Doing Business in Dubai

Licensing

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 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.

Legal Corporate Structures

The Commercial Companies Law which governs the operations of foreign business stipulates a total local equity of no less than 51% in any commercial company and defines seven categories of business organization that can be established in the UAE. Other requirements of the Law determine minimal capital contributions, the number of directors and shareholders and incorporation procedures as well as provisions concerning mergers and dissolution or onversion of companies. Exemptions from the 51% law are available:

Where the law requires 100% local ownership; In free zones including Jebel Ali Free Zone; Dubai Airport Free Zone, Dubai Internet City, Dubai Media City and Dubai International Financial Center In activities open to 100% 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% foreign ownership is permitted.

The seven legal structures for business are:

1. General Partnership Company

2. Partnership-en-commendam Share Partnership Company

3. General partnerships are limited to UAE nationals only. The Dubai government does not encourage the establishment of partnerships en commendam and shared partnership companies.

4. Joint-Venture Company: This represents a contractual agreement between a foreign party and a local party licensed to engage in the desired activity. The local equity participation must meet the 51% threshold but the profit/less distribution can be negotiated. There is no need to license the joint venture - the foreign partner deals with third parties under the name of the local partner who (unless the agreement is publicized) bears all liabilities.

5. Public Shareholding Company

6. Private Shareholding Company: By law, companies engaged in banking, insurance or financial activities must be run as public-shareholding companies. Foreign banks, insurance and financial companies can establish a presence by opening a branch or representative office. A minimum of 55% of the shares of a public shareholding company must be offered to the general public.
   
   The Board of Directors must have a minimum of three and no more than twelve directors. The minimum capital required is Dhs 10 million for a public company. The chairman and majority of directors must be UAE nationals and there is less flexibility of profit distribution than is permissible with limited-liability companies. An amendment to the Law permitted the choice of Vice-President from non-UAE shareholders indicating that non-UAE nationals can participate in the management of such a company at the highest level.
   
   A private shareholding company, like a public shareholding company issue shares but not through public subscription and the private shareholding company's incorporating documents must preclude public share offerings. The company must have a minimum of three shareholders and the minimum capital required is Dhs 2 million. In all other respects, this type of company is governed by the same regulations applicable to public shareholding companies.

7. Limited liability company: This 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. Companies Law stipulates that an LLC may engage in any lawful activity except for insurance, banking and investment of money for others. The minimum capital required is currently Dhs. 300,000 and while foreign equity in the company is capped at 49%, profit and loss distribution can be prescribed. Management may be the responsibility of the foreign partners, the national partners or a third party. To establish a limited-liability company:
   
   A commercial name for the company must be submitted and approved by the Licensing Department of the Department of Economic Development The company's Memorandum of Association must be notarized by a Notary Public in the Dubai Courts Approval must be obtained from the Department of Economic Development and an entry must be made in the Commercial Register.
   
   Once licensed by the Department of Economic Development, the company should be registered with the Dubai Chamber of Commerce and Industry.

Branches / Representative Offices of Foreign Companies

The Commercial Company Law stipulates that branches and representative offices 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. The local agent (sponsor) assists in obtaining visas, labour cards etc subject to a mutually agreed payment.

To establish a branch or representative office outside of the free zones, a foreign company should:

Apply for a license from the Ministry of Economy and Commerce submitting an agency agreement with a UAE national or 100% UAE owned company. The Ministry in turn will forward the aopplication to the Department of Economic Development to obtain approval from the Dubai Government and then forward the application specifying activity to the Federal Foreign Companies Committee for approval. Only then can the Ministry of Economy and Commerce issue the required Ministerial license specifying activity to be practiced by the foreign company.

Enter branch or office in the Department of Economic Development's Commercial register and obtain necessary license Enter the branch or office in the Foreign Companies Register of the Ministry of Economy and Commerce Register the branch or office with the Dubai Chamber of Commerce and Industry.

Professional Firms

According to Local Order No.63, 100% foreign ownership is permitted in establishing a professional firm provided that a UAE national is appointed as a local service agent. The local agent has no direct involvement in the business and is paid a lump sum or percentage of profits or turnover. The number of staff members that may be employed in a professional firm is limited. Architects, engineers, management consultants, health care professionals. Legal and
accounting firms can obtain professional licenses and operate as professional firms.

Law Firms that can assist you with these structures:

The Attorneys http://www.attorneys.co.ae/
Al Tamimi and Company http://www.tamimi.com/

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