Business Restructuring in the UAE for Indian Companies : A Complete Guide

Indian business owners and stakeholders are now considering expanding their business from the local community to the international UAE market. They can own a 100% of the company in the UAE. Most of the free zones have a zero tax environment, while the Mainland has some tax requirements. 

In this article, you will get a complete understanding of everything about company restructuring in the UAE for Indian companies. It covers the basics of restructuring, types of restructuring, process, and requirements. 

What is Business Restructuring and Why Does it Matter

Business restructuring is reorganizing the company in its legal structure, ownership, and financial processes to improve workflow and efficiency to meet new business goals. It’s totally different from setting up a new company and is generally faster and less expensive. For example, you started a freezone company in the UAE a long time ago. But when your business expanded, you felt the need to operate your business in the local market as well. So this will be called restructuring if you change your company’s business model from a free zone to the Mainland. 

Why Indian Companies Restructure in the UAE

The UAE has made it simple to start or restructure a business following the recent amendments made in the Federal Decree Law. India and the UAE have a formal agreement known as the Comprehensive Economic Partnership Agreement (CEPA). The tax regime is favorable for business structuring, and access to global markets is also simplified within the UAE. These are the main reasons why Indian companies are restructuring their business in the UAE. 

Key Differences: Restructuring vs. New Company Setup

Types of Business Restructuring in the UAE

Here are the different types of restructuring based on business running models.

1. Corporate Restructuring 

A strategic change in company ownership is known as corporate restructuring. It includes; 

• Addition or removal of shareholders
• Transfering shares
• Change in the percentage of ownership 
• Changing company from one form to another

2. Operational Restructuring 

A change in the legal profile or major business activities is referred to as operational restructuring. It involves; 

• Adding new business activities and removing the old & outdated ones
• Change in trade name or registered address

3. Financial Restructuring 

Any change to cope with the financial distress of the business is called financial restructuring and mainly involves a change in debt and equity positions. 

4. Jurisdictional Restructuring 

This restructuring model involves a change from one legal structure to another, like changing your company from a Freezone to the Mainland or vice versa. It may also include changing a sole proprietorship company to an LLC organization. 

5. Mergers and Acquisitions

It’s a complex type of restructuring business that involves merging companies and one partner acquiring another company’s assets and integrating them into their existing business structure. 

When Should an Indian Company Consider Restructuring? 

Restructuring can be considered in many cases, such as; 

1. Change of Business Activity

As your business evolves, you must also update the legal structure. Like a business that started its organization as a consultancy but later added on trading and e-commerce, it has to change its legal structure. 

2. Expanding from Freezone to Mainland (or vice versa)

Moving from one zone to another requires proper legal measures and structuring models. If you are changing your business zone, you will need business restructuring. 

3. Compliance with New UAE Corporate Tax Regulations

The corporate tax for free zones is 0%, while for the mainland, tax requirements are 0-9% based on the profit of 375,000 AED. As an Indian company, you must review whether your current business structure complies with regulations.

4. Change of Ownership or Entry of New Investors

You should update your company shareholding structure when a new business partner is added or there is a change in equity. 

Freezone vs Mainland Restructuring 

Restructuring across the two jurisdictions is widely considered due to different policies and tax requirements. In a free zone, corporate companies can not trade with local UAE citizens. You can have 100% foreign ownership and no personal income tax requirements. 

1. Restructuring within the same Freezone

It is the simplest form of restructuring and involves minor changes in company ownership, assets, or equities, but within the same company and the same legal structure. 

2. Moving from Freezone to Mainland

Moving from a free zone to the Mainland has some complexities, but you have to stay compliant with the legal procedures of the UAE. You have to register an LLC, obtain a trade license from the official Department of Economy and Development (DED), and secure a physical office for your regular business operations. You may have to close your freezone business entity completely.

3. Moving from the Mainland to the Freezone

Moving from the Mainland to the free zone is a bit unusual, but some companies do this because of tax implementation, or because they only intend to target international clients. In this case, companies have to register a new freezone entity and close the operations of the Mainland entirely, with all their contracts and agreements. 

4. Dual-license Options for Cross-Jurisdiction Operations

Following license amendments, it is now possible to operate in two different jurisdictions for your business activities without the complete dissolution of your previous company. With dual licenses, you do not need to have separate business entities in both zones. 

Step-by-Step Process for Business Restructuring in the UAE Process

1. Internal Audit and Restructuring Assessment

This is the basic step of assessment before conducting any activity. You need a comprehensive audit of your business, assets, trade license, contracts, and company registration status. Then you can move forward with a clear restructuring plan. 

2. Board Resolution and Shareholder Approval

In case of any change, you must obtain a notarized board of resolution and shareholder approval. The Indian Government Authority should also register it.

3. Appointing Legal and PRO Consultants

Appointing a legal and Pubic Relation Officer (PRO) consultant for all your legal matters is necessary. Because, as an Indian, you may not be able to understand the UAE restructuring laws as compared to a local consultant. 

