Starting a Public Joint Stock Company in Dubai (PJSC) offers an excellent opportunity for large-scale business expansion. This legal entity allows you to raise capital by offering shares to the public through an initial public offering (IPO), making it an ideal structure for businesses seeking substantial investments. In this blog, we will explore the step-by-step process for setting up a PJSC in Dubai, the key benefits, legal requirements, and how a business setup consultancy can assist in making the entire process seamless.
What is a Public Joint Stock Company?
A Public Joint Stock Company is a legal entity whose capital is divided into shares that can be offered to the public. The company can issue shares through an IPO, allowing the public to become shareholders. PJSCs are typically large-scale companies, requiring substantial capital for operation and expansion. In Dubai, this business structure is commonly used by major corporations in sectors like finance, telecommunications, and real estate.
Key Features of a Public Joint Stock Company in Dubai
- Minimum Capital Requirement: A PJSC in Dubai must have a minimum capital of AED 2.5 million, which can be raised through a public offering.
- Ownership Structure: At least 51% of the shares must be owned by UAE nationals. However, exceptions may apply in some sectors, such as banking or insurance.
- Board of Directors: A PJSC must have a minimum of three and a maximum of 12 directors, with at least one-third of the board members being UAE nationals.
- Shareholders: A PJSC must have a minimum of 10 founding shareholders.
- Liability: The liability of shareholders is limited to their share capital in the company.
- Listing on the Stock Exchange: PJSCs are required to list their shares on a stock exchange such as the Dubai Financial Market (DFM) or Abu Dhabi Securities Exchange (ADX).
Benefits of Setting Up a Public Joint Stock Company in Dubai
- Access to Capital: A PJSC can raise substantial capital by offering shares to the public, making it ideal for large-scale operations and expansion.
- Limited Liability: The shareholders' liability is limited to the value of their shares, which minimizes personal financial risk.
- Corporate Governance: PJSCs must follow stringent corporate governance standards, enhancing the company’s credibility and transparency.
- Enhanced Public Trust: Listing on a stock exchange increases public trust and confidence in the company.
- Attracting Investors: The structure allows foreign and local investors to buy shares, making it attractive to both institutional and individual investors.
Legal Requirements for Starting a PJSC in Dubai :
- Approval from the Securities and Commodities Authority (SCA): Before establishing a PJSC, you must obtain approval from the SCA to issue shares to the public.
- Share Prospectus: A prospectus must be prepared and submitted to the SCA and the Department of Economic Development (DED), outlining details of the share offering.
- Corporate Governance Compliance: PJSCs must comply with UAE corporate governance laws, including maintaining proper accounting records and appointing external auditors.
- Statutory Documents: The Memorandum of Association and Articles of Association must be prepared, defining the company’s structure, objectives, and governance.
- Auditor Appointment: An external auditor must be appointed to ensure financial transparency and compliance with UAE laws.
Step-by-Step Process to Start Company in Dubai
Step 1: Choose a Business Activity: Selecting the business activity is the first step in setting up your PJSC. Ensure that your chosen business activity is aligned with Dubai’s strategic sectors such as banking, construction, or real estate. It is important to verify that your business activity requires a PJSC structure.
Step 2: Prepare a Feasibility Study: A comprehensive feasibility study is required to demonstrate the financial viability of the business. This document is essential when applying for approval from the SCA and potential investors. The study should include projected financial statements, market analysis, and growth potential.
Step 3: Obtain Initial Approval from the SCA: Submit an application to the SCA to receive initial approval for establishing a PJSC. This includes providing the feasibility study, a business plan, and details of the share offering. The SCA will review the application to ensure it meets regulatory standards.
Step 4: Draft the Memorandum and Articles of Association: The company’s Memorandum of Association (MOA) and Articles of Association (AOA) must be drafted in accordance with UAE law. These documents outline the company’s capital structure, shareholder rights, governance framework, and other operational rules.
Step 5: Secure Founding Shareholders: A PJSC requires a minimum of 10 founding shareholders, with a minimum capital contribution. These shareholders will play a critical role in the formation and early governance of the company. Ensure that at least 51% of the shares are owned by UAE nationals.
