dubai business advisor-no.4

8/8/2019 Dubai Business Advisor-No.4

http://slidepdf.com/reader/full/dubai-business-advisor-no4 1/15

Dubai Business Advisor

Business Information Series

2009 | Vol. I | No. 4

Starting a Business

in Dubai:

A Practical Guide



Table of Contents

Introduction 4DecidingonActivitiesandaCorporateStructure 4

ObtainInitialApprovalfromtheDED 5

RegisteraTradeName 6

OtherApprovals 7

SecureaLocation 7

MemorandumofAssociation 8

GetaPOBox 8

GetaPhoneLine 9

Final Approval and Company Registration Certicate 9

BecomeaMemberofDubaiChamber 10

HiringWorkers 11

NextSteps 12

References 13

Acknowledgements 14



Introduction

Thisguideisintendedtoassistpeoplewhoareconsideringopeningabusiness

inDubai.Itscontentsshouldbeusefulintwostages.Forthoseintheplanning

phase, it contains information on the time and nancial commitments required

to open a business, which are key to conducting a feasibility study and nancial

planning.Forthosewhohavealreadydecidedtoopenabusiness,itservesas

aroadmap,guidingtheentrepreneurthroughthevariousphasesoftheprocess

and explaining what is required to complete each step.

It shouldbe noted that theproceduresdescribed in this guidecananddo

changewithtime.Whileeveryefforthasbeenmadetoensurethatthedetails

providedaretimelyandaccurate,readersareencouragedtospeakwiththe

responsible entities to conrm the latest information. In addition, given the

limitlesscombinationsofbusinessactivities,corporateentities,andownership

structures, each new business will inevitably be unique in some fashion. Assuch,nosingleguidecancovertheproceduralimplicationsofallpermutations

ofthesefactors.Tothisend,entrepreneursmayneedtoseekfurtheradvice

fromtheconcernedauthoritiesorlegalcounselshouldtheybecontemplating

an‘unusual’ideawithrespecttotheabovefactors.

Asageneralnote,entrepreneursshouldexercisecommon-sensediscretion

when engaging people or rms with whom they plan to transact business.

Inthispartoftheworld,personalrelationshipsareespeciallyimportantand

playacrucialroleinthebusinessrelationship.Itwouldbehovetheaspiringentrepreneurtotakethetimetogettoknowpeoplebeforeconductingbusiness

– whether they are potential partners, agents, employees, or professional

servicesproviders.

Deciding on Activities and Corporate Structure

The rst step in opening a business is determining the activities of the proposed

business.Aspartoftheapplicationprocess,theentrepreneurmustchooseabusinesscategory;withineachcategoryisalistofactivities.Eachlicensemay

haveuptotenrelatedactivities(subjecttothediscretionoftheDepartmentof

EconomicDevelopment–DED).TheDEDandDubaiChamberjointlypublisha

guidebook of the Standard Classication of Economic Activities, which is used

bytherelevantauthoritiestocategoriseactivitiesforlicensingandstatistical

purposes.

Oncetheactivitiestobepractisedhavebeendecided,theentrepreneurshould

determine the appropriate corporate structure for the business. There areseveral issues important tothisprocess, including thescopeofliabilitiesof

theownersandthedegreeofforeignownershippermittedineachstructure.

Interested readersshould refer toAlTamimi (2006) oranother resource for



adetaileddiscussionofthemeritsandfeaturesofeachstructure.Forthe

purposesof thisguide,wewillfocusontwoofthemostpopularstructures

–thesoleproprietorshipandlimitedliabilitycompany(LLC).

Asoleproprietorshipis,asitsnamesuggests,anestablishmentwithasingle

owner.Thereisnotastrictlegalseparationbetweentheestablishmentand

itsowner.Asaresult,theproprietorispersonallyliablefortheliabilitiesofthebusiness.

ForeignnationalsarepermittedtoestablishandconductbusinessintheUAE

throughasoleproprietorshipstructure.Therearecertainrestrictionsonthe

typesofactivitieswhichmaybepractisediftheownerisnotaUAEnational

or GCC national, as the case may be. Non-GCC nationals are generally

restricted to elds involving non-trading, professional services. Generally, a

foreignerlookingtoestablishasoleproprietorshipengagedinaprofessional

service will need to check with the DED as to whether it is required for him tohave qualications in respect of the activities he is applying for. Additionally,

foreigners forming a sole proprietorship are required to appoint a national

serviceagent,whowillperformcertainservicesrelatedtoadministrativetasks,

generally in exchange for a at annual fee.