4. Updating Memorandum of Association (MoA)

It is a foundational document of any company, and based on that, you must update it with respect to any change in the company’s legal structure. After the amendment, you must file and register it with the UAE governing authorities. 

5. Trade License Amendment or Fresh Licensing

After approval from the official authorities, the next step is to amend the trade license with the changes you have registered. In some cases, the authorities issue a fresh license instead of amendments. 

6. Bank Account Restructuring 

Did you know that your bank account can get frozen if the UAE banks do not have the accurate records of your accounts and assets? It’s very important to update the accounts with your personal and financial details. 

7. Visa and Immigration Status Updates

If your registered restructuring affects the company visa quota and immigration protocols, you must update all types of visas involving medical tests and Emirated ID as well. 

8. Tax Registration Updates with the FTA

The final step for restructuring is managing your tax profiles with the Federal Tax Authorities of the UAE (FTA).  You must notify the government entities overseeing the tax regulation in the UAE. 

Cost of Business Restructuring in the UAE for Indian Companies 

You can take a cost idea for restructuring in the UAE from the following table.

Cost comparison: Freezone vs Mainland restructuring

Freezone restructuring costs are 5000-20000 AED and are usually lower than Mainland restructuring costs, which are about 30000-60000 AED. 

Keep in mind that these are cost estimates, not the actual costs. The actual costs vary on the basis of the type of business restructuring you are doing. 

Average total restructuring cost range 

Average cost idea for company restructuring in the UAE from India is about 15000-50000 AED. There are some hidden costs as well that account for 20-30% additional charges in the total amount. Hidden costs can be the costs of office upgrades, late penalties (if any), and costs associated with third parties like clients and suppliers. 

Restructuring for Specific Business Types

Most companies restructure their business from free zones to the Mainland to operate freely within the UAE. However, it depends upon the specific business and reason why you are restructuring. For every business type, there is a different reason and method. You can take an idea from the following table. 

Documents Required for UAE Business Restructuring

Here is an overview of the document checklist for restructuring your business in the UAE. 

• Company Formation Documents: The main company documents you require for restructuring are the trade license, amended MoA, and related documents, such as share certificates and establishment cards. 
• Passport Copies and Pictures of all the investors and shareholders
• Emirates IDs in case of UAE residents
• Board Resolution approving all the changes in the business. All shareholders must sign it.
• The lease agreement should be updated. Ejari is applicable for Mainland Companies and a tenancy agreement in case of free zone restructuring. 
• NOC (A no-objection certificate in case of change of company)
• Documents from Indian Parent Company: They include the board of resolution, certificate of incorporation, share transfer agreement, and audited financial statements of the parent company. 

Timeline for Business Restructuring in the UAE

The timeline for Freezone restructuring is 2 weeks to 4 months, while for Mainland restructuring is 4 weeks to 6 months. The process can take longer if there are complexities in your case.

Factors Affecting the Restructuring Process

Here are some factors that can delay the restructuring process. 

1. Complexity of your corporation restructuring case
2. Type of restructuring you are choosing
3. Size of your organization 
4. Your Business’s current financial health
5. Legal challenges 
6. Local UAE market conditions

Common Challenges in Restructuring and How to Avoid Them

• There can be delays in government approvals due to missing documents and incorrect attestation. You should work with a qualified PRO consultant and start your application process as early as possible.
• While restructuring, when you amend your trade license, all the visas connected to that should be legally reissued. It takes time, and you should not leave the visa steps for the last stages. 
• UAE banks may freeze your account if you are late in providing updated corporate documents. Inform the banks early and submit your documents on time. 
• Contract and lease complications can be another major challenge while restructuring your business because they were registered under your old company and trade license. They need to be transferred or re-signed for business continuity. 
• A mismatched license can stop your business in the UAE. If you have expanded or made changes in your business, you must update your license with them as well.

Planning to Restructure Your Business From India? 

Are you from India and have made up your mind to restructure your business in the UAE for better financial aspects and growth opportunities? Consult our experienced team at KWS & CO to reorganize your underperforming business. We have licensed professionals to offer the best restructuring services in the UAE for Indian citizens. You have the opportunity to elevate your profits and explore new business opportunities. Call us anytime at +971 50 966 9086 or send an email to info@kwsncompany.com. We are here to take care of your business. 

FAQs

Can I restructure without shutting down my company?

Yes, by recent UAE Government policies, you have the option of dual licensing, by which you can restructure without shutting down your old company. 

How long does restructuring take in a UAE Freezone?

It can generally take from 2 weeks to 4 months. 

Will restructuring affect my existing UAE visas?

Yes, if restructuring involves a change in the company structure, you have to reissue the visas. 

Can I change my company’s legal form without liquidation?

Yes, with the help of a process called transformation, you can change the company’s legal form without liquidation.