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Implementation of the Jebel Ali Free Zone Authority concerning the Offshore Company: an overview

Sara Corradi

Author: Sara Corradi
Senior Lawyer.

Guiding Principle

The Jebel Ali Free Zone Authority (“JAFZA”) recently has issued a new regulation – not yet into force – regarding Offshore Companies. These new rules mark a significant step forward for the Offshore Companies set up in JAFZA and provide new tools for protecting the interests of foreign investors; thus below are mentioned some relevant provisions of the new regulation.

One of the most important provisions is the possibility to appoint just one director, whereas before the business and affairs of an offshore company shall be managed by not less than two directors. Furthermore the director is no longer required to be a natural person and this role can be performed also by a corporate entity, subject to the approval of the Authority.

Other relevant rules concern the matter of shares. First of all it will be possible to create different classes of shares and every class will have different rights regarding the governance of the company. The transfer of a share in an Offshore Company requires the approval of the Registrar and it will not be complete without payment of the applicable fee to the JAFZA Authority.

Under the previous regulation it was ambiguous whether an Offshore Company was deemed to be carrying out business onshore in the UAE if it held real estate and/or shares. The new provisions clarifes that an Offshore Company is permitted, amongst other things,

– to hold a lease of a property for use as its registered office in any designated freehold area in the UAE approved by the Authority,
– own property in one of the designated freehold areas in the UAE and
– own a stake in another operating Company onshore within the UAE.

Also regarding the residence visas there are important changes. Under the new regulation an Offshore Company that owns property in one of the designated freehold areas can apply to JAFZA for residence visa for its members (Shareholder and/or Director).

The new regulations amends also the provision concerning any Resolution passed by members. It has been now defined as a Resolution to be passed by 75% of the members – voting in person or through proxy – at a general meeting of which notice specifying the intention to propose the Resolution has been duly given. The old Regulations required instead a simple majority.

Finally under the new provisions it will be possible for an Offshore Company by a Resolution to apply to the Registrar for its corporate form to be converted to a Free Zone Company in the Jebel Ali Free Zone. Once the Offshore Company is converted to a Free Zone Company, the date of incorporation of the Free Zone Company will be that of the Offshore Company and all rights and obligations of the Offshore Company shall continue with the Free Zone Company. The Free Zone Company shall comply with all provisions of the Jebel Ali Free Zone Companies Regulations.

When the new regulation will come into effect investors will have access to new and important corporate governance tools.

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