New Jebel Ali Free Zone (JAFZ) Companies Implementing Regulations 2016 (the Regulations) are now in force. In this article we highlight some of the key changes and their likely impact.


The Regulations replace the previous regulations issued by the JAFZ Authority (JAFZA) governing multiple shareholder companies (FZCOs) and single shareholder companies (FZEs). The Regulations do not apply to JAFZ offshore companies, which continue to be governed by the JAFZA Offshore Companies Regulations 2003.

The Regulations specifically exclude the application of the Commercial Companies Law (Law No.2 of 2015) (CCL), although the registrar of companies in JAFZ (the Registrar) may apply certain provisions of the CCL to a company or a branch in respect of a matter not contained in the JAFZA laws.

In addition to combining the regulations governing FZCOs and FZEs into a single legislative instrument, the Regulations introduce a series of new provisions applicable to companies registered with JAFZA.

New legal forms

While continuing to allow the registration of FZEs, FZCOs and branches of foreign companies, the Regulations now also permit the registration of other company types:

  • PLCs: The Regulations provide for the incorporation of public listed companies (PLCs). As with the other corporate forms, a PLC must obtain a licence from JAFZA in respect of its activities, and such licence does not authorise the PLC to carry out operations outside of the free zone. A PLC wishing to operate onshore will therefore be required to set up a subsidiary or branch in the relevant Emirate. A PLC may operate overseas subject to applicable law in the relevant jurisdictions.

A PLC is required list its shares on a stock exchange within nine months of incorporation. Failure to list may result in fines and penalties. The Regulations do not refer to any particular stock exchange(s) on which a PLC is permitted to list. The introduction of the PLC form provides an interesting new alternative for UAE businesses considering an IPO.

  • Civil companies: The Regulations provide that a "civil company", formed in accordance with the UAE Civil Code, may be registered with JAFZA. Civil companies are effectively a form of general partnership, typically established by professionals. They are not a particularly attractive vehicle for investors, as the partners do not benefit from limited liability. The Registrar is to prescribe further guidelines in relation to civil companies in due course.
  • Holding Companies: The concept of a holding company is expressly introduced. This is in line with the same development for onshore companies incorporated under the CCL. In the past, it was difficult to find a licence category to support an entity incorporated only to hold investments in other entities. JAFZ holding companies must prepare consolidated financial statements for their group, in addition to standalone company accounts.

Provisions are also included to allow foreign companies to transfer their jurisdiction of incorporation to JAFZ, and for FZEs and FZCOs to convert to PLCs and vice versa. This provides flexibility for future corporate group restructurings.

Memorandum and Articles of Association

The Registrar is to prescribe new standard form memoranda and articles of association for FZEs and FZCOs, which an existing company must adopt upon licence renewal. Any amendments will require the approval of the Registrar.

Share capital

  • Shareholders: A FZCO may now have up to fifty shareholders (the previous maximum was five). This makes a FZCO more attractive as an investment vehicle and facilitates employee share schemes.

A PLC must have two or more shareholders, with no maximum.

  • Payment for Shares: A FZE, FZCO or PLC must have a minimum capital sufficient for its licensed activities or, in the case of a PLC, any such higher amount prescribed by the relevant stock exchange. The regulations no longer prescribe any statutory minimum capital or minimum nominal value per share.

The Regulations also contain more detailed provisions in relation to non-cash consideration, which provides helpful clarity in the context of structuring corporate transactions.

  • Changes to capital: Detailed new provisions are included to allow for consolidation and sub-division of shares and capital increases and reductions. The previous regulations simply provided that any alterations to capital required a board resolution and the pre-approval of JAFZA.
  • Different classes: The Regulations permit FZCOs and PLCs to issue different classes of shares. In the case of a FZCO, this will require the prior consent of the Registrar. Provisions are included to regulate any future variation of class rights. This amendment will be useful in the context of structuring joint ventures, management incentives and employee share schemes.
  • Treasury Shares: The Regulations allow a FZCO or PLC, with the approval of the Registrar, to buy back shares using distributable reserves, and to hold such shares in treasury pending a future transfer for cash or for the purposes of an employee share scheme. As is typical, shareholder rights are suspended while the shares are in treasury. Again, this adds helpful flexibility.
  • Share Transfers: Transfers of shares in FZEs and FZCOs continue to require the approval of the Registrar. For a PLC, however, shares are freely transferable subject only to compliance with the rules of the relevant exchange.
  • Financial assistance prohibition: A PLC may not provide "financial assistance", including by way of loan, gift, guarantee or security, to a person to acquire shares in the PLC (or in another JAZF company which is the holding company of the PLC). The CCL introduced a similar prohibition on financial assistance in respect of UAE onshore joint stock companies. Unlike the CCL, however, the Regulations include exemptions from the prohibition in certain circumstances. The prohibition does not apply to FZCOs or FZEs.

Company management

  • Directors, manager and secretary: A FZE or FZCO must have at least one director. It is also required to have a manager, who is named on its licence, and a secretary. A shareholder, director or the secretary may also act as manager. A FZCO is no longer required to have a separate board of directors.

A PLC must have a minimum of two directors and a secretary. It must also have a manager (who may also be a director or the secretary).

  • Directors' duties: In line with the general trend in the UAE towards improved corporate governance, the Regulations set out clearly the duties of the directors and the standards expected of them. These standards are similar to the UAE onshore position. Directors must act honestly, in good faith and lawfully in the best interests of the company; they should exercise the care, diligence and skill that a reasonably prudent person would exercise in similar circumstances; and they must exercise independent judgment. Conflicts of interest must be disclosed, but can be ratified by ordinary resolution of the shareholders. 
  • Loans to directors: There is a new prohibition on a JAFZ company providing financial assistance, such as loans, guarantees or security, to a director or to his/her spouse or children or to companies in which the director directly or indirectly holds 20% or more of the shares. This is similar to the prohibition on director loans under the CCL. However, unlike the CCL, such assistance may be permitted if certain conditions are met (including the requisite level of shareholder approval) and various exemptions are also included, such as the provision of D&O insurance.


The Regulations provide greater flexibility and clarity in relation to corporate set-up and operations in JAFZ. It will be interesting to see whether other free zones will follow JAFZA's lead in reviewing and modernising their company regulations.