In January 2020, new regulations came into the picture by the name of Companies Regulations, 2020. These were released by DMCC (Dubai Multi Commodities Centre) and Government of Dubai.  These rules have been issued for the comfort and flexibility of the existing companies as well as the companies to be established in the future in the free trade zone. These are the corporate compliance rules issued by the authorities in Dubai.


Earlier the registration of AOA was very rigid. A set format had to follow and anything beyond that would not be considered. However, now the AOA can be formed in a different manner. The DMCC provides the companies with the option to either adopt the DMCC template directly or modify it according to their own comfort. If they wish to modify the template they must get it approved by the Registrar by submitting a legal opinion. If the legal opinion is deemed fit and all the rules and regulations are being adhered to, the AOA is passed. If not, the changes are given so that the particular amendments can be made in the AOA.


As such, there is no minimum capital requirement for the companies in this region. However, the DMCC may impose AED 50,000 in certain companies depending on their activities. Thus, this rule is not the same for all companies.

All corporates may issue bonus shares if they wish to provided they are doing so from the retained earnings of the company. Corporates that are licensed by the DMCC are allowed to structure their share classes as per their needs and can give rights to holders as they deem fit. According to Regulation 27, in the AOA, it must be clearly mentioned what types of shares the company will issue along with the rights attached to the different kinds of shares. Regulation 32 creates the only exception of shares that cannot be issued i.e. bearer shares. A company’s financial aids are met through the issuance of shares and this structure of regulations provides them with quite the flexibility to do so with ease.


Officer Rules have especially been introduced for the officers (directors, managers, and secretaries) of the company. These rules regulate and keep a check on the roles and responsibilities of a company registered under DMCC. DMCC can further appoint a corporate service provided as a company secretary. Along with this, it lays down the rule that the company cannot financially aid the directors of the company. Also, the rules lay down the conditions on how a director, manager or secretary is to be appointed.


It is mandatory for a company to have a minimum of one director, one manager, and one secretary. In the case of a branch, one manager is required and the appointment of a secretary is optional. According to the rules, the manager and the director are compulsorily natural entities. However, secretaries can be an artificial person as well and can even be third party service providers.


The DMCC provides aid for times of insolvency and winding up as well. It lays down the procedure of winding up, may it be insolvent winding up, solvent winding up, or involuntary winding up. It also describes the powers of the directors in such cases and the appointment of a liquidator.


Auditing of financial accounts must be done according to International Financial Reporting Standards. Moreover, any breaches or noncompliance of the regulations by the company need to disclose in the audit report.


According to Regulation 39: ‘ A company must have a) a Shareholder Register b) an Officer Register c) a Security Register and d) a Minutes Register, in a legible form capable of being reproduced within a reasonable time.’[1]


Regulation 59 mandates the companies to the officers to call an EGM or class meeting withing not more than 60 business days after the request is made to do so.


A company in UAE needs to show that it is earning sufficiently in the FTZ for the business to carry on and it is not established in the zone only to benefit from the tax structure in the zone.

Businesses that lie in this area must inform their regulatory authority and submit the same within 12 months from the end of the financial year or else heavy penalties shall be imposed.

10. CbCR

Country-by-Country Reporting was established in April 2020 to mandate large Multi-National Groups of Entities to submit this report to provide a breakdown of audits from various countries. ‘The purpose of CbC Reporting is to eliminate any gap in information between the taxpayers and tax administrations with regards to information on where the economic value is generated within the MNE Group and whether it matches where profits are allocated and taxes are paid on a global level.’[2]


The United States of America regulates corporations on three different levels, local, state, and federal. While local and state vary, the federal corporate compliance laws are a set of blanket laws to be followed as basic compliances. In addition to this, the local, as well as the state laws, apply. These minimum standards by the federal government are outlined in the Securities Act of 1993 and the Securities and Exchange Act of 1934. The US Constitution allows a corporation to set up in any state and not with regards to where the headquarter of the company is situated.


A branch office is considered to be the same entity as the business. This means that it is not treated as a branch as such. During taxation, such an entity is not charged as per the branch in that area. But, the whole income of the business is taxed.


