The Importance Of Due Diligence When Establishing A Company In Abu Dhabi

17th April 2019

The importance of due diligence is critical when establishing a company in Abu Dhabi or Dubai. I'm still amazed how many foreign companies I speak to which don't do any due diligence when entering a foreign market.

What could doing due diligence mean for your organisation?

Staying Legal - Doing due diligence upfront to understand the local laws as a foreign company enters a new market will protect it. Knowing the laws will ensure the foreign company is operating legally as it starts doing business in Abu Dhabi or Dubai to avoid unnecessary penalties and fines.

Maximizing Profits - When setting up a Limited Liability Company (LLC) in Abu Dhabi or Dubai there is currently a requirement for a foreign company to partner with either a wholly-owned Emirati company or an Emirati individual (local sponsor). The foreign company is restricted to a maximum ownership of 49% in the entity, whilst the Emirati partner is required to hold 51%. However, knowing how things work in Abu Dhabi and Dubai could save a foreign company significant amounts of money, because whilst the shareholding structure is required to be 51% in favour of the local sponsor, the profit share doesn't need to match this. So, the foreign company can actually, legally secure and protect the majority of its profits. Imagine not knowing this and not being able to take advantage of this opportunity and the potential loss of profits.

Protecting Ownership Of The Business - As a local partner is required in an LLC structure the importance of carrying out due diligence to appoint the right local sponsor is important to ensure the ownership of your organisation is secure. If your experience and connections in Abu Dhabi and Dubai are limited, it is important not to rush in to appointing a local sponsor (aka local sponsor) and putting your business at potential risk. It's easy to meet people and get carried away with their promises and good intentions, but take a step back and consider...would you start a business in your home jurisdiction with a random person that you just met? Incredibly unlikely! Therefore, doing due diligence to identify a suitable partner for the ownership of your business is a huge undertaking and one which shouldn't be taken lightly. Individuals bring emotions and other risks to the business structure, so identifying a corporate nominee partner is a safe option. After all, protecting your assets is the primary concern here. If the individual is keen to open doors or making promises which are too good to be true, then most likely they are, so don't risk the ownership of your business with such promises - a separate agreement can always be structured whereby the individual is remunerated based upon deliverables - which could be a win-win for both parties.

How Gateway Helps With Secure Business Structuring In Abu Dhabi and Dubai?

Gateway Group works with foreign companies to understand their business intentions. We identify any potential risks and highlight ways in which to mitigate them, so their corporate structures are protected, they have operational control and they retain the profits in the Abu Dhabi or Dubai business. Gateway's experienced, on-the-ground experts ensure foreign companies have sufficient information to make informed decisions that are right for their business. Through its Special Purpose Vehicle (SPV), Gateway also provides a corporate nominee sponsorship service so clients have maximum control of their business.