|
 Introduction
The
basic requirement for all business activity in Dubai
is one of the following three categories of licence:
- 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 all issued by the Dubai Economic Department.
However, 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.
Practising
some trade activities (e.g. jewellery and insurance)
requires the submission of a financial guarantee issued
by a bank operating in Dubai.
In
general, all commercial and industrial businesses in
Dubai should be registered with the Dubai Chamber of
Commerce and Industry.
Fifty-one
per cent participation by UAE nationals is the general
requirement for all Dubai-established companies except:
- Where
the law requires 100% local ownership;
-
In the Jebel Ali Free Zone,
Dubai Internet City,
Dubai Airport Free Zone, Dubai Media City or the
Dubai International Financial
Centre;
- In
activities open to 100% AGCC (Gulf Cooperation Council)
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%
foreign ownership is permitted.
However,
speaking in October 2004, following a visit by then
US Trade Representative Robert Zoellick to the United
Arab Emirates, Mohammed Al Muzakki, undersecretary with
the UAE Ministry of Economy and Trade revealed that
the government may consider allowing 95% foreign ownership
of companies in sectors seen as beneficial to the regional
economy.
Al
Muzakki explained that:
"We
are studying this law and might change it. Foreign ownership
might increase to 95 percent of the project. But this
will depend on a case-by-case basis, and the company's
ability to transfer technology and its services to the
country."
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 Ruler's decree.
In
September 2005, Khalaf Al Habtoor, member of the Dubai
Economic Council, revealed that the UAE's Ministry of
Finance and Industry was putting the finishing touches
to new company laws.
The
legislation being finalised by the UAE authorities will
amend partnership rules, foreign ownership thresholds
and IPO rules.
Under
current rules, when a firm decides to float on the stock
market, it must list at least 55% of its shares, leaving
its former owners holding a minority stake. This has
led many family-owned enterprises to avoid listing.
However,
the proposed legislation would bring the listing threshold
as low as 25%.
Al
Habtoor, who consulted on the law during its development
phase, confirmed that:
"The
federal government is revising the company law which
will bring down the listing ceiling, making it flexible
for us...A change in this, offering flexibility, will
help the UAE's family businesses to go public."
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. It further lays down provisions
governing conversion, merger and dissolution of companies.
The
categories of business organisation defined by the law
are:
General
partnership company
Partnership-en-commandite
Joint venture company
Public shareholding company
Private shareholding company
Limited liability company
Share partnership company
Partnerships
Partnership companies are limited to UAE nationals only.
The Dubai government does not presently encourage the
establishment of partnerships-en-commandite or share
partnership companies.
BACK
TO TOP
Joint Venture Company
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.
BACK
TO TOP
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 office.
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,
40 million for banks and 25 million for insurance and
investment companies, 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.
A
minimum of 55% of the shares of a Public Shareholding
Company must be offered to the general public, but this
may soon change (see above.)
BACK
TO TOP
Limited Liability Company
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.
Companies
Law stipulates that an LLC may engage in any lawful
activity except for insurance, banking and the investment
of money for others.
In
Dubai, the minimum capital is currently Dh. 300,000
(US$ 82,000), contributed in cash or in kind. 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;
-
Draw up the company's Memorandum of Association
and have it notarised by a Notary Public in the
Dubai Courts;
-
Seek approval from the Economic Department 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 Economic
Department;
- The
company should then be registered with the Dubai
Chamber of Commerce and Industry.
BACK
TO TOP
Branches and Representative Offices
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 outside
of the free zones in Dubai, a foreign commercial company
should proceed as follows:
- Apply
for a licence from the Ministry of Economy and Commerce,
submitting an agency agreement with a UAE national
or 100% UAE owned company.
- Before
issuing the licence, the Ministry will forward
the application to the Economic Department to obtain
the approval of the Dubai government and will 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 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.
BACK
TO TOP
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.
As mentioned previously, 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 Economic Department is the authority in charge of
licensing such branches or representational offices.
BACK
TO TOP
Sole Proprietorships
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.
BACK
TO TOP
|
