Dubai, the authorities have deliberately sought to create an
environment which is well ordered without being unduly restrictive. As
a result, Dubai offers businessmen operating conditions that are among
the most liberal and attractive in the region.
There are many options open to international companies seeking to
establish a business relationship with Dubai.
Having a presence can provide considerable business advantages in the
Middle East. Businessmen in the region prefer to deal with someone
they know and trust and personal relationships are much more important
in doing business in the Arab world than they are in western Europe or
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
Industrial licences for establishing industrial or manufacturing
These licences are all issued by the Dubai
Department of Economic
Development. However, licences for some categories of
business require approval from certain ministries and other
authorities: for example;
Building Contracting Companies For Building Contracting Company License, Dh10,000 to be
extra at the
Department of Economic Development when the license issued first time.
General Trading For General Trading License, Dh15,000 to be extra at the
Department of Economic Development when the license issued first time.
Customs Broker Dh50,000 to be deposited at
Dubai Customs. This deposit is
irrevocable till the license is cancelled.
RTA Activities (following fees to be paid for RTA initial
Rent a Car: Dh5000
Bus Rental: Dh1000
Passenger Transport by rented Buses: Dh1000
For supermarket, 2000 square feet area is required.
Fifty-one per cent participation by UAE nationals is the general
requirement for all UAE established companies except:
Where the law requires 100% local ownership;
In the Jebel Ali Free Zone;
In activities open to 100% AGCC ownership;
Where wholly owned AGCC companies enter into partnership with UAE
In respect of foreign companies registering branches or a
representative office in Dubai;
In professional or artisan companies
(eg. consulting, educational service) where 100% foreign ownership is
Legal Structures for Business
In the past, each emirate followed its own procedures governing the
operations of foreign business interests. In practice, however, Dubai
and the other emirates followed the same general system, whereby
foreign companies operated in one of three ways: with a local sponsor,
through a partnership with a UAE national or company, or through a
private limited company or public shareholding company incorporated by
Since 1984, steps have been taken to introduce a codified companies
law applicable throughout the UAE. Federal Law No. 8 of 1984, as
amended by Federal Law No. 13 of 1988 - the "Commercial Companies Law"
- and its by-laws have been issued. In broad terms the provisions of
the Law are as follows:
The Federal Law stipulates a total local equity of not less than 51%
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.
The seven categories of business organization defined by the law are:
General partnership company
Joint venture company
Public shareholding company
Private shareholding company
Limited liability company
Share partnership company
Limited Liability Companies
A limited liability company 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 UAE, The minimum capital requirement law was abolished on 10th
August 2009. While foreign equity in the company
may not exceed 49%, profit and loss distribution can be prescribed.
Responsibility for the management of a limited liability company can
be vested in the foreign or national partners or a third party.
The following steps are required in establishing a limited liability
company in Dubai.
Select a commercial name for the company and have it approved by the
Licensing Department of the Economic Department;
initial approval for the activity from Economic Department;
Draw up the company's Memorandum of Association and have it
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 Commerce's 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.
Note: Trade Names that cannot be
reserved: Name of country, Name of Continent, Famous regions and
Towns, Coloure (blue, red etc.).
Foreign words and short words will be charged extra fee of Dh2000 per
Branches and Representative Offices of Foreign Commercial Companies
The Commercial Companies Law also covers the formation and regulation
of branches and representative offices of foreign companies in the UAE
and stipulates that they may be 100% foreign owned, provided a local
agent is appointed.
Only UAE nationals or companies 100% owned by UAE nationals may be
appointed as local agents (which should not be confused with the term
"commercial agent"). Local agents - also sometimes referred to as
sponsors -- are not involved in the operations of the company but
assist in obtaining visas, labour cards, etc and are paid a lump sum
and/or a percentage of profits or turnover. In general, branches and
offices of foreign commercial companies are not licensed to engage in
importing activity except for re-export or in the case of products of
a highly technical nature.
To establish a branch or representative office in Dubai, a foreign
commercial company should proceed as follows:
Apply for a
license from the Ministry of Economy and Commerce,
agency agreement with a UAE national or 100% UAE owned
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
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
practiced by the foreign company;
The branch or office should be entered in the Economic Department'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.
Branches and Representative Offices of Foreign Professional Companies
Branches and representative offices of foreign professional firms may
be 100% foreign owned provided UAE nationals or 100% UAE owned
companies are appointed as local agents. Such agents are not involved
in the operations of the firm but assist in obtaining visas, labour
cards etc and are paid a lump sum as remuneration. The Department of Economic Developmentt is the authority in charge of licensing such branches or
In setting up a professional firm, 100% foreign ownership, sole
proprietorships or civil companies are permitted. Such firms may
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 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, labour cards, etc.
Setting up Business in the Jebel Ali Free Zone
The Jebel Ali Free Zone was established in 1985 with the specific
purpose of facilitating investment. Accordingly, the procedures for
setting up in the zone are relatively simple.
While Jebel Ali was established to complement and contribute to
Dubai's growth and development, its legal status is quite distinct.
Companies operating there are treated as being "offshore", or outside
the UAE for legal purposes.
The option of setting up in Jebel Ali is therefore most suitable for
companies intending to use Dubai as a regional manufacturing or
distribution base and where most or all of their turnover is going to
be outside the UAE.
