Holding companies are widely recognised worldwide as a popular method of overseeing various assets, such as real estate properties or investments in other companies.
One key benefit of a holding company is that it shields the owner from any financial risks or liabilities associated with their assets. While holding companies are often associated with large corporations, they are also accessible to entrepreneurs wishing to establish them.
For individuals considering starting a company to acquire domestic or commercial properties or to invest in other businesses – a holding company structure could offer significant advantages, especially in Dubai. By choosing a holding company in Dubai, investors can streamline their operations and financial management while enjoying certain tax benefits and legal protections.
If you’re interested in setting up a holding company in Dubai, this guide can explain the associated benefits and costs, helping you make informed decisions about your chosen business ideas in Dubai. But let’s understand the basics first!
What is a holding company?
A holding company is a legal entity tasked with ownership of assets and/or shares of other companies. Its main role lies in the management of its subsidiaries, refraining from direct involvement in business operations. Plus, it prevents shareholders from potential liability issues by segregating assets from the liabilities of its subsidiaries.
In line with global trends, holding companies represent a prevalent business structure in the UAE, appealing to investors and entrepreneurs, both domestic and international.
Holding companies offer a range of ownership benefits, particularly advantageous for individuals seeking to consolidate corporate investments under a single entity.
How do holding companies work in the UAE?
Holding companies operating in Dubai and across the UAE adhere to the country’s established business regulations. While these entities can hold shares in other enterprises, they are restricted from engaging in commercial activities such as trading, manufacturing, or service provision.
Distinctively, the UAE does not impose specific paid-up capital requirements for the formation and ownership of holding companies, thereby streamlining the company establishment process and minimising entry barriers to the market.
Now that we’ve covered what a holding company is and how it functions, let’s explore its key advantages in detail.
8 key benefits of a holding company in the UAE
Establishing a holding company in Dubai and other regions of the UAE offers numerous benefits. Here are a few:
1. Asset protection and limited liability
In a UAE holding company, Asset Protection and Limited Liability collaborate to safeguard investments and subsidiary assets from legal and financial risks. This setup seperates operational businesses and asset holders, shielding assets from operational liabilities, legal disputes, and financial instability.
This structure prevents the adverse impact of challenges faced by one subsidiary from impacting others, thereby protecting the company’s financial health and boosting investor confidence.
2. Risk management
Risk Management enables the strategic distribution of financial and legal risks amongst subsidiaries. This approach isolates the impact of adverse events to specific parts of the business, safeguarding the entire group.
It preserves the holding company’s overall financial health, fosters stability for growth and investment, and enhances resilience against market volatility and legal challenges.
3. Establishing credit
Accessing credit from banks, creditors, and other institutions becomes more attainable as lenders evaluate the financial strength of subsidiaries managed by the parent company. Remarkably, acquiring a loan for the holding company and subsequently investing it in other assets becomes feasible.
4. Governmental support in the UAE
The UAE government creates a supportive business environment and extends various incentives to foreign investors, including trade privileges and more.
5. No minimum share capital requirement
To promote foreign and domestic investment, the UAE government refrains from imposing a minimum paid-up share capital requirement, making the business registration and formation process cost-effective and simple for investors.
6. Market expansion
Market expansion through a holding company helps instrategic diversification, enabling entry into new sectors and geographic regions with reduced operational risk and enhanced efficiency.
This structure bolsters a company’s growth objectives by leveraging the collective strengths of its subsidiaries, fostering an agile response to market dynamics and opportunities, both domestically and internationally.
7. Investment opportunities
Investment opportunities within a holding company make it more attractive to investors by consolidating the resources and capabilities of its subsidiary companies. This collaborative approach boosts the company’s market presence and financial stability, increasing its appeal for external investment.
8. Operational efficiency
Operational efficiency is achieved by centralising essential functions, thereby minimising redundancy and reducing costs. This streamlined structure facilitates optimal resource allocation across the group, enhancing overall performance and competitiveness.
Cost of establishing a holding company in Dubai
The expenses associated with establishing a holding company in Dubai are variable and depends on many factors. However, since they are typically situated in free zones, the overall cost tends to be lower compared to other locations.
This cost encompasses various components, including obtaining the necessary license, registering the company’s name, and, if necessary, arranging for a visa. While the total cost of opening a holding company in the UAE varies depending on your requirement, you can get an idea by using our online business cost calculator.
Engaging with SPC Free Zone can further reduce your expenses, keeping your overall cost at a minimum.
It’s essential to meticulously prepare all required documentation and complete the necessary paperwork for a seamless process. Experienced business setup advisors have extensive knowledge and experience in facilitating business formation procedures in Dubai and the UAE.
How can SPC Free Zone help?
The process of business setup in Dubai may entail certain complexities for entrepreneurs, particularly those unfamiliar with UAE business laws.
That’s why we recommend connecting with a professional team of business setup advisors, such as those at SPC Free Zone. These advisors work to expedite the process of setting up a company in the UAE, making it quick, smooth and seamless.
Consider launching your business with SPC Free Zone for these compelling reasons:
1. Prime business address Access a prestigious business location in the heart of Sharjah with convenient access to comprehensive on-site immigration services.
2. Diverse Business Activities Choose from over 2000 carefully curated business activities tailored to meet your entrepreneurial aspirations, providing ample options to realise your business vision.
3. Expedited visa approvals Get UAE Residency in 5 working days, accelerating your path to success and enabling rapid establishment in the market.
4. Efficient licensing Obtain all licenses instantly with the option to explore our Instant License feature for a seamless process.
5. Flexible ownership With our business setup services, you can enjoy the advantage of 100% foreign ownership and zero paid-up share capital.
Frequently Asked Questions
Dubai’s strategic location, strong economy, and business-friendly policies make it an excellent choice for setting up a holding company. Experienced advisors can help streamline the process of setting up a company in Dubai, ensuring compliance with local regulations and optimising the benefits of Dubai’s business landscape.
Companies form holding companies for multiple reasons, including protecting assets from risks, managing subsidiaries efficiently, and seizing opportunities for investment and growth.
Indeed, foreign individuals can own holding companies in the UAE. This is due to the significant changes in its business ownership regulations, simplifying the process for foreign nationals to establish and manage businesses, including holding companies, within the country.
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