While being a foreign investor in Dubai offers a range of possibilities for business growth, building new markets and expanding the scope of the business, it is also a very different experience for most investors and business owners.
For investors from areas outside of the United Arab Emirates, the specifics of the registration process to set up and obtain licensing for a business within the free zones can be more complex than in other countries. It is really not the process itself, but the model and the differences in making early decisions for a business that can limit the potential for growth going forward.
The first thing that any potential investor should do is to learn as much as possible about business in Dubai, particularly as a company in a free zone. There is a different culture both in the business community as well as within the country itself, which may make some business models more challenging to operate.
In Dubai, there is a very strong relationship, within the business community. There are also closer observances of religious protocols and practices, which can be confusing or be challenging for a foreign business owner to understand. Taking the time to know the culture and to avoid specific errors, such as doing business on a Friday or Saturday, which are traditional Muslim days for prayer, is part of learning.
Spending some time in Dubai prior to opening a business is a very smart strategy. This will also provide essential insight into choosing a free zone location, a business activity, and even a company legal form. It will also help you to understand the laws that may prevent a foreign entity from starting a specific type of business in the UAE. There are some situations where the law stipulates that only 100% ownership by nationals is possible for a given business.
One of the wisest decisions a foreign investor can make is to hire a law firm with expertise in assisting foreigners in opening businesses in the free trade zones. These legal advisors can work with you to understand the possible restrictions in choosing one free zone area over another, as well as the importance of choosing the best category for business activities, company forms and assisting in document preparation and other essential components of the process.
There are many different legal companies in Dubai that offer this service, just as there are legal firms and attorneys in any area throughout the world. Look for companies with an established presence in the emirate as well as with a reputation for strategic as well as legal services in company formation and registration.
It is important to understand that some aspects of the company registration and licensing approval process have to be completed by attorneys. This is true for both mainland companies (those owned at least 51% by UAE nationals) as well as offshore companies, which are those, owned 100% by foreigners and that is seeking to open in the free trade zones.
In order to start the process, the individual foreign investor will need to provide specific documentation to start the process. This starts with obtaining a visa, which will include a standard form to confirm identity as well as a completed medical form. The medical examination must be completed by a licensed medical professional, but it can be completed in any country.
For individuals in the registration process, other documentation will be required as the process proceeds. When the final application is submitted for approval with the DED, the Department of Economic Development and the Free Zone Authority, the attorney will ensure all documentation required is submitted.
This will include the application form for the free zone, the trade name, information on owners and shareholders (which can include copies of passports or CVs), a business plan, proof of tenancy, sponsor agreement (if applicable) as well as other approvals.
Choosing a Business Activity and Company Form
In Dubai, there are three general types of business licenses that are granted. These include the commercial license, which includes all companies that are trading in Dubai. The industrial license is for companies that will manufacture, fabricate or produce goods and a professional license, which is for consultants, service providers and other types of professionals not engaged in trade or industry.
Under these categories, there are various business activities. There are over 2100 different possible business activities to choose from, and they include very specific parameters for what the business is able to offer. For example, specific activities listed include flag manufacturing, carpentry, design and artwork services and so on. It will be necessary to choose a business category before proceeding with the registration.
While the DED can approve most activities on their own, some also require additional approvals from other government departments that may be federal or local. These additional approvals will require separate documentation and often require more detailed information on the business as well as the proposed activity.
The company legal form will also be determined in the registration process. This is similar to other business setups on an international basis where the company is designed as a sole proprietorship, a one-person LLC, a civil business, private shareholding company, public shareholding company or a partnership. Different options will have various requirements for owners and shareholders in the company, and some will only be possible for UAE nationals or with a UAE national as a sponsor.
Trade Name and Business Location Selection
Every business has to have a name to be registered. Each Free Zone Authority is responsible for approving trade names within that zone. There is no national trade name registry, which means that there may be businesses in different free zones with the same name.
Choosing a trade name in Dubai is more complicated than in other countries with specific limitations on words, symbols, professional designations and even personal names that can be used as a business name. Working with an attorney to consult on developing a list of potential business names will save time and frustration.
In free zones, it will be necessary to have a physical address for the business before registering a company. Most investors will rent office space in business centers established by the free zone. The space available is limited to the availability and the number of visas for the company. Starting with a minimal number of employees with visas is typically recommended to make this process easier.
In Dubai, there is a process to verify the actual physical space for the company. There will be an actual inspection of the location that will check for specific elements to be in place. In free zone business offices, these elements are usually present, but for those companies outside of the free zones, it will be critical to ensure all requirements are met to avoid failing this inspection and delaying the approval.
It will be essential for the foreign investor to open a bank account, pay all applicable fees and to make sure all share capital is available if required for the application.
After this is completed, all documentation will be reviewed by the legal team and submitted to the DED. When the documentation is complete and accurate, the approval time is often very quick, with the business license approved and the company ready to start operation.
The final step that will be required is to take the approval of the Company Registry Office and obtain the final company registration certificate. For more information, visit www.stalawfirm.com.