Dubai is a leading business hub. Investors and entrepreneurs from different countries strive to start their businesses there. One of the main reasons that attract entrepreneurs is Business Law in Dubai. Business Law in Dubai makes it hassle-free and straightforward for businesses in multiple ways. With the right understanding of its accommodating laws and the various ways you can set up your firm, Dubai is amongst the best regions to establish a new venture or expand an existing one.

Business Law in Dubai

Mainland vs. Free Zone: Which One’s Better for Your Firm?

It is great to take the leap and set up your organization. However, it is crucial to understand the type of company you should register as properly. This is because the company’s type defines its daily operations. At the same time, you must also look into the other affecting factors. These include ownership, place of work, and scope of business, amongst others.

Mainland Companies in Dubai enjoy the freedom to work in any place in the UAE. However, a foreign investor is allowed only a 49% share, while 51% of the company’s share would have to be owned by a citizen of the country.

On the other hand, Free Zone companies are allowed to work only in their zones. Nevertheless, the firms in these zones enjoy a much more relaxed business law, and incentives are better too. Dubai has 40 business zones, including the International Airport and the Dubai Techno Park. Foreign investors operating in the Free Zones can hold 100% of their companies’ shares as opposed to the Mainland Companies.

The Basics for Expats

Dubai has a large pool of expatriates from all across the globe, most of whom wish to own businesses in the city they now call home. The business laws in Dubai are extremely accommodating regarding expats registering their businesses. However, there are a few things to keep in mind here.

As a limited company, you, as an owner, will enjoy all the privileges just as a local company when setting up a business. This holds true only in adherence to the mainland or free zone laws. Sectors such as investment, banking, and insurance also should not be included.

You would also need to get a license and approval from the Economic Department and register your business at the Dubai Chamber of Commerce and Industry. Business owners can choose between a joint venture with a local company or a sole proprietorship.

According to a legal expert, Dr. Hassan Elhais;

“Joint ventures are beneficial if you have a specific project or technology. For a strategic partnership, lawyers in Dubai can advise on structuring, drafting, and negotiating.”

Foreign Ownership

Dubai business laws recognize foreign ownership laws which grant ownership to foreigners the to own up to 100% of a company in specific industries and sectors. This is because certain sectors need particular ownership requirements, making it a bit challenging for foreign investors as they will be required to either partner with a local individual or secure a special license and permit to operate in those sectors. A good example is the oil and gas sector, where a foreigner must have a local partner who owns at least 51% of the company. 

Equally, in the banking sector, it is mandatory for a foreign bank to establish a local subsidiary with a minimum capital requirement. In Dubai, foreign ownership is governed by the Federal Decree-Law No. 26 of 2020, which amended the Federal Law No. 2 of 2015 on Commercial Companies (CCL). Before establishing one, you can consult with a qualified company lawyer at Legamart for more insight into the rules and regulations of constituting a company in Dubai as a foreigner. 

Dubai business laws further invalidate the requirement for commercial companies to have a Dubai citizen as a major shareholder or agent, hence, giving full ownership to foreigners of all nationalities of onshore companies established by them.

Bankruptcy Law

Bankruptcy Law is one of the most talked-about business laws in Dubai. This is because of the hassle it caused in 2008 and settling said hassle in 2017. Therefore, it is essential to understand this business law properly before deciding.

Federal Law No. 18 (1993), or the old law, aligned itself to the framework of the Commercial Companies Law, the Civil Code, and the Commercial transactions law. Due to this, owners who declared bankruptcy faced harsh consequences and criminal charges. With the new law, Federal Law No. 9 (2016), the business law has set up a Financial Restructuring Committee and strives to find new alternatives to insolvency. Overall, the law is less harsh and more understanding for individuals. Thereby making Dubai’s business sector a booming industry where everyone feels secure in their investments.

However, it is always a good idea to advance with caution. This is because the laws may provide more leeway, but they are still stringent and very strict with their penalties. Prison sentences of up to 5 years and a fine of Dh 1 million are not uncommon if you mess with this business law.

