Share capital: what it means for UAE businesses.
What share capital means for a UAE business: how it works, a worked example in AED, common mistakes and the rules behind it.
Share capital is the money or assets owners put into a UAE company for its shares. For a mainland LLC it must be sufficient and paid in full.
What share capital means
Also called: Paid-up capital, Capital.
Share capital is the amount the owners contribute to a company in return for its shares. It is recorded in equity on the balance sheet and stays there until the company formally increases or reduces it. It is not a loan to be repaid and it is not income.
For a mainland Limited Liability Company, Article 76 of the Commercial Companies Law says the capital must be sufficient to achieve the company's objects and be divided into shares of equal value. Contributions can be in cash or in kind and must be paid in full at incorporation, with cash deposited in a bank operating in the UAE. Under Article 78, contributions in kind are valued by an approved financial consultant, or at an agreed value approved by the competent authority. Free zone companies follow their own authority's rules.
Capital matters later too. The size of each owner's holding decides who must be recorded as a beneficial owner, at 25% or more under Cabinet Decision No. 109 of 2023. It also sets the trigger for the capital loss rule: when an LLC's losses reach half of its capital, Article 308 requires a dissolution vote. For VAT, the issue of shares is an exempt financial service.
How it works
- The memorandum of association states the capital, the number and value of shares and each partner's holding.
- Cash contributions go into a UAE bank account, which releases them to the managers once the company's registration is shown (Article 76).
- In-kind contributions, such as equipment, must be valued under Article 78; an overvalued contribution must be topped up in cash.
- Any person holding 25% or more of the capital or voting rights, directly or indirectly, is a beneficial owner (Cabinet Decision No. 109 of 2023, Article 5).
- The issue, allotment or transfer of an equity security is an exempt financial service for VAT (VAT Executive Regulation, Article 42).
Worked example
Two partners form a Dubai mainland LLC offering IT support, with capital of AED 300,000 in shares of AED 1,000 each.
| Total share capital | AED 300,000 |
| Partner A: 180 shares (60%) | AED 180,000 |
| Partner B: 120 shares (40%) | AED 120,000 |
| Losses that trigger the Article 308 referral (half of capital) | AED 150,000 |
Both partners hold 25% or more, so both are beneficial owners, and losses of AED 150,000 would require the managers to refer dissolution to the general assembly.
Common mistakes
- Recording capital that was never paid in as if it were cash in the bank, or leaving an unexplained partner receivable in its place.
- Booking partner funding as share capital when it was agreed as a loan, or the reverse, which changes equity and the capital loss test.
- Changing the shareholding without updating the memorandum of association and the beneficial owner register.
The law
- Federal Decree-Law No. 32 of 2021 on Commercial Companies, Article 71 (definition of LLC), Article 76 (Capital of the Company), Article 78 (Valuation of contributions in kind) and Article 308
- Cabinet Decision No. 109 of 2023 on Regulating the Beneficial Owner Procedures, Article 5 (Identifying the Beneficial Owner)
- Cabinet Decision No. 52 of 2017 (VAT Executive Regulation), as amended, Article 42 Clause 3 (exempt financial services)
Frequently asked questions
Is there a minimum share capital for a mainland LLC?
Article 76 requires capital sufficient to achieve the company's objects and allows the Cabinet to set a minimum. No general minimum set under that power was found; individual licensing authorities or activities may set their own.
Can a single person own an LLC?
Yes. Article 71 allows one natural or legal person to incorporate and own an LLC, with liability limited to the capital in the memorandum of association.
Related terms
Memorandum of Association · Ultimate beneficial owner · Limited liability company · Retained earnings · Balance sheet. See every term in the UAE tax glossary.
For the full picture, read our guide: The Ultimate Beneficial Owner Register in the UAE: What Your Company Must Keep.
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