Starting a business in the UAE: What are the legal requirements?   

The UAE is one of the most attractive countries in the world for investors. The imaginative political leadership has developed legislation and procedures to assist expatriates in easily establishing enterprises. That is why business setup in the UAE is becoming a popular thing among business owners around the globe.

In this article, you will learn everything about how to set up a business in the UAE. It is critical to understand the legal criteria for establishing a business in the UAE. So, the information provided will assist you in avoiding preventable delays and confusion. Let’s observe:

1. Legal prerequisites for setting up businesses in the UAE

2. What are the legal requirements for setting up a business in the UAE? 

3. What is the Commercial Companies Law (CCL)?

4. Limited Liability Company (LLC)

5. How can Connect Group help you with your business setup in the UAE?

 

1. Legal prerequisites for setting up businesses in the UAE

 

Let us look into the legal prerequisites for a business setup in the UAE:

 

1.1.  The company’s legal structure 

It is fantastic that you have decided to start a business in a country with endless possibilities. You are on the correct path. You will soon possess one of the top company empires if you work hard and persevere.

However, you must define the sort of company organization you intend to establish, the business activity you intend to undertake. Also, you have to determine the jurisdiction in which you intend to operate. Setting up a business in Dubai is a critical decision since you must start your business at the proper moment and with the right resources.

Hence, a reputable business service provider can assist you in properly steering your UAE venture. Before proceeding, the legal form or legal structure of the business must be finalized. There are several company structures accessible, each of which differs from the others. Each has its own set of fundamental needs or legal processes for formation.

 

In the UAE, you can establish the following sorts of businesses:

 

• • LLC (Limited Liability Company).
  • Sole Proprietorship.
  • Corporation.
  • Limited Partnership.

 

 

1.2.  Rights to intellectual property  

Is your organization intending to launch new goods or methodologies? Then you must understand intellectual property laws and guarantee that you have gotten the necessary rights. Others may try to imitate your inventiveness if you do not. They may even assert ownership of the innovation, requiring you to pay a penalty for duplicating their product.

Not only that, but you must safeguard:

 

• • Your company’s trade name.
  • Business domain.
  • Idea.
  • Patents.
  • Trademarks.
  • Symbols and formulas.
  • Any necessary data before making them public.

 

Connect Group can assist you with intellectual property rights and how to safeguard them. As a result, we will assist you in obtaining the rights through the necessary channels.

 

1.3.  Obtain a license that is appropriate for your business 

To conduct business in the nation, you must get a trade license. The license will specify the jurisdiction and the activities that you can do. In most Emirates, the responsible government, the Department of Economic Development (DED), will grant a business license only after reviewing the paperwork.

Hence, before submitting your application to the DED, you must obtain approval from all appropriate agencies and ministries. For example, if you want to open a restaurant in Dubai, you will need certain permits before you can apply for a license. You will need a permit from:

 

• • The Health Ministry.
  • The Food and Safety Department.
  • The Dubai Municipality

 

 

1.4.  Make an agreement with your partners 

You might want to establish a business with some of your friends. A formal and written agreement must be reached. It will eliminate any possibility of a disagreement. Even if friction emerges between partners in the future, the settlement will be simple because the agreement is in place.

 

1.5.  Duties, responsibilities, and rights of employees 

Do not forget to provide a clear guideline outlining the employees’ roles, obligations, and rights. It must be delivered to each employee on their first day on the job. As a result, any future legal disputes might be avoided, and employee production may be maximized.

 

1.6.  Follow all safety precautions and guidelines 

Employees should not be harmed as a result of any of the activities. If the working environment creates a risk to the employees’ health or safety, they must be provided with appropriate safety equipment to avoid injury.

Furthermore, you must confirm that they are aware of the safety precautions and that they are following them correctly. Failure to comply will result in severe consequences from the authorities. If they discover that you are not adhering to the health and safety requirements, you may get in trouble.

 

2. What are the legal requirements for setting up a business in the UAE?  

 

2.1. Determine the legal form and activity

The first stage in obtaining a business license is the selection of the type of activities to be carried out. This has to do with the type of business you intend to create. Furthermore, you must define the specific type of the firm. Whether it is an institution, a branch of a foreign corporation, or a limited liability company.

Furthermore, the regulations, restrictions, criteria, and costs for business setup in the UAE differ depending on the type and nature of the operation.

 

2.2. Obtaining a trade name registration 

Once you have identified the activity and legal status, you must choose a trading name. The trade name must be distinct for the company to distinguish it from other companies. Nevertheless, keep in mind that the trade name’s title must represent the nature of the activity as well as its legal status.