AnotheroptionforthecorporatestructureofaproposedcompanyistheLLC.

Unlikeasoleproprietorship,theLLCisadistinctlegalentity,separatefromits

owners.ThepartnersareliablefortheobligationsofanLLConlytotheextent

oftheirinvestedcapital.Also,theremustbeaUAEnationalpartner(s)whoseownershipstakeisatleast51percentofthecompany’sshares.However,

GCCnationalsarepermittedtoown100percentofthesharesinanLLC,as

longastherearenopartnersinthecompanywhoarenon-GCCnationals.That

is,GCCnationalscannotreplaceUAEnationalsasthe51-percentpartnerofa

foreigninvestor,aspertheUAECompaniesLaw.

Onceanentrepreneurhasdeterminedtheactivitiesoftheproposedbusiness,

as listed in the Standard Classication of Economic Activities, and decided

uponanappropriatecorporatestructure,theyshouldproceedtotheDEDtobegintheapplicationprocess.

Obtain Initial Approval from the DED

The rst step is to obtain the initial approval. The initial approval essentially

statesthattheactivityhasbeeninitiallyapprovedbytheDEDandallowsthem

toproceedwiththenecessarystepstoobtainabusinesslicense.Inorderto

applyforinitialapprovalfromtheDED,oneneedsthefollowing:

Acompletedapplicationform.•



Other Approvals

After the DED, the applicant may have to proceed to other Government

Departments to obtain other approvals. As examples, the following

Departments’ approvals are required for these activities:

MinistryofInformation,foradvertisingandmediarelatedactivities;

MinistryofEconomy,forinsuranceactivities;

DubaiMunicipality,forcontractingandmanufacturingactivities.

Secure a Location

Withtheinitialapprovalinhandandatradenameregistered,theentrepreneur

shouldlooktosecuringalocationfortheproposedbusiness.Beforesigning

a lease, it is highly recommended to get pre-approval from the Planning

Department of Dubai Municipality for the proposed site. Ofcials from the

Planning Department need the parcel ID number associated with the site,

whichthelandlordwillbeabletoprovide.TheparcelIDnumberislinkedinthe

PlanningDepartmentdatabasetoalistofpermissibleactivitycodesfromthe

DED’s Standard Classication of Economic Activities. This allows the Planning

Departmenttoapproveasiteforaproposedbusinessbasedontheparcel

IDnumberandtheinitialapprovalgrantedbytheDED.AfterthePlanningDepartmenthasgivenapprovaltothesite,CivilDefencemustalsosignoff

ontheproposal.CivilDefencewilldoanon-siteinspectionofthepremises,

although they may waive this requirement for businesses whose activities have

minimalsafetyimplications,insteadoptingforrandominspectionsafterthe

business is in operation. Some businesses, such as a restaurant, will require

anon-siteinspectionfromCivilDefence,aswellasotherapprovals–fromthe

HealthDepartmentandSewageDepartment–beforethesitecanbeapproved

forbusiness.

It is also necessary to secure approval foranameboard for theproposed

business,whichmustbeinEnglishandArabic.Thisapprovalcomesfrom

theDED,who ensure that thenameboard isconsistentwith theproposed

business and registered name. It is generally required that the entrepreneur

obtainano-objectionletterfromthelandlordfortheuseofthepremisesasa

businessandforthenameboard.

A.

B.

C.



Memorandum of Association

ThenextstepistodrafttheMemorandumofAssociation(inthecaseofanLLC)

ortheappointmentcontractwithalocalserviceagent(inthecaseofasole

proprietorship).TheDEDprovidesspecimencopiesofthesedocuments,which

entrepreneurscanusefortheirowncompany.Itisstronglyrecommended,

however, that entrepreneurs who wish to make even slight modications to

thesedocumentsconsultlegalcounselforthispurpose.Legalfeesfordrafting

aMemorandumoftenruninthethousandsofdirhams,butthisdocumentis

criticaltothenewbusiness,asitlaysouttherightsandresponsibilitiesofthe

partnersanddirectorsofthenewcompany.Additionally,theMemorandum

setsoutcertaincorporateproceduresandpractices,suchaswhichpartnersor

employeesofthebusinesshaveaccesstothecorporatebankaccount.

