The business landscape in Abu Dhabi offers a variety of options for entrepreneurs and investors looking to establish a foothold in this vibrant Emirate. One such option is the formation of a Private Joint Stock Company (PrJSC), a unique type of business entity that combines elements of partnership and corporate financing. This article will delve deep into what constitutes a Private Joint Stock Company, its features, advantages, and the steps to set one up in Abu Dhabi.
What is a Private Joint Stock Company?
A Private Joint Stock Company (PrJSC) is a corporate structure in which the company’s capital is divided into shares. However, unlike a Public Joint Stock Company (PJSC), the shares are not available for public trading. PrJSCs are often the preferred choice for family-owned businesses and medium-sized enterprises looking to transition into a more formal corporate structure without going public.
Key Features
Ownership
In a PrJSC, the shares are privately held by a limited number of shareholders. While there is generally more flexibility in ownership, a majority share must often be held by UAE nationals.
Liability
The liability of shareholders is limited to their share in the company, thereby protecting personal assets from the business’s financial risks.
Minimum Capital
A minimum capital requirement exists for PrJSCs. As of the last update in September 2021, the requirement is usually AED 5 million, but it’s advisable to check the most current regulations.
Governance
PrJSCs must have a Board of Directors to oversee the company’s management and operations. They are also subject to specific corporate governance rules.
Advantages
- Limited Liability: Shareholders have limited liability, providing a layer of financial protection.
- Ownership Control: Shares are not publicly traded, allowing for greater control over the company.
- Investment Opportunities: Easier to attract private investment compared to other corporate structures like LLCs.
- Flexibility: Offers a good degree of flexibility in management and operational practices.
- Capital Raising: Share capital can be increased by issuing new shares to existing or new shareholders.
Regulatory Framework
Department of Economic Development (DED)
The DED in Abu Dhabi is responsible for issuing the commercial license required for a PrJSC and overseeing its activities.
Securities and Commodities Authority (SCA)
For PrJSCs considering a future public listing, the rules and regulations set by the SCA would come into play.
Legal Requirements
Documentation
The key documents for setting up a PrJSC include:
- Memorandum of Association (MOA)
- Articles of Association
- Feasibility study or business plan
- Identification documents of shareholders and board members
Approvals and Licenses
Approval is required from the DED and potentially other specialized government bodies depending on the company’s area of activity. After approval, a commercial license will be issued, enabling the company to start its operations.
Steps for Establishing a PrJSC
- Feasibility Study: Prepare a comprehensive feasibility study outlining business objectives, market analysis, and financial projections.
- Initial Approval: Obtain initial approval from the DED for your business name and activity.
- Documentation: Compile all necessary documents including MOA and Articles of Association.
- Board of Directors: Appoint the members of the Board of Directors.
- Capital Deposit: Deposit the minimum required share capital in a bank approved by the UAE Central Bank.
- DED Final Approval: Submit all documents to the DED for final review and approval.
- Commercial License: Upon approval, pay the license fee and obtain the commercial license, after which the company can commence operations.