What are the Basic corporate laws for business in Dubai?

Dubai is one of the most cosmopolitan and prosperous cities in the world, where numerous businesses and companies of various sizes and sectors are concentrated. To establish and operate a business in Dubai, it is necessary to know and comply with the regulations and standards that govern the commercial field. That is corporate law. Corporate law is the set of laws that regulates the constitution, dissolution, operation, and liquidation of companies. Thus, such as relationships with shareholders, partners, employees, clients, the government, suppliers, and other economic agents.

In this article, we are going to explain to you what the basic corporate law is for doing business in Dubai. For both local and foreign companies. We will show you the different legal forms that you can choose for your company, and the procedures and requirements that you must comply with. In addition, the benefits and incentives that you can obtain, the rights and obligations that you must respect. You will also see the resources and solutions that you can use in case of conflict or difficulty. We hope that this information is useful to you and encourages you to start your business project in Dubai.

Basic Requirements for all Business Activities in UAE

Before starting your own business, you have to know the legal requirements according to corporate law. That is why in this section we will analyze the legal prerequisites for creating a company in the UAE.

Legal structure of the company: The first thing you have to define is the type of business organization you intend to establish. And not only that but also the business activity you intend to develop. Additionally, you have to determine the jurisdiction in which you intend to operate your business. Opening a business in Dubai is a critical decision as you must start your business at the ideal time and with specific resources.

Intellectual property rights: Next, you have to understand intellectual property laws and ensure that you obtain the necessary rights. You have to know that others may try to imitate your inventiveness if you do not. Additionally, you have to safeguard the following information

The commercial name of the business.

• ·      Business domain.
• ·      Idea.
• ·      Patents.
• ·      Trademarks.
• ·      Formulas and symbols.
• ·      Any additional information before making it public.

Obtain the ideal license: If you want to do business in the country, you have to obtain a business license. With this license, you will specify the jurisdiction and the activities you will carry out. In much of the Emirates, the responsible entity is the Department of Economic Development (DED). The DED grants a commercial license only after reviewing the documentation.

Agree with partners: You may want to establish a business with some of your family or friends. It is essential to reach a formal, written agreement between your potential partners. This will eliminate any possibility of disagreement. Even if friction arises between the partners in the future, the agreement will be simple because the agreement is in force.

Commercial Licenses

When you know what businesses you are going to do, you have to research the new UAE corporate law. By knowing this, you can know which license you need for your business. One of them is the commercial license, which allows a company to import, market, and export products and sell some services in the UAE. Thanks to Dubai's strategic location, which is between important markets in Asia, Europe, the Middle East, and Africa, this is a good option. That is, it is an attractive option for companies that want to establish themselves and profit in the region.

Additionally, companies have the option to participate in commercial relationships, both local and international. To obtain a business license in Dubai, you only have to follow a few simple steps. Below you will see a brief description of the steps to follow to obtain a business license in Dubai.

Decide the configuration of the continental or free zone: To set up your business you have to decide between a free zone or continental territory. The nature of the business will depend on this decision.

Choosing a business name: A crucial step in the process of establishing a business in the UAE is choosing a name. It is important to know the set of naming conventions that currently exist in the country according to corporate law.

Submit your license application: Finally, you just have to submit the business license application. If you settle on the mainland, you have the option of submitting your application to the Department of Economy and Tourism (DET). On the other hand, if you want a Free Zone configuration you can apply directly in the free zone.

In addition, it is essential to provide all the necessary documents and proof of payment of the fee to obtain the license.

Professional Licenses

You should know that the Department of Economic Development (DED) offers different types of licenses for different companies in Dubai. In this case, we are going to talk about the professional license for companies. In short, it is for companies that want to carry out professional activities.

Companies in Dubai with intentions to carry out operations in services need a professional license. You have to know that only the Department of Economic Development can issue the license (DED). Additionally, only people who have a professional degree and a lot of experience in a specific field are eligible for this license.

Generally, entrepreneurs in Dubai are often hesitant to apply for a professional license and a business license. In Dubai, several companies have the option of being eligible for both commercial and professional licenses.

Any business or commercial activity only needs a business license in Dubai to operate. The DED has an administrative system that segregates the various sectors into different licensing options. That is, provide better constructive and regulatory facilitations. However, it is important to choose the right business license for setting up your business in Dubai.

