Differences Between FZC and FZE

In UAE business can be done either in ‘Mainland’ or in ‘Freezone’. In a freezone, a company can be formed with 100% ownership by the expat(s). But, the owner can be only one person or more than one as well. Depending on the numbers of owners for the freezone company the suffix with the name of the company can be given as a Free Zone Establishment (FZE) when it is having only one owner and Free Zone Company (FZC) when it is having more than one owner. For example if the company’s name is ABC LLC then with single owner, the name will be ABC LLC FZE and with multiple shareholders, it will be ABC LLC FZC.

How to change the number of owners

In some freezones (like Creative City of Fujairah, Hamriya Freezone etc.) during the formation of the company, the package itself defines the minimum and the maximum number of owners it can have. In that scenario as well if a company has selected a package of single ownership and after some months they want to add some other owners, in that case first the package is needed to be upgraded to multiple shareholders package by submitting required documents and sufficient amount for the amendment in the license. In some freezones like Ajman Freezone for more than one shareholder there also can be a certain fees which are required to be paid whether the company was initially built with multiple shareholders or the license got amended to multiple shareholders. Similarly, if a free zone company decides to change the number of shareholder to only one they need to amend their license and they may or may not change the package depending on their financial situation and future goals.

Percentage of share capital

Unlike the mainland license there is no mandatory sharing of any percentages in between the shareholders and they can select the shares according to their wish. Hence, it is obvious that a FZE company’s owner will have the 100% hold of its share whereas the share can be distributed equally or as per the wish of the multiple shareholders for a FZC company. If an owner wants to get an investor visa then it is better to keep some good amount of share for him.

Decision making

When a free zone company is formed with more than one shareholder then all the documents and signature on the forms are required from all the shareholders. Both or all the shareholders can decide to take a third person as a manager or any one amongst them (in some freezones all of them) can become the manager to operate the company. But while taking any decision regarding the license amendment or the liquidation of the company the presence of all the shareholders or at least the original signature of all the shareholders is mandatory. If any of these are not possible then the same can be done with a POA where the selling and purchase of shares will be mentioned or by passing a board of resolution. It can become more difficult in case the shareholder is a company and not an individual. Hence it will be easier for a FZE company rather than a FZC company.

Expenses

The package cost for more than one shareholder is more than a single shareholder package in some freezones while it is same in others. It is not mandatory though that the expenses should be equally shared by all the shareholders.

The Free zone establishment or company is the choice of the owner(s). There is no mandatory rule for any activity to have single shareholder or multiple shareholder for any particular activity. Hence, it is a choice and it can be made up checking the possibility to grow with the association or if not enough trustworthy then without any partner.

This blog is written by Ms. Ananya, Business Advisor at Flyingcolour Business Setup, VAT and Accounting Services, Dubai. She specializes in serving clients looking for business setup license in Dubai freezones. If you have any question regarding setting up business in any of the Dubai freezones then please contact us at +971 4 4542366 or email us at info[at]flyingcolour[dot]com.