particularly when it comes to Shareholding Companies. The notion is a long-standing requirement under the United Arab Emirates' Commercial Companies Law, often known as the Companies Law, which requires that every firm be a shareholding company with native shareholders owning 51 percent of the share capital and foreign parties owning 49 percent.

If a person is dissatisfied with this arrangement, they can always opt for a free zone where a foreigner can possess the entire property. The following step is to choose the best site once you've determined the major requirement. Having the ideal location would enable the company to swiftly attract the proper consumers and clients, resulting in increased sales. Following that, there are only a few formal requirements to fulfill. They are, indeed.

  • Select a trade name for your business. It must not resemble with the name of any existing company in the UAE. Register the name with the Companies Registrar in Dubai
  • Get an initial approval from the Department of Economic Development (DED) in Dubai. It is an approval to initiate the registration process of the company
  • Fill an application form and attach all the required documents to it
  • Submit the same to the DED for business registration
  • The authority will look through the application and the documents and approve/disapprove depending upon the authentication
  • If approved, you can further fill out an application to obtain license
  • Once you get the license, you can officially start your public shareholding firm in Dubai

Advantages of a Public Shareholding Company

A Public Shareholding Company shares the advantages of a limited company with its private counterpart as a limited business. However, there are some distinctive characteristics of a public limited corporation that provide it some distinct advantages, many of which reinforce one another.

Raising funds through a Public Share Offering

The capacity to raise share capital is the most obvious benefit of being a public limited company, especially if the company is listed on a recognized exchange.

The capital that may be raised is often significantly larger than that of a private limited business because it can sell its shares to the public and anyone can invest their money.

It's also feasible that having a company listed on an exchange will entice hedge funds, mutual funds, and other institutional traders to invest.

Increasing the number of Shareholders and Sharing Risk

Offering public shares allows a corporation to distribute the risk of ownership across a wide number of stockholders. This may allow early investors in the company to profitably sell part of their own shares while still owning a significant portion of the company.

Obtaining funding from a diverse group of investors offers some advantages over relying just on one or two "angel investors," as many private companies would do to help them develop. While an angel investor can give a significant amount of finance and knowledge, the founders may not be happy with the level of control the angel expects over the company's path.

Other Sources of Funding

A public limited business will often find itself in a better position when looking at other potential sources of money, in addition to share capital.

For example, the requirements of being a public limited company and maintaining a stock exchange listing might boost a firm's creditworthiness when it comes to issuing corporate debt (and therefore reduces the return the company needs to offer investors).

Banks and other financial institutions may be more eager to lend to a public limited company, especially if it is publicly traded. The firm may also be in a stronger position to negotiate lower interest rates and loan payback arrangements.

Opportunities for Growth and Expansion

The significance of being able to raise capital lies in how it may be used to benefit the company. The public limited company can benefit from having more money available and on better terms than a private corporation.

  • Pursue new projects, new products, or new markets
  • Make capital expenditure to support and enhance the business
  • Make acquisitions (whether in cash or by offering shares to the shareholders of the target business)
  • Fund research and development
  • Pay off existing debt (or replace existing debt with new debt on better terms)
  • Grow organically

Conclusion

Incorporating a company in Dubai has a number of advantages. Dhanguard assists foreign investors in establishing their dream firms in Dubai, serving as a one-stop shop for company formation, accounting, bookkeeping, taxation, and corporate secretarial services. Please contact us for assistance if you are looking for a dependable partner to help you establish a Dubai company.

Dhanguard provides the business setup and company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free company setup in Mainland and Freezone in UAE.

Dhanguard provides the company formation services in Dubai, UAE with the guidance of our professional team of consultants. Faster and hassle-free offshore company formation services and company formation services in Mainland and Freezone in UAE.

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