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What company laws exist in the UAE?

Какие законы о компаниях существуют в ОАЭ?

The Government of the United Arab Emirates has managed to create a flexible and effective legislative framework for the development of the economy, which, according to the plan, should approach the level of international standards as soon as possible. Increasing competitiveness, attractive conditions for investment from abroad will become a reliable basis for creating a stable, prosperous economy of the country. The laws on companies in the UAE, which have been in force for a long time, as well as updated ones, are designed to protect businesses from monopolization, counterfeiting, and other negative manifestations that will make it difficult to achieve the tasks set.

Competition Law

It is primarily aimed at preventing the formation of monopolies and protecting investors from the influence of other negative practices present in global business. The document was developed on the basis of WTO recommendations. The legalized provisions will help create a favorable investment environment for business development, increase its efficiency and competitiveness, as well as consumer welfare.

Certificate of Origin Law in the UAE

It is intended to protect the market from forged documents on the origin of goods. According to this legislative act, the Ministry of Economy has received the right to fine persons who forge certification certificates and other supporting documents.

Federal law regulating the registration of Commercial Organizations

This legislative act is aimed at increasing the transparency of the work of firms and protecting the interests of shareholders. Now all commercial enterprises are required to develop common corporate governance criteria that strengthen the protection of financial information, improve managerial efficiency, and ensure the integrity of the work of senior management.

Commercial Arbitration Law

Will regulate the work of courts dealing with domestic civil and international disputes. Under the new rules, civil disputes will be considered in local courts, and international disputes – in the capital’s federal Court of Appeal. The provisions of the law are brought into line with the international principles of arbitration, as well as the law of the UN Commission on International Trade Law.

The main legislative provisions governing the registration of business and its conduct in Dubai

Businessmen

The main conditions for doing business are registration with the Dubai Chamber of Commerce and Industry and the availability of a license. For sellers of goods and services – commercial, for artisans, freelancers, narrow specialists providing services – professional, for entrepreneurs engaged in production activities – industrial.

Regardless of the type, licenses are issued for one year, after which they should be renewed. The Economic Department of Dubai is engaged in issuing a permit document. However, most licenses must also be certified by relevant ministries or other government bodies. For example, a permit for the right to engage in:

  • banking and financial transactions are certified by the Central Bank of the UAE;
  • production of manufactured goods – in the Ministry of Finance and Industry;
  • pharmacy or medical practice – in the Ministry of Health.

The greatest requirements for opening are imposed on firms whose activities are related to oil and gas operations. Such corporations are required to pay corporate tax. Some commodity items are subject to a high excise duty: tobacco products and electronic cigarettes – 100%, carbonated drinks – 50%, bank guarantees are required for some types of activities.

What registration forms are available when opening a company in the UAE

  1. General partnership.
  2. Partnership.
  3. Joint Venture (JV).
  4. Open Joint Stock Company (JSC).
  5. Closed Joint Stock Company (CJSC).
  6. A limited liability company (LLC).
  7. Partnership with stocks.

JV design

A joint venture is registered on the basis of a cooperation agreement between foreign and local organizations and their licenses legitimizing the chosen occupation. The new joint venture does not need to be licensed again. An important condition for opening a joint venture is the distribution of capital: the share of a local representative should account for at least 51% of the funds. At the same time, the ratio of profit and loss distribution can be any (these are internal decisions of the organization). The joint venture is best suited for parties involved in the implementation of some special project.

Registration of JSC or CJSC

Registration of JSC or CJSC

According to the legislation of the UAE, organizations engaged in finance, insurance or banking must be registered as a joint stock company. Foreign companies working in the insurance sector, carrying out financial transactions or engaged in banking can open their branch or representative office in Dubai, which will be considered as a presence in the territory of the state. This form of registration is suitable for the implementation of large commercial projects. To open a bank branch, the authorized capital of 40 million AED will be required, for an insurance or investment firm – 25 million AED, for a joint stock company – 10 million AED, for a joint stock company – 2 million AED. At least a quarter of the shares in a joint stock company must belong to representatives of the general public.

Registration of LLC

Opening a business in the form of a limited liability company is suitable for those who count on the implementation of long-term projects on the territory of the principality. LLC can be opened if there are only two persons (the maximum number of participants is 50 people). The participation of each shareholder is limited to the share of the contributed capital. Foreigners have the right to have a share not exceeding 49% (51% should be the share of a citizen of the country). An LLC can engage in any type of commerce, with the exception of investment, insurance, finance and banking.

