STARTING A BUSINESS IN DUBAI
With its strong economy, transparent laws and regulations and a government that is welcoming to foreign investors, Dubai has established itself as the trade and investment centre of the Middle East
From multinational companies and financial giants to small but nimble service companies and fast-growing IT enterprises, Dubai is the ideal gateway to the potentially lucrative markets of the Middle East, North Africa and Asia.
Foreign companies may establish a business presence in Dubai either as a branch or representative office, a commercial company, a professional business or a free zone entity. To do that, the foreign entity must first apply for a business licence from the appropriate government agency.
Licensing
The basic requirement for all business activity in Dubai is one of the following three categories of licences:
■ Commercial licences covering all kinds of trading activity
■ Professional licences covering professions, services, craftsmen and artisans
■ Industrial licences for establishing industrial or manufacturing activity
These licences are issued by the Dubai Department of Economic Development (with the exception of licences for hotels and other tourism-related businesses which are issued by the Department of Tourism and Commerce Marketing).
Also, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.
More detailed procedures apply- to businesses engaged in oil or gas production and related industries. In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.
Ownership requirements
Fifty-one per cent participation by UAE nationals is the general requirement for all UAE established companies except:
■ Where the law requires 100 per cent local ownership
■ In the Jcbcl All and Dubai International Airport Free Zones, and other special economic 7,ones
■ In activities open to 100 per cent Arabian Gulf Cooperation Council (AGCC) ownership
■ Where wholly owned AGCC companies enter into partnership with UAE nationals;
■ In respect of foreign companies registering branches or a representative office in Dubai
■ In professional or artisan companies where 100 per cent foreign ownership is permitted
Legal structures for business
Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 – the Commercial Companies Law (CCL) – and its by-laws govern the operations of foreign business. In broad terms the provisions of these regulations are as follows:
■ The Federal Law stipulates a total local equity of not less than 51 per cent in any commercial company and defines seven categories of business organisation which can be established in the UAE.
■ It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.
The seven categories of business organisation defined by the Law are:
■ General Partnership Company
■ Partnership-cn-commendam (Simple Limited Partnership)
■ Joint Venture Company
■ Public Shareholding Company
■ Private Shareholding Company
■ Limited Liability Company
■ Partnership Limited with Shares
General Partnership Company
A general partnership company is an arrangement between two or more partners whereby each of the partners are jointly liable to the extent of all their assets for the company’s liabilities. The CCL provides that only UAE nationals are allowed to be partners in a general partnership.
Partnership-en-commendam
This is a company formed by one or more general partners who are liable for the company’s liabilities to the extent of all their assets, and one or more limited partners liable for die company’s liabilities to the extent of their respective shares in the capital only.
Joint Venture Companies
A joint venture is a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation in the joint venture must be at least 51 per cent, but the profit and loss distribution can be prescribed. There is no need to license the joint venture or publish the agreement. The foreign partner deals with third parties under the name of the local partner who (unless the agreement is publicised) bears all liability.
In practice, joint ventures arc seen as offering a suitable strucftire for companies working together on specific projects.
Public and Private Shareholding Companies
The Law stipulates that companies engaging in bunking, insurance, or financial activities should be nin as public shareholding companies. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office.
Shareholding companies are suitable primarily for large projects or operations, since the minimum capital required is DhslO million (US$2,725 million) for a public company, and Dhs2 million (US$ 0.545 million) for a private shareholding company. The chairman and majority’ of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible in the case of Limited Liability Companies.
Limited Liability Company
A Limited Liability Company (LLC) can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. Such companies are recognised as offering a suitable structure for organisations interested in developing a long-term relationship in the local market.
In Dubai, the minimum capital is currently Dhs300,000 (US$82,000), contributed in cash or in kind. While foreign equity in the company may not exceed 49 per cent, profit and loss distribution can be prescribed. Responsibility for the management of an LLC can be vested in the national partners or a third part)’. The following steps are required in establisliing an LLC in Dubai:
■ Select a commercial name for the company and have it approved by the Licensing Department of the Department of Economic Development
■ Draw up the company’s Memorandum of Association and have ir notarised by a Notary Public in the Dubai Courts
■ Seek approval from the Department of Economic Development and apply for entry in the Commercial Register
■ Once approval is granted, the company will be entered in the Commercial Register and have its Memorandum of Association published in the Ministry of Economy and Commerces Bulletin
■ The licence will then be issued by the Department of Economic Development
■ The company should then be registered with the Dubai Chamber of Commerce and Industry
Branch of a foreign company
The CCL covers the formation and regulation of branches and representative offices of foreign companies in the UAE and stipulates that they may be 100 per cent foreign owned, provided a local agent is appointed.
Only UAE nationals or companies 100 per cent owned by UAE nationals may be appointed as local agents (which should not be confused with the term commercial agent). Local agents – also often referred to as sponsors – are not involved in the operations of the company but assist in obtaining visas and labour cards, and are paid a lump sum and/or a percentage of profits or turnover.
To establish a branch or representative office in Dubai, a foreign company should proceed as follows:
■ Apply for a liccncc from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100 per cent UAE-owned company. Before issuing the licence, the Ministry will
■ Forward the application to the Department of Economic Development to obtain the approval of the Dubai Government
■ Forward the application specifying the activity that the office or branch will be authorised to undertake in the UAE, to the Federal Foreign Companies Committee for approval
■ Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial licence specifying the activity to be practised by the foreign company
■ The branch or office should be entered in the Department of Economic Development’s Commercial Register, and the required licence will be issued
■ The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce
■ Finally, the branch or office should be registered with the Dubai Chamber of Commerce and Industry
Professional firms
In setting up a professional firm, 100 per cent foreign ownership, sole proprietorships or civil companies are permitted. Such firms mav engage in professional or artisan activities but the number of staff members that may be employed is limited. A UAE national must be appointed as a local service agent but he has no direct involvement in the business and is paid a lump sum and/or percentage of profits or turnover. The role of the local service agent is to assist in obtaining licences, visas and labour cards to name a few.
To register a trademark
All forms regarding trademark protection can be downloaded from the Ministry of Economy website. The site provides complete instructions for submitting applications for trademark registration.
Documents required include the application form, full evidence and specific details of the trademark (including a legal translation of any foreign languages), business documents and powers of attorney (if necessary). The total fee of Dhs6,000 is to be paid over the various stages leading to final registration. Trademark protection lasts 10 years and is renewable.
Download from www.economy.ae
■ Trademark forms
■ Registration forms (foreign, local and individual)
■ Renewal of a trademarks protection
■ Licensing to use a trademark
■ Marking the amendment after registration
■ Transfer of ownership of a trademark
■ Registering a trademark
■ Mortgage of a trademark
■ Deleting a trademark
■ Refund of fees
■ Request of information on trademark
■ Requesting a certificate/a copy certificate
■ Trademarks bulletin
