Modification in Share Capital

What is Share Capital and how to modify the same?

The money you invest in your future business to help it expand and run on a daily basis is called share capital. You receive all or a specific number of shares as a shareholder in exchange for making such an investment. Share capital and the number of shares are subject to fluctuate over time. The general consensus is that start-up entrepreneurs don’t need to raise or decrease their capital, and the process is seen as being extremely distant and exclusive to large companies. We’ll explain why this is a fairly typical procedure and why you might eventually need to have it done in a few minutes. Comprehending this procedure will enable you to make appropriate plans.

It may not be necessary for you to reduce share capital in the near future if your business is just getting started. The rationale is that companies frequently reduce their share capital in order to generate or enhance distributable profits or to offset cumulative losses. There is a greater likelihood that you will require additional share capital, and we will address several of those reasons now.


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How is the share capital ratio considered?

The majority of business owners in the United Arab Emirates choose to incorporate their companies with the minimum share capital that the registration authority mandates. This can be AED 50,000 in Dubai free zones, between AED 100,000 and AED 300,000 in the Northern Emirates free zones, and either AED 150,000 or AED 300,000 for local or mainland businesses, as we previously discussed. One (1) share typically equates to AED 1000, so you would own 50, 100, 150, or 300 shares. Consider the following scenario: you have fifty shares, and you would like to invite two more partners, each of whom must have an equal number of shares. It would not be feasible for the three of you to divide 50.

You would therefore raise the share capital from AED 50,000 to, let’s say, AED 150,000. Furthermore, when all company owners wish to be eligible to apply for investor visas, a share capital increase is frequently necessary. The minimal amount of shares and share capital that a business owner needs to possess in a company in order to apply for an investor visa is always specified by registration authorities. Therefore, if you were the sole proprietor at first and had AED 50,000 in share capital, your future partners would also need to have AED 50,000 in shares in order for them to be eligible to apply for investor visas. The final example relates to a current requirement of the Dubai Multi Commodities Centre (DMCC), a free zone located in Dubai. In conclusion, there are two possible share capital amounts: increases and decreases. In either scenario, the procedures for such modifications are outlined in pertinent registration authority regulations. In conclusion, there are two possible share capital amounts: increases and decreases. In either scenario, the procedures for such modifications are outlined in pertinent registration authority regulations.

How the share increase or decrease happens and what documentations are required to finish the transactions ?

It is customary to include a resolution from the shareholders. This document must include the increased or decreased number of shares for each shareholder, be on company letterhead, and have a company stamp. Registration authorities frequently make their own templates available for use. To make sure the format will be accepted, you can also run your draft by the appropriate registration authority representative.

A board resolution from the parent company should be prepared if your business is legally a subsidiary of another company. A parent company’s good standing certificate is typically needed for subsidiaries as well. Remember that all corporate documents issued by a foreign parent company must be legalized, attested, and stamped by the UAE embassy and Ministry of Foreign Affairs in the country in which they were issued. Subsequently, the documents must be stamped at the Ministry of Foreign Affairs in the UAE. We would like to remind you that the UAE does not recognize or accept documents that are only apostille.


You may be required to obtain a notice of approval (NOC) from your regulating authority in order to proceed with a share capital amendment if your company engages in specific business activities that are subject to regulation by other governmental authorities.

Original corporate documents of your company, such as the Memorandum and Articles of Association and share certificates, must be returned to the Registrar during both the increase and decrease of shares procedures. With respect to the new share capital amount, authorities will be amending the same.

You must wait for the pre-approval to occur and for the registration authority to issue the letter to your bank (the latter will apply, if you wish to increase share capital) after you provide the registration authority with all of the above-mentioned documents and pay the applicable processing fees, which also vary from AED 1,510 to AED 4,515. After the pre-approval, which could take three to fourteen days, you will either receive your revised corporate documents back (in the event that the share capital is decreased) or a letter to the bank (in the event that the share capital is increased).

In order to complete the share increase process, you must first deposit money into your bank account, get a letter from the bank verifying the deposit of funds, and then return the bank letter to the registration authority.

You will receive a bank release letter along with all amended corporate documents back in 5 to 10 days. In the latter case, your funds will no longer be frozen when you return to the bank. You are free to utilize them as you see fit.