So, what is a Public Shareholding Company?

A Public Shareholding Company is a corporation 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).

• In Dubai, a PJSC must have at least ten founding members, and its management must be delegated to a board of directors comprised of three to fifteen individuals whose terms of office cannot exceed three years.
• Only 35% of the share capital can be held by the founders, with the rest having to be sold to the general public. In a public shareholding firm, the Chairman and the majority of the directors must be UAE nationals.

What are the Key Aspects of a Public Shareholding Company in United Arab Emirates?

There are a few major aspects about the Public Shareholding Company which you should be familiar with. Let’s check them out-

LIABILITY

The Public Shareholding Company's financial liability is considered separate from the financial liability of each of its shareholders.

ASSET DIVISION

The Company shall be liable for its debts and obligations with its assets and properties, and the Shareholder shall not be liable for such debts and obligations before the Company except in proportion to the shares he owns in the Company.

NAME OF THE COMPANY

The name of the Public Shareholding Company is drawn from its objectives, but it must be followed by the words "Limited Public Shareholding Company" everywhere it occurs. The Company may not be registered in the name of a natural person unless the purpose is to exploit a patent that has been lawfully registered in that person's name.

QUESTION OF SUBSCRIPTION

Subscriptions to the company's shares must be open for a minimum of two weeks and a maximum of four weeks. If shares are not fully subscribed, founders may extend the subscription period for another two weeks with the Ministry's permission.

MANAGEMENT

For a definite period, the Company will be governed by a Manager or Management Committee, but should not exceed 3 years period, whose members must be no less than two and no more than seven, whether shareholders or others, in line with the Company Memorandum of Association. A shorter duration may be specified in the Memorandum. A chairman, a deputy chairman, and those authorized to sign on behalf of the Company will be elected by the Management Committee. An extraordinary decision of the General Assembly can prolong a Public Shareholding Company's fixed term.

CAPITAL

AED 10 million (about $2.7 million) in capital is required to establish a public shareholding company in Dubai, with a nominal face value of AED 1 to 100. The minimum capital requirement for a banking firm is AED 40 million, whereas the minimum capital requirement for insurance and investment organizations is AED 25 million.

The preparation of a founders' agreement, a prospectus, or invitation for public subscription supported by an overall business plan or feasibility study and an auditor's certificate, a due diligence survey, a memorandum, and articles of association are the other requirements for forming a public shareholding company in Dubai.

SHAREHOLDING

The primary shareholders, or founding members, are entitled to 35% of the share capital, with the remaining 75% available to the general public.

MAJORITY

The Chairman and a majority of the management board must be Emiratis, and the UAE national must possess 51 percent of the shares.

QUESTION OF BRANCH

Local banking, insurance, and financial initiatives must, in most situations, be conducted as a PJSC, although international companies engaged in similar operations can create a branch or a representative office in Dubai.

In United Arab Emirates, the procedure for forming a Public Shareholding Company is as follows-

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 fulfil. They are, indeed: -

1. Choose a trade name for your company. It must not be confusingly similar to the name of any existing corporation in the United Arab Emirates. In Dubai, register the name with the Companies Registrar.
2. Obtain preliminary permission from Dubai's Department of Economic Development (DED). It is permission to begin the company's registration process.
3. Fill up an application form and include all relevant documentation.
4. Submit it to the Department of Economic Development (DED) for business registration.
5. The authorities will review the application and documents and decide whether to approve or disapprove based on the authentication.
6. If your application is approved, you can proceed to fill out an application for a license.
7. You can launch your public shareholding firm in Dubai once you have the license.

Documents Required in United Arab Emirates to Form a Public Shareholding Company

All the relevant documents required to start your own Public Shareholding Company are listed below-

• Founder's Agreement with Application for Registration and Licensing
• Approval of a Business Activity by the Government
• Invitation to Public Subscription Prospectus
• Approval from the UAE Securities and Commodities Authority for public shareholding
• Certificate of Auditors
• Public Shareholding Resolution from the Ministry of Economy
• Survey of Due Diligence
• 2 copies of the Feasibility Study for the Project
• 4 genuine copies of the Memorandum and Articles of Association
• Public Notary
• Photocopies of the Contract for Office Space and the Registered Plot Number
• Written Acceptance of Appointment by the Appointed Board of Managers and Directors.
• Original documents containing the names, dates, and places of birth of the directors.

The benefit of Financial Reorganization in a Public Shareholding Company in United Arab Emirates

A public shareholding corporation is formed to manage large projects, and its financial position changes annually as a result of its operations, profits, and losses. Deductions for asset depreciation or capital restructuring also affect the company's financial position, because a company deducts a portion of its net profit and does not distribute these funds to its shareholders, instead putting them into the company reserves as additional insurance against future losses.

• These funds can also be utilized to ensure that shareholders get a standard annual dividend or to provide financial support to the company.
• If a firm suffers significant financial losses that threaten shareholder, third-party, or creditor rights, or if it is unable to meet its financial obligations, or if its losses exceed 50% of its paid capital, the company is said to be in "financial distress."
• In this case, the company will require "financial reorganization," which can be accomplished by negotiating with the company's creditors to restructure and settle the company's debts. The corporation may be able to avoid declaring bankruptcy if this is done. If the firm is legally unable to repay its obligations or if its losses reach 75% of its subscribed capital and the Board has not resolved to enhance the share capital and successfully reduce the losses, mandatory bankruptcy may be declared.

What are the general advantages of starting a Public Shareholding Company in United Arab Emirates?

Th general advantages of starting a Public Shareholding Company in UAE are listed below for a better understanding-

Ability to raise funds through the sale of shares

One of the advantages that public shareholding companies that they have the option to raise capital by selling stock to the general public. It is difficult to collect huge sums of funds before to becoming public, other than through borrowing, to fund operations and new product offers. A private firm can only raise funds by reinvesting revenues, taking out a loan, or obtaining investments from a few affluent individuals, who may not be able to cover the company's financial needs.

Public shareholding corporations can raise money in the primary and secondary markets by enabling the general public to buy their stock. Public shareholding corporations can raise substantial sums of cash on public markets, allowing them to engage in capital-intensive activities. In exchange, stockholders’ profit from stock capital gains as well as dividend payments.

Financial data is readily available

The SEC requires public corporations to produce quarterly and annual financial statements, as well as other required documentation. Shareholders, financial media, interested investors, and financial analysts will be able to acquire extra information about the company as a result of the requirement. Because financial information regarding the company is readily available, analysts may more easily calculate the company's valuation. Private corporations, on the other hand, are not required by law to make their financial reports public.

How can Dhanguard help?

The benefits of forming a company in the United Arab Emirates are numerous. 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 seeking for a dependable partner to help you establish a Dubai corporation.