Additionally, any individual or company with competent skills can be considered a professional. The companies and individuals that require a DED professional license in Dubai are as follows:

• ·      Auditors, accountants, and financial advisors.
• ·      Advertising and marketing professionals.
• ·      Entertainment artists.
• ·      Architects
• ·      Education professionals and teachers.
• ·      Business consultants
• ·      Legal advisors and lawyers. For instance, the corporate lawyers.
• ·      Medical representatives.
• ·      Craft activities and carpentry.
• ·      Technical services
• ·      Consulting
• ·      Publishing and printing
• ·      Web designs and internet services.
• ·      Beauty salons.
• ·      Auditing and accounting companies.
• ·      Information technology services.
• ·      Management consultancies.
• ·      Health care services and doctors.

These are some of the most common activities that require a professional license.

Industrial Licenses

An industrial license in Dubai is a permit that allows industries to carry out manufacturing activities. That is, manufacturing and producing any semi-finished or entirely manufactured product. This includes any product that has to be manufactured from raw materials and undergo processing, packaging, and assembly.

Defining what is part of an industry category can be a difficult task. Simply put, the term production is the process of transforming raw materials or natural resources from their raw state to a final product. As a result, to apply for an industrial license, a company has to have a physical presence in Dubai. That is, a manufacturing plant, factory, or warehouse.

If you are a business owner and want to apply for this license, you have to register your business. Subsequently, you have to send the application to the Dubai Department of Economic Development (DED) and the Dubai Chamber of Commerce and Industry. You have to know that the DED is ultimately responsible for issuing industrial licenses to business owners in Dubai.

On the other hand, it is important to know that any business that wants to carry out industrial activities in Dubai must have an industrial license. Additionally, businesses that need an industrial license have to be in specific industrial areas of the city. Obviously, they also have to operate in an industrial environment.

A business activity can be industrial if it involves a production process, industrial segregation, accumulation, and packaging of final products. That is, if you own a company that manufactures products in this way, you must have a valid industrial license.

Some examples of the most common industrial activities are the following:

• ·      Raw materials processing.
• ·      Manufacturing of fabrics and textiles.
• ·      Manufacture of petroleum products.
• ·      Metal and foundry work. For instance, iron and steelwork, and tool manufacturing.

The UAE Commercial Company Law (13) of 1988

According to the UAE Business Companies Law (13) of 1988, foreign companies cannot incur financial obligations. The representative office must be registered with the UAE Ministry of Economy and then with the Dubai Economic Development Department. Commercial law also requires the office to interact with the UAE National Local Service Agent, whether an individual or a UAE national-owned company.

The branch can be 100% owned by the foreign company, but the company must appoint a local service agent, who must be a UAE national or a company owned by UAE nationals. Branches or representative offices are prohibited from carrying out any type of import activity and cannot generate profits.

Types of Businesses in Dubai UAE

Looking at where Dubai has come in such a short time, it's easy to see why starting a business in Dubai is such an attractive prospect for entrepreneurs. Dubai's Department of Economic Development (DED) even reports a 13% year-on-year increase in the number of new businesses. Especially those who want to do business in the city. Dubai's growing economy presents many opportunities for locals and foreigners. Finance, services, real estate, commerce, and real estate are returning profits.

Below, you will see the types of legal structures and the characteristics of the different types of companies that can be established in Dubai.

General Partnership Company

The General Partnership Company is made up of two or more nationals in the UAE. It is important to know that each of them is responsible for their debts. Generally, this form is not available for foreigners. Only the names of the actual partners can be included in the company name, but the company can have a special business name.

The interests of a partner or shareholder can be transferred according to the partnership agreement or with the approval of all partners. The management may include one or more directors who are local, who may or may not be partners in the company. The dissolution of a partnership can occur due to insanity, death, bankruptcy, or retirement of one of the partners. The rest of the partners, however, can unanimously decide to continue the company, as long as such a decision is recorded in the commercial registry.

Joint venture company

Joint ventures refer to a contractual agreement between a party that is foreign and another local party with a license to carry out the desired business activity. In this way, the capital of the local party in the joint venture must be at least 51%. However, the distribution of profits and losses can be based on the terms that the partners choose.

Typically, no exclusive license is issued in the name of the company. This is because the license of the original partner is sufficient so that the project can be executed with the collaboration of the other partner who is responsible for participating in the management of the company.

In this way, in Joint Ventures, the partners agree through a contract to share the profits or losses of one or more commercial companies. Additionally, these companies may be in the name of one of the partners. Therefore, contracts for these joint ventures can be oral or written and notarization is not necessary.

In practice, joint ventures provide an appropriate structure for companies to work together on specific projects. Thus, the DED and Dubai Municipality are responsible for reviewing and approving the commercial registration of this joint venture. Therefore, they also ensure compliance with corporate laws for business in Dubai.

