Legal Terms Involved in Business Setups in UAE

July 10, 2017by admin0

UAE enjoys a celebrated history of economic advancement and diversification of resources. As an oil rich country and a bustling trade hub, UAE has become a key player in the global economic corridor. Over the last decade, UAE has made great leaps in business setup industry offering merits and incentives to entrepreneurs and businesses from all around the globe. The successful integration of thousands of business set-ups in various states of UAE has stimulated an encouraging and approving atmosphere for the expatriate community.
Here are a few things every entrepreneur and investor must know before establishing a commercial presence in UAE.

Doing Business with Public and Private Sectors

Latest statistics issued by the Ministry of Labour revealed that about 3.8 million workers in 285,000 firms work in UAE’s private sector. Over the years, business setup in UAE for public and private sector have sporadically increased. Here are some basics about the two sectors.
• Businesses engaged in insurance, banking or financial activities must be run as public shareholding companies according to UAE Law.
• Shareholding companies perform better for large-scale operations and or projects.
• Investors can set up a shareholding company for starting from a minimum investment of Dh.10 million as Public Joint Stock Company and a minimum of Dh.2 million for Private Joint Stock Company.
• At least 25% of shares of public shareholding company must be offered to the general public.

PUBLIC JOINT STOCK COMPANY AND PRIVATE JOINT STOCK COMPANY

The capital of a Public Joint Stock company is divided into equal value and tradable shares.
To get a Public Joint Stock company started, a minimum of 10 founding members are compulsory. In comparison, a Private Joint Stock company requires a minimum of 3 founding members and the shares of this entity cannot be bought by the public. In order to sell the shares to the public, the entity must be transitioned into a public joint stock company after meeting several conditions.

Imports and Exports

Although imports are quota free, they must be licensed by the Ministry of Commerce and Industry and handled by registered UAE agents.
• Trade license is officially granted when the UAE-owned shares are above 51% of the foreign entity.
• Goods such as alcohol (100% tax) and tobacco (50%) are highly taxed. Merit goods such as education, foodstuff items, machinery, equipment and raw materials are exempted from taxation under the Law for Organizations of Encouragement of Industry.
• Any nature of goods that pose threat to public safety, environment or national security can be banned under The Commodities Import and Export Federal Law No. 13 of 2007. Apart from imports, UAE is also the biggest re-exporting center in the Middle East.
• The exportation and re-exportation of strategic goods such as weapons, military hardware, chemical and biological items require special exportation license.
Other than these, there are no restrictions on exports except for historical value items which require approval from Ministry of Culture and Heritage.

Foreign Exchange Laws

Generally, UAE does not have any currency exchange restrictions or control laws on the exchange of funds, while free zones can repatriate 100% of their profits in accordance with regulations of the particular zone in UAE. To combat criminal proceeds and terrorist financing fronts, UAE has taken to strengthen its laws by implementing anti-money laundering procedures which prevent funds from being illegally moved outside of UAE.
Since the Gulf Cooperation Council is a sworn member of the Financial Action Task Force, it enforces strict measures to meet the international standards. To make sure no such attempts are made, the Dubai International Financial Center makes it compulsory for companies associated with DIFC to appoint a dedicated resource from their office in UAE as MLRO (Money Laundering Reporting Officer). One of the primary responsibilities of MLRO is submitting an annual report detailing steps the company has taken to implement its anti-money laundering rules.

Employment Laws

Employment laws of UAE allow expatriates to apply for jobs through a well-defined process. Companies looking for resources advertise for vacancies and candidates can submit employment offer letter to the Ministry of Labour to obtain preliminary approval.
• After acquiring work visa and residency in UAE, the employee can start working as an expatriate.
• UAE Nationals have reserved right of employment (15%) which gives them an employment quota in certain sectors with regards to Emiratization guidelines.
• Employment contracts are governed by the federal law, however, UAE Freezones can take precedence over the federal laws and introduce their own standard form of employment and terms.
• The employment terms include working age group, working hours, public holidays, vacation, different leave types, employee progress reports, safety standards and terminations of contract.
• To handle employee grievances and disciplinary code, Ministry of Labour and Social Affairs has introduced a minimum wage limit and a special program.
• The pensions and social security themes are governed by Pensions and Social Securities Law.
To help the expatriate community even further, the employment laws feature Wages Protection System which ensures the wages or salaries are transferred to the employee on time only through selected and authorized financial institutions.

Copyrights and Trademarks

Ministry of Economy is the governing authority in charge of supervising and enforcing intellectual property rights in UAE. The Trademark Federal Law, for instance, protects and regulates the trade names and trademarks and the Federal Law No. 7 of 2002 Concerning Author’s Rights and Neighboring Rights give copyright protection to a wide range of works. These laws are principled in on widely accepted international conventions and regulations, particularly focused on ownership of employee work and future copyright assignments. Similarly, patents can also be protected through UAE’s Industrial Property Law. These patents are registered in the UAE to maximize protection and enforceability, so the infringers are rightly caught, penalized and imprisoned. Since UAE is a member of GCC, it will allow companies to avail regional filings of patent applications within GCC.
How can IBG Consulting help you?
IBG Consulting has an extended experience of having setup more than 200 companies in UAE with timely and updated legal consultation provided to the clients to guide them on their company formation journey in Dubai and other emirates of UAE, across jurisdictions including Free zones, Offshore and Mainland companies.

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