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: -
- 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.
- Obtain preliminary permission from Dubai's Department of Economic Development
(DED). It is permission to begin the company's registration process.
- Fill up an application form and include all relevant documentation.
- Submit it to the Department of Economic Development (DED) for business
registration.
- The authorities will review the application and documents and decide whether to
approve or disapprove based on the authentication.
- If your application is approved, you can proceed to fill out an application for
a license.
- 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.
