Best Practices for Maintaining Entities in the UAE

As companies look ahead to the upcoming business year, there are several activities focused on financial planning and strategic development that can help ensure success in 2024 and beyond. Among these priorities, it is equally essential to consider annual obligations and compliance requirements, as they play a pivotal role in maintaining a company's health.

Effective entity maintenance is essential for the success of businesses in the United Arab Emirates and across the world. It often involves a range of activities aimed at ensuring the compliance of the entity with local laws and regulations.

These tasks include trade license registration and renewal, company record updates and adherence to statutory requirements such as annual account filing, Ultimate Beneficial Owner (UBO) disclosure and compliance with Economic Substance Regulation (ESR).

The importance of maintaining UAE entities in compliance with local requirements, regardless of whether they are registered in a free zone or on the mainland, cannot be overstated. Proper entity maintenance not only helps avoid penalties but also plays a pivotal role in establishing robust corporate governance, building trust with stakeholders and attracting potential investors to foster business growth.

This blog explores the best practices for entity maintenance in the UAE. Whether a business owner, investor or professional working in the UAE, understanding the key aspects of local compliance regulations is vital for streamlining operations, mitigating risk and ensuring long-term success in the UAE market.

Key Compliance Requirements in UAE

Registration and licensing

Following a set of best practices is crucial when registering entities in the UAE. Navigating the complexity of company registration can be daunting, given that the UAE offers a choice of 50 distinct jurisdictions (seven onshore options and over 40 designated free trade zones), each with its unique requirements and specifications.

To begin, it is essential to carefully select the most suitable location for the business based on its activities, target market, office space requirements and operations. Once the optimal jurisdiction is identified, businesses must familiarise themselves with the specific requirements and regulations set by the relevant authorities and ensure they obtain the necessary permits and approvals before commencing operations.

In addition, companies should ensure that all documentation is accurate and updated, as any discrepancies may affect business operations.

Annual renewals and filing

Once the entity is incorporated, timely annual renewals and filings are crucial to ensure that businesses stay in good standing, avoid penalties and comply with the regulations set by the UAE government and/or the relevant free zone authority. The key UAE annual corporate compliance requirements are:

• Renewal of the trade license
• Renewal of the establishment card
• Renewal of the office lease agreement
• Renewal of the Ministry of Economy’s certificate (Applicable to all Branches of foreign companies)
• Filing of Ultimate Beneficial Owner (UBO)
• Filing of Economic Substance Notification
• Filing of Economic Substance Report, if the company conducts one of the relevant activities as stated in the Cabinet of Ministers Resolution No. (57) of 2020
• Filing of annual financial accounts, where applicable
• Filing of VAT quarterly return if the company is registered to VAT

It is essential to stay updated with the specific filing and renewal deadlines, as they may vary depending on the legal structure and whether the company is registered in a free zone or on the mainland.

Bookkeeping and accounting

The maintenance of books of accounts is essential for making informed business decisions, and it is also a mandatory requirement in the UAE. According to Federal Law No. 2 of 2015, Article 26 of Commercial Companies, every company must uphold accurate accounting records reflecting its transactions and be prepared to disclose this information at any time.

These accounting books/records should adhere to IFRS standards and must be preserved in either electronic copies or originals for a minimum of five years. Furthermore, a limited liability company is obligated to appoint an auditor to annually audit the company's accounts, as stated in Article 27 of Federal Law No. 2 of 2015.

Board of directors/shareholder meetings

Directors and shareholder meetings are integral for ensuring entities comply with local requirements. As per Article 92 of Federal Law No. 2 of 2015, a limited liability company must hold a general meeting comprising all partners. This general assembly is required to convene at least once a year, within four months following the fiscal year's end, and the venue and date must be specified in the Memorandum and Articles of Association.

Per Article 94 of Federal Law No. 2 of 2015, the annual general assembly meeting should be vested with the authority to deliberate and make decisions on the following matters:

1. Receive managers' reports on the company’s activities and financial standing
2. Set and approve the balance sheet and profit and loss account
3. Determine profits to be distributed to partners
4. Appoint managers and determine their remuneration
5. Appoint members of the board of managers (if applicable)
6. Appoint members of the supervisory board (if applicable)
7. Appoint one auditor or more and determine their remunerations

Need to know more?

Staying on top of all compliance requirements can be overwhelming, especially if the owners or management of the UAE entity are located overseas. Enlisting the help of a professional consultant can provide you with essential guidance.

Fragomen is here to support you through the entire journey of company formation and maintenance in the UAE. With a comprehensive grasp of the legal and regulatory landscape, Fragomen's local professionals will keep you informed about changing requirements, minimizing the potential for mistakes or oversights that could result in fines or delays in visa processing. For questions, please contact Corporate Services Manager Francesca Borghi at [email protected].

This blog was published on 15 December 2023, and due to the circumstances, there are frequent changes. To keep up to date with all the latest updates on global immigration, please subscribe to our alerts and follow us on LinkedIn, X, Facebook and Instagram.