Introduction:
Choosing the right legal entity is a crucial step when establishing a business. In Abu Dhabi Global Market (ADGM, there are various legal entity types available to entrepreneurs. Understanding the characteristics and requirements of each entity type is essential for making informed decisions. This article provides a comprehensive guide to the different legal entity types in ADGM, as defined by the ADGM Companies Regulations 2015 and subsequent amendments.
- Public Company Limited by Shares:
A Public Company Limited by Shares (PLC) is a company that has offered shares to the general public. It is the only type of company allowed to be listed on stock exchanges. It may offer shares or any securities of the company for sale to the general public. It may be quoted on the stock exchange, but not all public companies are listed companies. The share capital and the liability of the shareholder is limited to the amount paid or unpaid (if any) on their shares. PLCs have a share capital, and the liability of shareholders is limited to the amount paid or unpaid on their shares. The minimum share capital requirement for a PLC is US$50,000.
- Private Company Limited by Shares:
A Private Company Limited by Shares (LTD) is privately owned and cannot offer its shares for sale to the general public. While it can have a share capital, the liability of shareholders is limited to the amount paid or unpaid on their shares. LTDs are commonly used for various business ventures, both small and large.
- Private Company Limited by Guarantee:
A Private Company Limited by Guarantee (LTG) is designed to protect members from liability. It does not have a share capital, and its members act as guarantors rather than shareholders. Members of LTGs agree to contribute a specific sum of money (a guarantee) if the company is wound up. This type of company is suitable for member associations, clubs, and professional membership organizations.
- Restricted Scope Company:
A Restricted Scope Company is similar to a Private Company Limited by Shares, but it has fewer disclosure requirements and lighter compliance obligations. It is often used by professional investors, government entities, family offices, and specific institutions that require less regulation and greater confidentiality. A Restricted Scope Company can only be incorporated as a subsidiary of a group that publicly files consolidated accounts or as a subsidiary of a company formed by Emiri decree or by individuals from the same family.
- Private Company Unlimited with Shares:
An Unlimited Company is a company without any limit on the liability of its members. Although it has a share capital, shareholders are personally liable for the company’s debts to an unlimited extent. This type of company cannot offer its shares for sale to the general public.
- Private Company Unlimited without Shares:
Similar to the Private Company Unlimited with Shares, a Private Company Unlimited without Shares does not have a share capital. Shareholders are personally liable for the company’s debts without any limit. It also cannot offer its shares for sale to the general public.
- Branch of Foreign Company:
A Branch of a Foreign Company allows a company incorporated or formed outside of ADGM to establish a presence within the free zone. The structure and requirements of the branch depend on the regulations of the foreign company. It is commonly used to establish a small presence or a representative office for referral of business transactions.
- Limited Liability Partnership (LLP):
A Limited Liability Partnership (LLP) is commonly used by professionals such as accountants, auditors, and lawyers. In an LLP, each partner’s personal assets are protected, and partners are not personally liable for the debts or liabilities incurred by other partners.
- General Partnership:
A General Partnership is an arrangement where partners conducting a business jointly have unlimited liability. Each partner is personally liable for the partnership’s obligations, and their personal assets may be used to settle debts.
- Limited Partnership:
A Limited Partnership (LP) exists when two or more partners jointly conduct a business, with at least one general partner and one limited partner. General partners have unlimited
- Protected Cell Company (PCC):
A Protected Cell Company (PCC) is a unique corporate structure where a single legal entity consists of a core and multiple cells. Each cell within the PCC has its own separate assets and liabilities, providing a high degree of segregation. The PCC operates as a hub and spoke structure, with the core organization connected to individual cells. While each cell is independent from one another and the core, they are all part of the same legal entity. PCCs are commonly used in the investment and insurance industries to create separate compartments for different assets or policies. A PCC can be formed as a Public Company Limited by Shares, Private Company Limited by Shares, or Private Company Unlimited with Shares.
- Incorporated Cell Company (ICC):
An Incorporated Cell Company (ICC) is similar to a Protected Cell Company (PCC) in that it comprises a core and individual cells. However, in an ICC, each cell is incorporated as a separate legal entity without any shareholder relationship with the ICC itself. This means that each cell within the ICC is treated as a distinct company under the law. The ICC structure offers a higher level of legal separation between cells, allowing for greater flexibility and autonomy. Similar to PCCs, ICCs can be established as a Public Company Limited by Shares, Private Company Limited by Shares, or Private Company Unlimited with Shares.
- Open-Ended Investment Company:
An Open-Ended Investment Company is a type of investment company that issues and redeems shares at the request of investors. Unlike closed-ended investment companies, open-ended investment companies do not have a fixed number of shares. Instead, they issue new shares as investors buy into the fund and redeem shares as investors sell their holdings. These companies are commonly used for collective investment in securities, providing investors with the opportunity to participate in a diversified investment portfolio. Open-Ended Investment Companies can be structured as Public Companies Limited by Shares or Private Companies Limited by Shares.
- Closed-Ended Investment Company:
A Closed-Ended Investment Company is an investment company that issues a fixed number of shares, which are then traded on a stock exchange or sold privately. Once the shares are issued, the company does not issue any additional shares or redeem existing ones. The value of the shares is determined by supply and demand in the market. Closed-Ended Investment Companies are suitable for long-term investments and often invest in a specific asset class or industry. They can be structured as Public Companies Limited by Shares or Private Companies Limited by Shares.
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