ESTABLISHING A BUSINESS

The World Bank has identified the UAE as one of the least cumbersome countries in which to set up a new business. According to a recent report, the World Bank stated that only 29 days is needed to set up a new business in the UAE, whereas the average period for the Middle East and North Africa (MENA) region is 60 days. The report estimates the cost of setting up a newbusiness (as a percentage of gross per capita national income) in the UAE at24.4 percentcompared to the MENA average of 76.1 percent. Again, at ten procedures for setting up a new business, the UAE is also lower than the MENA average of twelve.

Licensing
There are three categories of licence for all business activity in the UAE:

1.Commercial Licences: covering trading
activities
2.Industrial Licences: for establishing an industrial
or manufacturing activity
3.Professional Licences: covering professional
services, craftsmen and artisans
Official approval is required from the appropriate
government ministry or department to set up
a company to engage in certain activities,
including:

Financial Institutions
New industrial projects, expansion
Medical
Air transport and Services
Publishing, printing, advertising, filming,
photography
Education and training
Agriculture and animal welfare
Customs clearance, forwarding, cargo
services
Telecommunications equipment
Insurance companies and professional firms
Legal consultancy
Engineering and contracting

Ownership
The general requirement for all companies established in the UAE is 51 percent ownership by UAE nationals. The exceptions to this rule are listed opposite.
Activities not requiring 51% local ownership:
100% ownership is permitted in Free Zones

Activities allowing 100% AGCC ownership
Where wholly owned AGCC companies enter into partnership with UAE nationals
Foreign companies registering branches or a representative office in Dubai Professional companies are permitted to have 100% foreign ownership Instances where the law requires 100 percent local ownership.

Legal Structure
The Companies Law (see 1.13(c) page 27) sets out
in detail the regulations governing the operations
of foreign business. The Federal Law defines
seven categories of business organisation:
1. Limited Liability Company
2. Partnership-en-commendam
3. Joint Venture Company
4. Public Shareholding Company
5. Private Shareholding Company
6. Share Partnership Company

Limited Liability Company
A Limited Liability Company can be formed by a minimum of two and a maximum of 50 persons. The liability of each person is limited to their
shares in the capital of the company.
Documents required:

Certificate of capital contribution from a Bank
Auditor’s certificate for shares of all kinds
All other items requested in the application form

Process to set up a LLC:
1. Approval of company name and activity from the relevant office of Economic Development, Municipality and Chamber of Commerce
2. The Articles of Association must be notarized according to the requirements of each emirate(s)
3. Application package must be delivered to the Department of Economic Development or the Municipality as appropriate
4. Following approval, the new company will be included in the Commercial Rgister and the Articles of Association published in the Bulletin of the Ministry of Economy
A licence will then be issued by the Department of Economic Development (Dubai and Sharjah) or the Municipality or the Chamber of Commerce of the other emirates. Foreign equity in the company may not exceed 49 percent. The distribution of profit and loss can be mutually agreed by the parties. An LLC can be managed by the foreign or national partners or by a third party. Branches and Representative Offices Foreign branches may exercise only the activities
for which they are licensed by each emirate. Branches and representative offices of a foreign company may be 100% foreign owned, provided a UAE agent is appointed. The local service agent has no capital share and management power.

The agent’s services consist mainly in obtaining the relevant licences and authorisations. Agents are not responsible for any of the financial obligations of the company’s branch or representative office within the UAE or abroad. Agents are paid a lump sum and/or a percentage of profits or turnover.

Documents Required:

Company registration certificate
Company profile
Board of Director’s agreement to establish a branch
Copy of Articles of Association
Power of Attorney to the Representative
Financial statements for the past two years
Contractual Agreement with the local agent
Details of the local representative

Process:
1. A licence application must be submitted to the Ministry of Economy. If approved, the application is sent to the economic department of the emirate in which the business is to be undertaken.
2. Once licensed by the emirate, the company is registered by the MOE. Fees for a first approval are AED10,000. A bank warranty of AED50,000 is also required for registration, which must be renewed annually, subject to payment of AED10,000. Each branch can have several sub-branches: the same licensing and registration procedures must be followed for each branch or sub branch.

Joint Venture
This is a contractual agreement between a foreign party and a local party. Local equity participation must be at least 51% but the parties can mutually agree the distribution of profit and loss.

Public and Private Shareholding Companies
(PJSC)
These companies are suitable for large projects or operations. The chairman and the majority of directors of a Public Shareholding (PJSC) company should be UAE nationals with at least 51 percent of the shares held by UAE nationals. The minimum capital required to set up a PJSC is AED10 million. Private shareholding companies have the same requirements for the participation of UAE nationals and the minimum capital required in this case is AED2 million.

Professional Firms
Sole proprietorships and 100 percent foreign ownership is permitted. The number of staff members is limited and a UAE national must be appointed as a local agent.

General Partnership Companies
These companies are confined to UAE nationals since the partners are responsible for liabilities to the extent of their total assets. This opportunity is not extended to non-nationals as the majority of their assets are usually located outside the UAE. Partnership in commendum is also restricted by law to UAE nationals.