TheMemorandummustbeinArabic,orinbothArabicandEnglish(inthis

case,thedocumentistypicallywritteninparallel,withArabicinonecolumnandEnglishintheother).IftheoriginaldocumentisinEnglish,itwillneedtobe

translatedbyanaccreditedtranslator.Itisimportanttonotethatintheevent

ofadiscrepancybetweentheEnglishandArabicversionsofthedocument,the

courts will use the Arabic version as the ofcial version of the Memorandum.

ThedocumentmustthenbetakentoanotaryattheDEDoratDubaiCourts.

Thenotarywillchecktoensurethat theMemorandumcontainsthecorrect

information and is in compliance with the UAE Companies Law before

notarisingthedocument.Forhisservices,thenotarywillcharge0.25percentofthepaid-upcapitalmentionedintheMemorandum;thisamountiscapped

atAED10,000.

Get a PO Box

It is not required, but is advantageous, for the entrepreneur to open a PO Box.

Asthereisnopostaldeliverytoresidentialorcommercialaddresses,thisis

theonlywaytoreceivemail.ThiscanbedoneatanEmiratesPostbranch.EntrepreneurswillneedtobringthefollowingtoopenaPOBox:

Initial approval certicate (or business license). If the PO Box is opened

with an initial approval certicate, the business owner must bring in the

businesslicensewhentheapplicationprocessiscomplete.

Apassportcopyoftheownerormanager.

Acompletedapplicationform.

TheannualfeeforaPOBoxforabusinessisAED570.Thisincludeskeyand

registrationfees.Therentalagreementisonacalendaryearbasis.IfthePO

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contractforalocalserviceagent,inthecaseofasoleproprietorship

ownedbyaforeigner.

Corporate owner’s documents, ofcially translated.

Passport copies of the owners – or their representatives – and the

managers.Noobjectionletters(ifapplicable).

OtherGovernmentDepartments’approvals(ifapplicable).

The fee structure for nal approval is complex and depends on a variety of

factors.Fortunately,theDEDwebsitehasa‘simulator’thatasksaseriesof

questions about the proposed business to estimate the cost of a trade license.

One of the major fees is linked to the annual rent of the business premises; ve

percentofthisamountispayableasamarketfee.Inanycase,thebestwaytoassessregistrationfeesistovisittheDEDwebsiteandusethesimulator.

Likethe initialapprovalprocess, theDEDaimstoprocessapplicationsand

issuethePaymentVoucherforthebusinesswithinonetotwobusinessdays.

The license (for sole proprietors and LLCs) and Certicate of Partners and

Commercial Registration Certicate for LLCs are issued upon payment.

Become a Member of Dubai Chamber

Just opposite the DED’s main building is Dubai Chamber’s headquarters.

Registering with Dubai Chamber is quick, and entrepreneurs leaving the DED

withtheirnewtradelicenseshouldhaveallthedocumentstheyneedreadilyat

hand. The following documents are required to register with Dubai Chamber:

Acopyofthebusinesslicense.

Apassportcopyoftheowner/partners.

AcopyoftheMemorandumofAssociation(forLLCs)oracopyofthe

appointmentcontractforalocalserviceagent(forsoleproprietorships

ownedbyforeigners).

A copy of a power of attorney, if an authorised representative is

registeringthecompany.

Anauthorisedsignatoriescard,whichDubaiChamberprovides,with

signaturespecimensofthepartners.

Membershipfeesvarybasedontheactivitiesinwhichthecompanyisengaged,

buttheyaretypicallylessthanAED2,000peryear.

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Membership in Dubai Chamber is required for most businesses registered in the

Dubaicustomsterritory(i.e.notinthefreezones).Allbusinessesthatexport

and require Certicates of Origin from Dubai Chamber (whether in the free

zonesornot)willneedtobecomememberstoobtainthem.Allbusinessesare

encouragedtobecomemembersofDubaiChamberinordertotakeadvantage

of the numerous benets of membership.

