Businesses thrive in Dubai on the back of a highly open economy enriched by easy and affordable incorporation procedures. Apart from ensuring ease of doing business, the UAE government protects the interests of the business owners through a solid structure of the legal framework. Every investor, before initiating the process of business setup in Dubai, should have a deep understanding of the legal requirements and related documents that are mandatory perquisites for opening and running a successful company.
Complying with these requirements will ensure legal protection for your business but non-compliance may force you into a path riddled with penalties, lawsuits, etc. If you are a foreign investor, the legal requirements are likely to complicate the process of business setup in Dubai. But you need not worry as you can seek the assistance of the best business setup consultants in Dubai who are well-versed in UAE laws and regulations.
Following are the legal prerequisite you need to ensure before starting to set up a business in Dubai:
1. Prepare Required Documents for Trade License
Obtaining a trade license is the most critical legal procedure you need to undergo to commence the process of business setup in Dubai. Be it in the mainland or any free zones, you need to undertake the required procedures to secure a valid trade license in Dubai. With a trade license, you can generally set up a commercial, industrial, or professional company in Dubai. For this you need to initiate the procedure including identifying a legal structure (LLC, sole establishment, free zone company, branch, civil company, etc.), reserve a trade name, signing of Memorandum of Association (MoA), etc.
The mainland (DED) and free zone Authorities issue a trade license while the offshore authorities issue a certificate of incorporation in the UAE. A trade license normally includes details such as the company’s legal name, legal type, issue, and expiry date, license number, registration number, company address, contact details, partners’’ details, the company’s manager and business activities, etc. If you are a foreign investor unaware of the legalities of obtaining a trade license, it is high time you consult the best business setup consultants in Dubai for expert advice.
2. Written Agreement with Business Partners
While initiating the procedures of business setup in Dubai, you must discuss with the partner’s crucial aspects including the roles and responsibilities, company vision, shareholding, and remuneration, etc. The tide may change any day leading to disagreements with the partners, especially if you are setting up a Limited Liability Company (LLC) in Dubai Mainland.
All the important aspects regarding the company should be discussed and included in the written agreement. The agreement should also contain details of what to do when a partner exits or dies. The clauses you have written in the agreement will decide the outcome of any future disagreements with the partners or shareholders. Foreign investors sometimes draft side contracts for their LLC business in Dubai to counter potential disputes that arise when the UAE national sponsor declares that he does not own 51% shares in the company.
3. Agreement on Distribution of Profit & Loss
For the LLC business setup in Dubai, a minimum of two shareholders are required and the maximum can be 50. Although the rule on capital sharing is 51% for the Local Sponsor and 49% for the foreigner, the Law is silent on the profit-sharing ratio. The foreign shareholders can discuss with the local sponsor and draft an agreement on the profit-sharing ratio that gives them more control over the profits. In the case of distribution of profit and loss the foreign investors can have 80% and give the 20% to the local UAE sponsor. Talk to the best company setup consultants in Dubai on how to include the profit-sharing ratio in the primary agreement.
4. Be Sure of the Legal Structure of the Company
Company by-laws define the rules that define how your entity should be governed. By-laws establish the duties and responsibilities of the key members of the organization such as the board of directors. By-laws also describe how these clauses can be amended and who can recommend the amendments and how the amendments will be voted upon.
The by-laws, in essence, etch out the company’s structure, individual roles, and governance matters. The by-laws include a Memorandum of Association (MoA) and Articles of Association (AoA). The professional companies may also have a Local Service Agent (LSA) agreement. Consult with the best business setup specialist for assistance in drafting the MoA, AoA, and LSA in compliance with the relevant laws
5. Secrecy of the Business Information
Dubai is a highly competitive market and you need to have a robust legal framework in place to protect the privacy of your business secrets including customer lists, pricing plans, etc. The non-disclosure agreement helps you establish confidentiality in your company’s relationship with your contractors, employees, and business partners. A non-disclosure agreement effectively safeguards all the critical information about your company.
6. Board to Approve Audited Financial Statements
An annual audit of the financial statements is a mandatory requirement as per the Commercial Companies Law for the mainland companies in the UAE. After the audit, you need to ensure that the board of directors examine the audit report and approve the same before submitting to the competent authority. This is a globally approved practice followed by companies across the world. However, most UAE companies ignore this and you need to ensure that the board approves the audited financial statements before submitting them to the government authority. Consider this as one of your top priorities while initiating the process of business setup in Dubai.
7. Securing a Brand Name
Many businesses, especially startups, ignore the crucial aspect of conducting trademark registration in the UAE. You must register trademarks of your brand name, logo, and design, etc with the UAE Ministry of Economy to protect your Intellectual Property (IP) rights. You can enjoy the ownership of your IP assets only if you perform the trademark registration in the UAE.
You can initiate the registration process after registering the company with the assistance of experienced trademark agents in Dubai. After registering the trademark with the Ministry of Economy, you will get exclusive rights to use the trademark in all the seven emirates of the UAE. Failing to register the trademarks of your company makes you vulnerable to IP infringements and your business will suffer. For assistance, you can consult with business setup consultants in Dubai that offer trademark registration services.
Choose the Reputed Business Setup Consultants in Dubai
Setting up a business in Dubai is an exciting as well as a lucrative prospect if you ensure that you are complying with all the legalities as per the UAE Laws and relevant free zone laws. The rules and procedures of business setup in Dubai may appear to be daunting but the assistance of an expert with adequate legal knowledge and years of experience in company formation in Dubai will simplify your endeavour. Be it the mainland, free zone, or offshore company formation, you need the assistance of the best business setup consultants in Dubai such as Jitendra Business Consultants (JBC). JBC’s business setup consultants are well-versed in the UAE Laws including labour laws and immigration laws. With JBC’s assistance drafting legal documents such as MoA, AoA, and also conducting trademark registration becomes easier.