The Jebel Ali Free Zone Authority or JAFZA, is the oldest and largest free-zone in UAE and had recently introduced a new set of progressive measures on offshore companies that repeals the previously existing regulations. The new regulations, titled ‘JAFZA Offshore Companies Regulations 2018’, fill in the gaps caused by the previous regulations of 2003 and allow for more flexibility in order to enhance operations for foreign investors. In brief, the new regulations afford more protection to foreign investments and provide for new ways of structuring the investments within the UAE.
Some of the key changes introduced are as follows:
Ability to Create Different Classes of Shares: A limited liability company (LLC) incorporated under the new regulations, will now be able to create different share classes subject to approval from the JAFZA Register of Companies. This is of considerable significance as it allows shareholders to apportion economic and voting rights across the varying share classes in whichever manner, they consider appropriate.
Ability to Apply For Residence Visa For Members: An off shore company, owning property in a designated freehold area in UAE can now apply to the JAFZA Authority to obtain residency visa for its members such as shareholders and directors, subject to requirements of the Authority.
Laxation in Director Requirements: Previously, under the old regulations, two directors were mandated and it was necessary that these positions can be held only by natural persons. Currently, under the new regulations, only one director is required and they do not necessarily have to be a natural person and can be a corporate entity, subject to approval from the JAFZA authority.
Permitted Real Estate Ownership and Related Activities: Under the old regulations, the law was vague as to whether an offshore company that held real estate and/or shares onshore was deemed to be carrying out business onshore in the UAE. Under the revised regulations, it is clearly stated that an offshore company is allowed to lease property for use as registered office in designated freehold areas in the UAE that are approved by the JAFZA; they are allowed to own property in one of the designated freehold areas in UAE; and they are allowed to own a stake in another company operating onshore in UAE.
Requirements For Resolution Passing: Previously, a simple majority was the standard but now, resolutions can be passed through approval of 75% of members voting in person or by proxy, at a general meeting, for which the notice of intention to pass such a resolution was duly given.
Transfer of Shares: In the new regulations, share transfers are now subject to approval from the registrar and require payment of applicable fees to the JAFZA Authority for validation and completion.
Registered Agent Duties: previously, there were no specific duties owed by registered agents to their respective JAFZA offshore companies, however, the new regulations require registered agents to maintain records of the related offshore company and are subsequently held accountable towards the JAFZA authority on such matters.
Further, there are two novel concepts introduced in the new regulations that are meant to attract foreign investors by making transacting to and within JAFZA convenient and accessible:
Transfer of Incorporation: Foreign companies may now re-domicile as offshore companies to JAFZA and offshore companies in JAFZA may transfer their incorporation to foreign jurisdictions; both processes are subject to relevant conditions put forward by the authority.
Conversion to Free-zone entity: An offshore company in JAFZA is now able to convert to a free-zone company within JAFZA and continue operations as a JAFZA free-zone entity.
As can be seen, the new regulations proposed by the Jebel Ali Free-Zone are a significant step forward towards protecting foreign investments by reflecting the authority’s intention to make the free-zone attractive to international investors. GERMELA-LOOTAH with its long-standing experienced team of legal consultants is always available to answer your questions and to guide you through any legal concerns your company may have. For further information or assistance, please contact our colleagues at Germela-Lootah at +971-4-288-8345 or at