Jebel Ali Free Zone Incentives
100% foreign ownership;
Exemption from all import duties;
100% repatriation of capital and profits;
Freedom from corporate taxation, as applied throughout Dubai, with
the added bonus of a renewable 15 year guarantee in the Free Zone;
Abundant inexpensive energy; Simple and efficient recruitment
procedures ensuring the availability of a competitive skilled and
A high level of administrative support from the Free Zone Authority.
Companies approved for operation in Jebel Ali Free Zone will be
granted one of the following types of licences: Trading, Industrial,
Service or National Industrial. These licences are renewable annually
for as long as the company holds a valid lease from the Free Zone
Trading licences will be granted to companies holding a valid
licence issued by the Dubai Economic Department or an equivalent
authority in the UAE, and to companies incorporated outside the UAE.
In each case, the permitted activities on the Free Zone licence must
conform to those on the existing licence. Trading licences are also
issued to Free Zone Establishments (FZE).
Industrial licences are issued to companies incorporated outside the
UAE and to Free Zone Establishments.
Service licences are only granted to companies holding a valid UAE
National Industrial licences are issued to industrial companies
registered within or outside the UAE, provided they meet the
conditions of having at least 51% AGCC equity and their local
production accounting for at least 40% value added. Such companies
must obtain the provisional approval of the UAE Ministry of Finance
and Industry. A National Industrial licence grants its holder the same
rights as those of national and AGCC companies, and products exported
to AGCC states will be exempted from customs duties.
If a company wishes to practise more than one of the above mentioned
activities, it must obtain a separate licence for each category of
Companies holding a Free Zone licence are permitted to operate in the
Jebel Ali Free Zone and outside the UAE. Operation within the UAE can
be undertaken either by a commercial agent, representative,
distributor, or the mother company licensed by the relevant UAE
authority. Any company holding a Free Zone licence can itself purchase
goods or services within the UAE.
Setting Up a Branch of a Foreign Company
Any company wishing to set up a project in Jebel Ali Free Zone must
first complete a simple questionnaire. From the information provided,
the Free Zone Authority can make a first assessment of whether the
company's needs can be met.
After consideration of this questionnaire, the company will be
A licence application including an appendix with details of the
documents required concerning the company's legal status;
A proforma of information required for planning; and
A consumer request for electricity supply.
On receipt of these documents, the Free Zone Authority will consider
the proposal. If provisional approval is given, the company will be
asked to prepare and submit the documents called for in the appendix
to the licence application.
After the checking of these documents, a meeting will be called to
discuss and finalise the project details. If everything is
satisfactory, the Authority will issue conditional approval for the
project. Thereafter, a lease agreement and, if required, a personnel
secondment agreement will be prepared by the Authority for signature
by the company.
At the time of signing, the applicant will be required to provide the
insurance policies called for in the agreements and should pay the
agreed rental and licence fee prior to collection of the licence.
If the company wishes the Free Zone Authority to sponsor employees on
its behalf, applications for entry permits may be submitted once the
licence has been issued. The bank guarantee called for in the
personnel secondment agreement will be required at this stage together
with visa charges.
If the company's project involves the erection of a structure,
detailed plans must be submitted after the lease has been signed. When
the plans have been agreed, a building permit will be issued.
Administrative work, such as importing equipment or engaging labour
for installation of equipment, may proceed in parallel with
construction work. But application for entry permits for operatives to
be sponsored by the Free Zone Authority will not normally be accepted
until a completion certificate for the construction has been issued.
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%, 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 are seen as offering a suitable structure
for companies working together on specific projects.
Public and Private Shareholding Companies
The Law stipulates that companies engaging in banking, insurance, or
financial activities should be run as public shareholding companies.
Foreign banks, insurance and financial companies, however, can
establish a presence in Dubai by opening a branch or representative
Shareholding companies are suitable primarily for large projects or
operations, since the minimum capital required is Dh. 10 million (US$
2.725 million) for a public company, and Dh. 2 million (US$ 0.545
million) for a private shareholding company. The chairman and a
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.
Setting Up a Free Zone Establishment
A Free Zone Establishment - or FZE - is an establishment formed and
registered in Jebel Ali and regulated solely by the Free Zone
Such establishments must have a capital of at least Dh 1 million and
liability will be limited to the amount of paid-up capital. A FZE need
only have a single shareholder and is an independent legal entity.
Any company, organisation or individual wishing to form a Free Zone
Establishment must submit a completed application form to the FZE
Department of the Free Zone Authority. A decision on whether
permission has been granted will be given within 30 days of receipt of
the application and any other information and documentation required.
If permission is granted, the Authority will record all relevant
details in the FZE Register and issue a Certificate of Formation. This
will specify the date of registration after which the FZE will be free
to conduct any such business as is permitted in its Special Licence.
nationals can set-up business in Dubai without local partner as a sole
proprietorship. Partnership with foreigners is subject to the
-------------------------------------------------------------------------------------------------------- GCC nationals and foreigners can form partnerships without Emirati
sponsorship Dubai has allowed partnerships between GCC investors and
foreigners without Emirati sponsorship, on condition that investors
finance projects through capital inflows. GCC nationals can have
foreign business partners without third local party in Dubai for any
project worth a minimum of Dh10 million and based on foreign knowledge
Investments should come under the categories of enabled sectors like
industrial, services, tourism or other businesses that add critical
value to the emirate’s economy.
Another compulsory condition for this new initiative is that investors
move the business headquarters to Dubai and engage experienced
professionals. One more of these businesses conditions is there should
focus on the quality of the employees rather than quantity. All
workers should fall under the skilled worker category.
However, such new businesses can’t be set up before submitting a
concrete business proposal to be approved by the DED committee.
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