General Laws Applying to All Business Ventures

Regardless of what sector you choose to set up your business in, there are several business laws to follow. These laws include those that govern Electronic Transmissions and Commerce laws. Also, these comprise Federal Law No. 4 (1979), which combats Commercial Fraud, Federal Law No. 20 (2016) on Mortgage to secure debt, Customs law of the GCC States, and the Protection of Intellectual Property and Trademark laws.

The business sector in Dubai is growing at a rapid rate, and the business law setup accommodates the ventures perfectly. However, knowing all aspects of the law is imperative before setting up your business venture.

Also, you can ask for help from our legal consultants in the United Arab Emirates.

How Can Corporate and Commercial Lawyers Help You?

Corporate and commercial lawyers usually deal with commercial and business legal matters; they assist with transactions, documentation and paperwork, but they may also help in other company issues requiring motions, actions and court issues.

For example, when you hire a commercial lawyer to run your business in Dubai, the person usually owns a business or is a manager. These legal professionals are versed in transactions, financial matters, economic and legal disputes, litigation, and other issues.

They tend to have extensive experience in contract drafting, company mergers and acquisitions, employee agreements, negotiations and similar items. As with other lawyers, some work through a law firm, and others are hired exclusively through a business and tend to the needs of that corporation specifically. These legal professionals have a law degree and have passed the bar exam with all accompanying rights and duties of other legal representatives.

Corporate Lawyers in Dubai

Here are some of our best Contracts in LegaMart that can provide your Contract drafting needs;

Gaurav Bangia

Gaurav is an independent lawyer enrolled with the Bar Council of India and the Bar Council of Delhi. He is a broad-based corporate, international commercial and business lawyer.

Ayham A. Othman

Ayham A. Othman is currently in the Corporate Dep. Director and the Co-Managing Partner of Clout Legal Consultancy Firm in the United Arab Emirates. Ayham has brought to the firm’s practice over 14 years of experience in corporate and commercial legal matters and civil and commercial litigation, in addition to his negotiation and mediation recognized skills. His pragmatic and results-driven approach has made him a trusted advisor to national and regional corporations and many prominent members of the UAE and Jordan business landscapes.

Federico Vasoli

Federico is a cross-jurisdiction and cross-cultural lawyer. He is also admitted to the Bar of Milan and Malta’s Chamber of Advocates as a European Union lawyer and by the Vietnamese Ministry of Justice as a foreign lawyer.

Frequently Asked Questions (FAQ)

What are the main laws governing business in Dubai?

The main laws governing business in Dubai include Federal Law No. 4 (1979), which combats Commercial Fraud; Federal Law No. 20 (2016); Commercial Companies Law (Federal Law No. 2 of 2015), Commercial Transaction Laws (amended by Federal Decree-Law No. 14 of 2020 amending certain provisions of the Federal Law No. 18 of 1993) and Intellectual Property Law.

What are some of the available business structures in Dubai?

The following are the main business structures that are suitable in Dubai;

• Limited Liability Company (LLC)
• Sole Partnership
• Branch or Representative office
• Free Zone Company 
• Offshore Company

What are the benefits of establishing a free zone business in Dubai?

Some of these benefits include; 100% foreign ownership; 100% repatriation of capital and profits; 100% import and export tax exemption; and 100% exemption from income and corporate taxes. There is also the aspect of no currency restrictions, and its customs procedures are simplified. 

Conclusion

Dubai’s business law is governed by several laws and regulations designed to promote businesses and protect the interests of investors. These laws create a favourable environment for investors ranging from low taxes, diverse legal structures and a well-established legal system. 

In addition, Dubai business law accommodates foreign ownership of companies in most sectors, making it an attractive feature to appeal to foreigners in addition to setting a branch office for foreign companies to establish a presence in Dubai.

Also, if you are interested in setting your business up in Dubai, the article below will be handy for you:

DUBAI: Best Place to Start Your Business