In general, the registration of a trading name is subject to the following conditions:

 

1. 1. It should be well-matched with the needed type of activity and legal status. Also, it should not have been previously used or be presently registered in the same company industry.
   2. It shall not violate any public law or rules.
   3. It must not be identical to any local or foreign trade name registered with the Ministry of Economy. Additionally, it must not be deceptive to consumers/clients.
   4. The Department of Economic Development (DED) has the authority to cancel a trading name. This will occur if it finds that it is identical to an existing one or does not meet the department’s standards and conditions.

 

 

2.3. Obtaining approval 

After registering a trading name and receiving a certificate, preliminary permission from the DED is required to easily and quickly receive all additional approvals. So, business people should be aware that the preliminary permission is only valid for three months from the date of issuance.

If the certificate expires, the business owner must get a new one before proceeding to the next stage.

 

2.4. Obtaining a license 

The next step is to obtain the business license after obtaining all essential permissions. The business’s economic and legal position will determine the paperwork needed to get a business license. It is important to remember that you must translate foreign papers into Arabic by a legal translator and confirmed by the Ministry of Justice.

Business setup in the UAE or other regions is not a straightforward process.  One must go through a lengthy procedure to fulfill all legal criteria. Fortunately, there are business consultancy services in Dubai and other parts of the UAE that may help make the process much smoother.

Connect Group is also well-known for offering services such as business setup in the UAE, including:

 

1. 1. Business licensing.
   2. Sponsoring.
   3. Partner outsourcing services.
   4. Processing all the legal paperwork.
   5. Handling and assisting in free-zone and non-free zone licenses.

 

Given the fact that we have years of experience and strong relationships with the relevant government authorities, we can have your business ready to operate very quickly. You can contact us to learn more about our business formation services.

 

3. What is the Commercial Companies Law (CCL) 

 

A new Commercial Companies Law went into effect on July 1st, 2015, replacing the old Federal Law No. 8 of 1984. With the new CCL came a slew of reforms that impacted businesses across the UAE. Companies that fail to comply with the CCL may face a variety of consequences, including:

 

1. 1. Fines.
   2. License suspensions.
   3. Deregistration.
   4. In extreme situations, criminal prosecution.

 

However, the gravity of the infraction by the company/directors will determine the penalty levied.

 

4. Limited Liability Company (LLC) 

Foreign investors can conduct business through a Limited Liability Company under the CCL. This is a common way of doing business in the UAE in all commercial areas. However, as an exception, there are banking, insurance, and financial investments, which cannot be legally carried out by an LLC.

 

4.1. National partner requirements in the UAE 

In most cases, you can set up an LLC with a minimum of two and a maximum of fifty shareholders. This may be possible as long as a UAE national owns at least 51% of the shares of the company.

Profit and loss sharing may be prescribed to favor the minority shareholder in proportions of up to 80/20. This is because, in the Emirate of Dubai, the shareholding of a foreign partner in the company cannot exceed 49%.

Under the CCL, a single UAE resident or a firm controlled entirely by UAE nationals may now form an LLC on their own. The management of an LLC might be delegated to a foreign partner or a third party. It is feasible to enter into a scheme of arrangement with the UAE national partner.

This is for safeguarding and specifying the interests of the minority partner, especially if the minority partner supplies all of the capital in the firm. However, you should note that the UAE national would continue to own at least 51 percent of the firm lawfully. Hence, any effort to transfer shares that impact this minimal level is prohibited by Article 10 of the CCL.

 

4.2. Procedure 

A first application should be filed to the applicable government registration authority seeking approval of the LLC’s name and operations. The Dubai Department of Economic Development (DDED) handles this in Dubai. The responsible authority in Abu Dhabi is the Abu Dhabi Department of Economic Development.

Depending on the nature of the action, specific authorization from relevant ministries or agencies may also be necessary. Oil and gas-related companies, for example, normally require the prior consent of the Office of the Ruler of the Emirate concerned. However, in some circumstances, they will need the permission of the Supreme Petroleum Council.

Therefore, if the application is complete and you pay all the required costs, everything will be perfect. The relevant Emirates business licensing agency will then add the LLC to the Commercial Registry database and grant an operating license.

 

5. How can Connect Group help you with your business setup in the UAE?  

When the time comes to establish a business in a foreign country, you must be smart and cautious. It is preferable if you get assistance from a reputable company such as ours, to guide you with your business setup in the UAE.

We will advise you on the finest business solutions and get you up and running as soon as possible. Even though we have stressed the importance of understanding the legal requirements, you should not be concerned. The legislative system of the country is likewise geared toward the seamless operation of corporate enterprises.

Would you like to contact Connect Group to obtain more information on how to set up a business in the UAE? If you have any questions, call us on + 97143316688. You can email us at contact@connectgroup.co, and you will talk to one of our representatives who will answer your questions.

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