To register an LLC, you need to:

  1. Choose a name, get consent from the Economic Department.
  2. Draw up the charter and certify it in a notary office and in court.
  3. Submit an application for registration of LLC in the register of commercial organizations.
  4. Conclude a constituent agreement and publish it in the summary of the Ministry of Economy.
  5. Get a license.
  6. Enter LLC in the register of the Dubai Chamber of Commerce and Industry.

Opening a branch or representative office in Dubai without registration

Foreign firms have the right to open subsidiaries or representative offices on the territory of the Emirates without registering them in the usual manner. A branch is a full–fledged enterprise that has the right to conclude contracts, work in any field for which there is a license. A representative office is a marketing and administrative center that searches for orders, clients, and collects information. It can employ no more than 4 employees. The main work on the implementation of orders and projects with new clients is carried out by the head office.

A branch or representative office must be 100% owned by a foreign parent company, but when registering on the territory of the principality, a local agent will be required. An individual citizen or a company 100% owned by a local resident can act as such.

To open a branch or representative office without registering a company, you need to:

  1. Find a local agent and, with his support, apply to the Ministry of Economy for a license. Before the permit is issued, the Ministry of Economy will contact the Dubai Economic Department and the Federal Committee for Foreign Affairs to obtain confirmation of the permitted occupation.
  2. Get a license.

Registration of IP

Discussion

Suitable for artisan or professional activities. An individual enterprise can be 100% owned by a foreigner, but the participation of a local agent is mandatory. He may not be directly involved in business, but must receive a fee for intermediary services in communicating with authorities, banks, etc. Payment may be a one-time payment or in the form of a percentage of turnover or profit.

Registration of the enterprise in the FEZ

Opening an enterprise in the UAE free economic zone is the most attractive investment option for foreigners, since the latter receive a lot of privileges:

  • exemption from corporate tax for a period of 50 years and personal income tax;
  • 100% ownership of the business;
  • no duties on import and export of products;
  • free withdrawal of earned funds to the homeland;
  • assistance from the state in the selection of personnel, solving housing problems, providing warehouse and office space.

In addition, each FEZ specializes in the development of a certain segment of the economy and for this it has all the conditions, taking into account the specifics of this segment. Free economic zones are located near highways, ports and air harbors, which simplifies the transportation of raw materials and finished products. It also facilitates their storage, since giant warehouse terminals are located in seaports.

What is a commercial agency and what is its advantage

For a number of large and medium-sized corporations, it is often more profitable to form a commercial agency instead of opening a new organization, i.e. to hire an authorized person who, as an exclusive distributor, will deal with advertising, sales, distribution of products, provision of services, negotiating, concluding transactions on behalf of the corporation. Usually, this form of cooperation is formalized as an agreement (contract agency), according to which the agent is hired on a permanent basis and receives a commission.

Only a local resident or a company that is 100% owned by a citizen of the country can act as an agent. The agreement is drawn up so that the agent can use all the protection tools provided by the legislation of the country.

The agency is required to be registered with the Ministry of Economy and work within the territory assigned to it (usually the entire emirate).

If a foreign corporation decides to curtail its activities for no good reason or simply does not want to resume work, the hired agent is legally entitled to compensation.

Taxation during registration

According to the Dubai Income Tax Decree of 1969, organizations whose profits exceed one million dirhams per year are required to pay tax. If the income is from:

  • 1 to 2 million AED, then the tax will be 10%;
  • 2 to 3, then – 20%;
  • 4 to 5, – 40%;
  • over 5, – 55%.

The customs tax on imports is charged in the amount of 5%.

What other rules should be followed in order not to violate the law when registering and further work

  1. Any type of activity must be licensed.
  2. It is forbidden to use the workplace at the same time and as a residential one.
  3. If the organization intends to work during hours that are considered non-working according to the general rules, then it is necessary to take a special permit.
  4. Special permission is required if:
    • it is necessary to work on the Ramadan holiday;
    • it is necessary to install an ATM outside the bank premises;
    • for promotional events and promotions;
    • a transport with a trailer is used in the work.
  5. It is prohibited to distribute printed, audio and video products advertising objects and actions that violate public morality and run counter to Islam.

The laws on companies in the UAE provide comfortable working conditions and reliably protect both local and foreign businesses. They allow entrepreneurs to concentrate their efforts on developing new ideas and projects and getting maximum profit.

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Vladimir Sviridov
Vladimir Sviridov
General Manager RLC Consulting
With a Postgraduate Masters in Finance from The, Moscow State University, Russia. Vladimir started his professional career as an auditor of the financial sector of EY. After that, he worked for several years in senior positions in corporate banking. In 2018-2021, he managed the finances of a large agricultural holding, and is currently responsible for strategic planning, corporate partnership and financial management in the role of General Manager of RLC Consulting GROUP in the UAE.

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