The basic requirement for ah business activity in Dubai is one of the fohlowing three categories of licence:

Commercial licences covering any 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 cale­gories 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 lu 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 Jebel Ali and Dubai Airport Free Zones

In activities open to 100 per cent 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 and its by-laws govern the operations of foreign business. In broad terms the provisions of these regulations are as follows: 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 b 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-en-commendam

Joint venture company

Public shareholding company

Private shareholding company

Limited liability company

Share partnership company

 

Partnerships
 

General partnership companies are limited to UAE nationals only. TheDubai government does flot presently encourage the establishment of partnership-en-commendam and share partnership companies.

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 are seen as offering a suitable structure for companies working together on specific projects.

Public and Private shareholding companies
 

The law stipulates that companies engaged 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 Db 10 million (US$ 2.725 million) for a public company, and Db 2 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 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 Dubai, the minimum capital is currently Dh 300,000 (US$ 82,000), contributed in cash or in kind. While foreign equity b the company may not exceed 49 per cent, profit and loss distribution cao be prescribed. Responsibiity for the management of a limited liabiity 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 Department of Economic Development

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 lndustry.

Branches and Representatives offices of foreign companies
 

The Commercial Companies Law 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 ont 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, labour cards, etc. 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 licence 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 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 bas 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.