One-Person Company (Single-Owner LLC) in the UAE: Legal Concept, Formation, and Characteristics
- abdelrahman abobakr
- 2 days ago
- 3 min read
Introduction
The One-Person Company (OPC) is a relatively new legal concept introduced under the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021).It represents a significant development in the UAE’s corporate framework, allowing a single individual — whether a natural or legal person — to establish and own a company with limited liability.
This model departs from the traditional legal principle that a company must be formed by at least two partners, marking a step forward in simplifying business ownership and supporting entrepreneurs.
Legal Definition
A One-Person Company is a company owned entirely by one person whose liability is limited to the amount of capital they have invested. From a legal perspective, it is treated as a form of Limited Liability Company (LLC) but with special provisions to adapt to single ownership.
This means the owner’s personal assets are separate from the company’s assets — they are liable only to the extent of their capital contribution.
Legal Framework
Under Article (71) and related provisions of the Federal Decree-Law No. 32 of 2021, the One-Person Company follows the same legal principles as an LLC unless otherwise specified. However, due to its unique structure, certain rules differ to suit the case of single ownership.
Key Legal Characteristics
1. Limited Liability
The owner’s liability is limited to the company’s capital. In other words, the owner allocates a specific portion of their personal wealth to the company’s business activities. If the company incurs losses, the owner’s liability does not extend beyond that amount — protecting their remaining personal assets.
2. Legal Personality
The company has a separate legal identity distinct from its owner. This separation allows the company to own assets, enter into contracts, sue, and be sued in its own name.
3. Capital and Ownership
The capital is fully owned by one person — either an individual or a corporate entity. All profits and losses are attributed to the owner, and ownership cannot be divided among multiple shareholders.
4. Management
The owner may manage the company personally or appoint one or more managers to act on their behalf. The appointed manager exercises powers as specified in the company’s Memorandum of Association (MOA) or management resolution.
5. Legal Restrictions
The company cannot issue public shares or bonds, as it is a private legal entity.
The owner cannot establish more than one One-Person Company, unless they are a corporate entity.
The transfer of ownership requires a notarized transfer document, and the company’s license must be updated accordingly.
6. Conversion into an LLC
The One-Person Company may be converted into a Limited Liability Company (LLC) if new partners are added. Similarly, an LLC may be converted into a One-Person Company if one partner acquires all the shares.
Legal Advantages
Full Control – The owner enjoys complete authority over the company’s management and decision-making.
Limited Liability Protection – The owner’s responsibility is restricted to their invested capital, safeguarding personal assets.
Ease of Formation – The incorporation process is simple, requiring only one founder and minimal documentation.
Continuity and Legal Stability – The company continues to exist independently of its owner’s personal financial situation.
Encouragement of Entrepreneurship – This structure allows individuals to operate formally under a recognized legal entity without the need for partners.
Legal Considerations
While the One-Person Company provides great flexibility, it also imposes responsibilities on the owner to maintain proper financial separation between personal and company accounts. Failure to do so could lead to lifting the corporate veil, making the owner personally liable for company debts.
Conclusion
The introduction of the One-Person Company under UAE law reflects the country’s ongoing efforts to support entrepreneurs and simplify business establishment. From a legal perspective, it offers the benefits of limited liability, full ownership control, and separate legal identity, while maintaining compliance with the UAE Commercial Companies Law.
At Rashid Al Naqbi Advocates & Legal Consultants, we assist clients in drafting the Memorandum of Association, obtaining the necessary licenses, and ensuring full legal compliance when forming One-Person Companies and other business entities in the UAE.
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