Hiring Workers

The rst step in hiring workers is to obtain an establishment card from the

DepartmentofNaturalisationandResidency–Dubai(DNRD).Thispermitsthe

companytoengagetheDNRDfortransactionsrelatedtosecuringresidency

for expat workers. The following documents are required for this application:

Acompletedapplicationform.

Acopyofthecommerciallicense.

AcopyofthelistofpartnersissuedbytheDED(ifanLLC).

Copies of the e-gate cards of the partners who are authorised

signatories.

Notarisedsignatureauthorisationsforauthorisedsignatories.

A map of the establishment’s location and ofce phone numbers.

Acopyoftheleaseforthebusiness’spremises.

Passportcopiesofthesignatories/manager.

Thefeesfor the immigrationestablishmentcardvarybasedon thetypesof

visas the business plans to acquire, but they are typically around AED 1,160.

AfterreceivinganestablishmentcardfromtheDNRD,businessesmustgetanestablishmentcardwiththeMinistryofLabourandSocialAffairs.Thiscardis

similartotheabovecard,butitallowsthebusinesstoconductbusinesswith

theMinistry,whohavetoapproveallapplicationstohireanexpatriateworker.

The following documents are required for the labour establishment card:

Acopyofthetradelicense.

Copiesofthepartners’passportsandvisas(ifapplicable).

Acompletedapplication.

Powerofattorneyforanynon-localauthorisedsignatory.

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AcopyoftheMemorandumofAssociation.

AcopyoftheestablishmentcardfromtheDNRD.

Amapoftheestablishment’slocation.

Acopyoftheleaseforthebusiness’spremises.

One passport-size photograph each of the local/sponsor or the

signatoriesandthemanagerorthepersononthelicense.

PIN (Personal Identication Number) of the local/sponsor.

Acopyoftheworkpermitofthemanager/othersignatories.

ThefeesfortheaboveapplicationareAED2,250.Ittypicallytakesaroundtwo

weekstocompletetheapplication.

After a business has the above establishment cards, they can secure

employmentandresidencyvisasforthestafftheyrecruit.Theprocedures

for this process are complicated and vary based on the type of position

being lled, the qualications of the prospective employee, and other factors.

Severalbusinessesreportthatthetotalcosttorecruitanemployeeisaround

AED 10,000, including all fees and bank guarantees / deposits required.

Next StepsThenextstepforabusinessistocommenceitsoperations.Whetherabusiness

is taking its rst steps after just having set up, is looking to grow and reach out

to new markets, or is facing internal or external difculties, Dubai Chamber is

theretohelpitsmembers.Aspartofitseffortstoassistbusinessesandfoster

anenvironment conducive to theirgrowth,DubaiChamberoffersBusiness

AdvisoryServicestocompanieslookingtoembraceopportunitiesandmeet

newchallenges.ContactDubaiChambertolearnhowyoucanavailofthese

servicesforyourbusiness.

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References

AlTamimi,E.(2006).SettingupinDubai(4thEd.).Dubai:Excelencia.

For Further Reference:

DEDwebsite:

www.dubaided.gov.ae

DNRDwebsite:

www.dnrd.gov.ae

EmiratesPostwebsite:

www.emiratespost.co.ae

Etisalatwebsite:

www.etisalat.ae

MinistryofLabourwebsite:

www.mol.gov.ae

DubaiChamberwebsite:

www.dubaichamber.ae



1

Acknowledgements

Thefollowingprofessionalswereoftremendousassistancetothepreparation

ofthisguidebysharingtheiradvice,knowledgeandexperiences.Ofcourse

anyerrorsoromissionsarethesoleresponsibilityoftheauthor.

FromTrench&Associates,MsCynthiaTrenchandMsKeeleyFoley.

FromCapitalAdvantage,MsSharonDitchburn.

From the DED, Messrs Jassim Alqallaf, Juma Al Suwaidi, and RaufMammadov.

FromDubaiMunicipality,MrAbdullaAlMulla.

FromEmiratesPost,MrAliAbdulrahmanAli.

FromNationalBankofDubai,MsShomitaBoseandMrShujaKamili.

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