There are different ways to set up a presence in the UAE depending on emirate and free zone, as well as different partnering options. It is prudent to clarify all aspects before setting up a business, says Nita Maru, Managing Partner of TWS Legal Consultants.
It is a well-established fact that every company in the UAE must be duly licensed to operate in the country, irrespective of whether it is commercial, professional, or industrial in nature. What is less evident is how the law and lawyers play a vital role in the formation of a new company.
Aspiring entrepreneurs, and those who already practice their profession but seek to grow it, will do well to consult a team of licensed solicitors who can advise on the procedures and processes of procuring a commercial license, and one that is best suited to existing and future plans.
How to establish a presence in the UAE
The laws in the UAE are rarely demanding, but can often prove to be daunting. Commercial licenses are never generic but, instead, are specific to the nature of the business activity and its proposed location.
For instance, the Commercial Companies Law and the Trade Agencies Law comprise the primary federal legislative framework controlling commercial activities in the UAE – but each of the seven emirates, and every free zone, has its own set of rules and regulations.
Foreign entities interested in establishing a presence in the UAE have five options:
- Create one of seven types of permanent establishments
- Establish a branch office
- Create a civil company (in Sharjah or Dubai)
- Enter into a commercial agency agreement
- Create an entity in a free zone.
UAE free zones and offshore companies
The latter is definitely a popular and preferred option: free zones allow for up to 100 percent foreign ownership, and are favored with reduced trade barriers, tariffs and quotas. The uniqueness of a company registered in any of the UAE’s free zones is the ability to have a real office and truly operate within the country when compared to traditional offshore companies, which cannot operate on the territory where they have been registered.
Again, in contrast to classical offshore companies elsewhere in the world – where financial movements are scrutinized by banks and supervisory bodies – onshore companies registered in the free zones of the UAE are considered as fully resident but are not taxed, and therefore do not raise much reason for investigation.
That said, following the introduction of the Regulations for Jebel Ali Free Zone (JAFZ) Offshore Companies in 2003, international companies can establish JAFZ offshore companies, with benefits that are superior, if not similar, to other international offshore jurisdictions. Since 2006, the emirate of Ras Al Khaimah has also allowed the establishment of RAKIA offshore companies.
SME partnering options in the UAE
Small- and medium-sized enterprises (SMEs) can typically be formed by partnerships between Emiratis, between associated and inactive partners, between two equal partners or by general and participating partners who must be Emiratis and expatriates respectively – making another compelling case for using a sound legal structure for setting up a local business. For independent practitioners who wish to start small, getting a professional license or setting up a sole proprietorship company are smart solutions.
Even at a quick glance, there are multiple options for any potential entrepreneur, and it is only prudent to ensure that all aspects of establishing a business are clarified before starting.
We have been advising and assisting expatriate residents in establishing all types of business entities – both onshore and offshore, and special purpose vehicles (SPVs) for projects – and I can state with great certainty that the decision eventually boils down to each individual’s specific goals and needs.
Having a solid idea and a sound business plan are but starting points. Establishing a company in the right jurisdiction quite often involves jurisprudence.
Besides being official agents for the Jebel Ali Free Zone Authority (JAFZA), we provide professional and personalized assistance to clients who wish to set up a business anywhere in the country, ensuring that applications meet with the approval of respective authorities. Typically, this involves due diligence on everything – industry, partner, location – before moving ahead with paperwork, legal work and leg work.
And finally, there is the matter of investment, and a great solicitor should be able to design bespoke solutions to suit exacting budgets, and yet remain flexible and scalable.
Nita Maru is a British qualified solicitor and Managing Partner of TWS Legal Consultants.