Every company must have at least one issued share. The companies may structure their share in classes providing different types of shares and giving different rights to those shares. All the shareholders of the company have limited liability. The limitation is up to the nominal value of each share.

The share capital holds no minimum limit for incorporation and thus any company can establish a business with any amount of share capital provided at least one share is issued.

14. TAX

Companies are not taxed at a single level in the USA. Just like the compliance laws, these are taxed on local, state, and federal levels. ‘The federal government uses the IRS to collect income tax, capital gains tax, tax on dividends, interest, other passive income, and employee payroll taxes.’[3] Furthermore, these companies are then taxed as per the requirements of the local and state authorities.


A corporation has a choice between becoming an S Corporation or a C Corporation. These have been created only for the purpose of taxing. An S Corporation is where the business is not taxed. Instead, the income from the business is treated as the owner’s income and is charged as his income tax. In a C Corporation, both the entities are treated separately and are taxed separately. However, there is an eligibility criterion to fall apply for the S Corporation:

  • Be a domestic corporation
  • Have only allowable shareholders
  • Have no more than 100 shareholders
  • Have only one class of stock
  • Not be an ineligible corporation (i.e. certain financial institutions, insurance companies, and domestic international sales corporations)[4]

Given that federal laws and state laws are separately imposed upon businesses, certain circumstances where these laws coincide with one another might arise. In such a situation of a discrepancy, the US Constitution contains the ‘Supremacy Clause’ according to which the Constitution, federal laws, and any treaty which the country has entered into will be considered above the state laws and shall be followed before the state laws.


The business laws of the USA and UAE differ on many grounds. Beginning with the language of the contracts, in the USA, the English language works fine when contracts are taken into account. However, in the UAE, any contract which is in the English language has to be translated in Arabic as well. In a situation where a dispute arises, the text written in Arabic is treated above the English language text. This might create a problem for English speaking corporations.

In the USA, corporations are governed at multiple levels, i.e., federal law, state law, and the local law. On the other hand, in the UAE, an individual body decides the regulations and all the corporations have to adhere to it. In the USA, blanket rules are provided to be adhered to and further the state applies the relatable rules along with the companies which incorporate rules into their by-laws. For the purpose of taxation, each level imposes its own tax which the corporation has to pay. State laws are different in all 50 states. This increases the complexity of the process of business. The corporation is bound by first the federal rules, then the state rules, and finally the local rules. UAE has a very uniform system. The government along with certain institutions decides the rules for all the companies and there is no intermediate level. Both for the mainland companies as well the ones in free trade zones, there is only one level at which the rules are laid down as well as the tax policy is taken.

In UAE, the business and the branch of the business are treated as separate entities and the revenue generated from the branch is considered as the revenue of the branch itself, whereas, in the USA, the branch is treated as a part of the business and not a unit of the business. Hence, the tax to be charged on that particular branch is charged on that of the whole business.

The simple criteria of the UAE provide limited liability to the shareholders of the corporation as the business and the shareholders are considered to be separate entities. USA provides an option to the owners of the corporation to either get taxed separately on the business and the shareholder’s income just as UAE or the other option would be to get the business revenue also taxed as the owner’s personal income. However, for the second option, certain conditions are to meet.

Both countries have no minimum capital requirements. But UAE, might in certain activities lay down a minimum capital of AED 50,000.


While both countries are hubs to huge corporations and multinational companies, there are various differences if one wants to incorporate them in these countries. The choice to choose to incorporate in the country depends on the convenience of the corporation. The sure thing is both the countries have taken measures for the easement of the businesses and are amending their rules time and again for the same reason. For this reason, no matter what the size of the business is, the corporation can be established.

[1] https://www.stalawfirm.com/en/blogs/view/dmcc-company-regulations-2020.html; 24.06.2020; 21:13

[2] UAE Compliance Update; Rima Mrad and Anand Singh; BSA

[3] https://www.ilpabogados.com/en/the-essential-corporate-law-in-the-united-states-usa/; 24.06.2020; 10:42p.m.

[4] Ibid

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