Public Joint Stock company

A PJSC also known as a Public Joint Stock Company; is a company in which business capital is divided into equal parts. Furthermore, their respective number of shares is responsible for limiting the liability of each shareholder. Public limited companies in Dubai must have at least 10 founding members.

The management of this company must be in charge of a board of directors that is made up of between 3 and 15 people. Furthermore, the term of this board cannot exceed 3 years. This way, you can comply with the UAE corporate law. The founding partners will only be able to have 35% of the share capital and the rest must be offered to the public.

The president and most of the directors of this company must be nationals of the UAE. In addition, the corporate laws for business stipulate that banking, insurance, and other financial companies must be managed as Public Limited Companies. However, foreign banks, insurance companies, and commercial companies can establish themselves in Dubai with a representative office or branch.

The minimum capital needed to establish a Public Limited Company in Dubai is about AED 10 million. In addition, with a face value of 1 to 100 AED. Therefore, if you want to establish a public limited company you can seek help from the best legal firms in Dubai.

Private Joint Stock company

The Private Limited Company is defined as an organization whose capital is divided into negotiable shares of equal value. Furthermore, a partner of the same will be liable only to the extent of his participation in the capital of the company. All this is by the corporate laws for the business of the UAE.

A Private Limited Company must have a minimum share capital of AED 2 million. Furthermore, the shares of this type of company cannot be offered to the public. On the other hand, a minimum of 3 founding members are needed to establish a private limited company. On the other hand, 51% of the shares must belong to a UAE national.

Private limited companies are established to carry out industrial or commercial activities. Furthermore, these companies cannot carry out professional activities. In this way, a Private Stock Company is subject to all the regulations and standards that apply to Public Stock Companies.

However, the rules and regulations relating to the public subscription of shares are not included. On the other hand, a Private Limited Company, after two years of its incorporation and meeting certain requirements, can become a Public Limited Company.

Limited liability company

An LLC is a common way to do business in the UAE in all areas of business. However, there are exceptions such as banking, financial, and insurance investments that an LLC cannot legally make. This way, in most cases, you can form an LLC with a maximum of 50 shareholders and a minimum of 2.

Furthermore, this can only be possible if a UAE national owns at least 51% of the company's shares. On the other hand, participation in profits and losses may be prescribed in favor of the minority shareholder in proportions that can reach up to 80/20. This occurs because, in Dubai, the participation of a foreign partner cannot exceed 49%.

You need to apply to the relevant government registration authority. This way, you can obtain approval for the operations and name of the LLC. Depending on the nature of the action, specific authorization from ministries or any relevant body may be required.

If you want to ensure that your application is complete and meets all requirements, it is important to hire a good attorney. This way, you will be able to establish your LLC and follow the corporate law in UAE.

Partnerships (permitted only to UAE nationals)

Limited Partnership: This is made up of one or more general partners who are responsible for all of your debts. In addition, they have one or more partners who are responsible for the debts of the partnership only to the extent of their capital contribution. In this way, the limited partner cannot participate in the administration or have his name appear in the name of the partnership.

Partnership Limited by Shares: This company has both general partners with unlimited liability and partners whose liability is limited by their participation in the capital. Additionally, general partners must be UAE nationals, while participating partners can be foreigners. The capital must be at least AED 500,000 in tradable shares that are of equal value.

What are the crucial and major guidelines of business laws in Dubai?

Commercial Companies Law: It is one of the most cited laws in the business field. This specifies that the UAE must be the nationality of all companies that are established in the country. In this way, all continental companies are subject to the regulations and standards that are imposed by the Commercial Companies Law.

Anti-Money Laundering Law: The UAE has a robust system to track, monitor and eradicate money laundering. In this way, the UAE uses a system called the Anti-Money Laundering System. In addition, this system was put in place to control cash flows much better and also combat the financing of terrorism.

Tax Law: This law takes care of aspects ranging from tax procedures, tax rates, tax implementation, tax obligations, tax exemption, and many more.

Final Thoughts

Currently, Dubai is one of the best cities to do business in the world. Thanks to its great strategic location, cultural diversity, modern infrastructure, and innovative environment; It is the ideal destination for all investors and companies. However, if you want to establish your business in Dubai, you must know and comply with all corporate laws in this sector.

In this way, Dubai corporate laws are based on the Federal Civil Code of the UAE. Here the general principles of commercial law and the specific laws of each emirate are established. There are many types of companies in Dubai and depending on which one you choose, your benefits will change and the requirements to establish yourself will also change.

Therefore, you must have a good corporate law lawyer. In this way, you will be able to count on advice from a lawyer who specializes in this sector. In addition, he will know everything about labor laws and the MOL UAE, which is responsible for ensuring the well-being of the country's market and that companies comply with laws and regulations.

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