Step 6: Open a Bank Account and Deposit Capital: Once the initial approval is obtained, you must open a corporate bank account in Dubai. The minimum capital of AED 2.5 million must be deposited in the account as proof of funds.
Step 7: Obtain Commercial Registration from the Department of Economic Development (DED): The next step is to register the company with the DED. This involves submitting the MOA, AOA, and bank statements showing the deposited capital. The DED will issue a trade license, allowing you to legally operate as a PJSC in Dubai.
Step 8: Conduct an Initial Public Offering (IPO):Following registration, the company can proceed with the IPO. This involves offering shares to the public and listing the company on a stock exchange like the DFM or ADX. Ensure that all regulatory and disclosure requirements are met during the IPO process.
Step 9: Obtain Final Approval from the SCA: Once the IPO is completed, the final approval from the SCA must be obtained. The SCA will ensure that the company has complied with all regulatory requirements, including corporate governance and disclosure standards.
Step 10: Commence Operations: After obtaining final approval and completing the IPO, the PJSC is officially operational. Ensure compliance with ongoing corporate governance, reporting, and financial auditing requirements to maintain your listing on the stock exchange.
Costs Associated with Starting PJSC:
- Capital Requirement: AED 2.5 million minimum capital.
- Trade License Fee: The trade license cost will vary depending on the business activity, ranging from AED 10,000 to AED 50,000.
- SCA Fees: Fees associated with obtaining approval from the Securities and Commodities Authority can vary based on the size of the IPO.
- Legal and Notary Fees: The cost of preparing legal documents such as the MOA, AOA, and shareholder agreements.
- IPO Costs: IPO-related costs include marketing, legal, and brokerage fees.
What is the difference between a Public Joint Stock Company (PJSC) and a Private Joint Stock Company (PrJSC)?
Capital Requirement:
- PJSC: Requires a minimum capital of AED 2.5 million. Shares can be publicly offered and traded on the stock exchange.
- PrJSC: Requires a lower capital, typically AED 2 million, but shares cannot be publicly traded.
Ownership:
- PJSC: Must have at least 10 founding shareholders and 51% UAE national ownership.
- PrJSC: Requires at least 3 shareholders, and the UAE national ownership requirement is still applicable (51% for UAE nationals).
Share Trading:
- PJSC: Shares can be publicly traded through an Initial Public Offering (IPO) on a stock exchange like DFM or ADX.
- PrJSC: Shares are privately held and cannot be offered to the public or traded on a stock exchange.
Regulatory Oversight:
- PJSC: Subject to more stringent regulations from the Securities and Commodities Authority (SCA) and must comply with corporate governance and financial transparency rules.
- PrJSC: Though regulated by the SCA and the Department of Economic Development (DED), a PrJSC has fewer reporting and compliance requirements compared to a PJSC.
Governance:
- PJSC: Requires a Board of Directors with at least 3 to 12 members, and at least one-third of the board must be UAE nationals.
- PrJSC: Also requires a Board of Directors but operates on a more flexible governance structure.
How We Can Help:
Setting up a Public Joint Stock Company in Dubai can be complex and time-consuming, involving numerous legal and financial requirements. At Plan My Firm , we specialize in helping businesses navigate the setup process for various legal entities, including PJSCs. Our services include:
- Company Formation: Assistance with preparing the required documentation, obtaining SCA approvals, and IPO coordination.We not only help PJSC but we can guide you in all teh types of company formations such as Civil company setup ,LLC company setup ,branch office ,General partnership company setup and sole etsablishment etc.
- Corporate Governance Advisory: Ensuring that your PJSC complies with UAE corporate governance standards.
- Residency Visas: We assist in obtaining residency visas for shareholders and employees.Such as Investor visa ,UAE golden visa ,Work visas etc.
- Bank Account Opening: We facilitate the opening of corporate bank accounts, ensuring smooth transactions.
- Legal Compliance: Our team ensures that your company adheres to the UAE’s financial reporting and compliance regulations.
Contact us today to get started with your Public Joint Stock Company in Dubai and take the first step toward business growth and public investment.