Basics of Business Law in Dubai
Dubai is a leading business hub. Investors and entrepreneurs from different countries strive to start their businesses here. One of the main reasons that attract entrepreneurs is Business Law in Dubai.
The Business Law in Dubai makes it simple and hassle-free for businesses in multiple ways. With the right understanding of its accommodating laws and the various ways in which you can set up your firm, Dubai is amongst the best regions to establish a new venture or expand an existing one.
Mainland vs. Free Zone: Which one’s better for your firm?
It is great to take the leap and set up your own organization. However, it is crucial to have a proper understanding of the type of company you should register as. This is because the company’s type defines the working of its daily operations. At the same time, you must also look into the other affecting factors too. 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 own zones. However, the firms in these zones enjoy a much more relaxed business law, and incentives are better too. Dubai has around 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 which wish to have their own business in the city that they now call home. The business laws in Dubai are extremely accommodating when it comes to expats registering their businesses. However, there are a few things to keep in mind here.
As a limited company, you, as an owner, will be enjoying all the privileges just as a local company when it comes to 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. The business owners have an option to choose between a joint venture with a local company or a sole proprietorship.
According to a legal expert, Dr. Hassan Elhais, “Joint venture is beneficial if you have a specific project or technology. For a strategic partnership, lawyers in Dubai can advise on structuring, drafting, and negotiating.”
The Bankruptcy Law is one of the most talked-about business laws in Dubai. This is because of the hassle it caused in 2008, as well as the resolving of said hassle in 2017. Therefore, it is extremely important to understand this business law properly before making the decision.
The 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, which is Federal Law No. 9 (2016), the business law has set up a Financial Restructuring Committee and strives to find new alternatives to insolvency. The law is, overall, less harsh, and more understanding for the 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 up to 5 years and a fine of Dh 1 million is 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 a number of business laws to follow. These laws include those that govern the Electronic Transmissions and Commerce laws. Also, these comprise of 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 set up accommodates the ventures perfectly. However, it is always imperative to know all aspects of the law before setting up your business venture.