Dubai Types of Company:

The basic requirement for all business activity in Dubai is one of the following three categories of licence:

Commercial licences covering all kinds of trading activity; Professional licences covering professions, services, craftsmen and artisans; Industrial licences for establishing industrial or manufacturing activity. These licences are all issued by the Dubai Economic Department. However, licences for some categories of business require approval from certain ministries and other authorities: for example, banks and financial institutions from the Central Bank of the UAE; insurance companies and related agencies from the Ministry of Economy and Commerce; manufacturing from the Ministry of Finance and Industry; and pharmaceutical and medical products from the Ministry of Health.

More detailed procedures apply to businesses engaged in oil or gas production and related industries.

Practising some trade activities (e.g. jewellery and insurance) requires the submission of a financial guarantee issued by a bank operating in Dubai.

In general, all commercial and industrial businesses in Dubai should be registered with the Dubai Chamber of Commerce and Industry.

Fifty-one per cent participation by UAE nationals is the general requirement for all Dubai-established companies except:

Where the law requires 100% local ownership; In the Jebel Ali Free Zone, Dubai Internet City, Dubai Airport Free Zone, Dubai Media City or the Dubai International Financial Centre; In activities open to 100% AGCC (Gulf Cooperation Council) ownership; Where wholly owned AGCC companies enter into partnership with UAE nationals; In respect of foreign companies registering branches or a representative office in Dubai;

In professional or artisan companies where 100% foreign ownership is permitted. However, speaking in October 2004, following a visit by then US Trade Representative Robert Zoellick to the United Arab Emirates, Mohammed Al Muzakki, undersecretary with the UAE Ministry of Economy and Trade revealed that the government may consider allowing 95% foreign ownership of companies in sectors seen as beneficial to the regional economy.

Al Muzakki explained that:

"We are studying this law and might change it. Foreign ownership might increase to 95 percent of the project. But this will depend on a case-by-case basis, and the company's ability to transfer technology and its services to the country."

In the past, each emirate followed its own procedures governing the operations of foreign business interests. In practice, however, Dubai and the other emirates followed the same general system, whereby foreign companies operated in one of three ways: with a local sponsor, through a partnership with a UAE national or company, or through a private limited company or public shareholding company incorporated by Ruler's decree.

In September 2005, Khalaf Al Habtoor, member of the Dubai Economic Council, revealed that the UAE's Ministry of Finance and Industry was putting the finishing touches to new company laws.

The legislation being finalised by the UAE authorities will amend partnership rules, foreign ownership thresholds and IPO rules.

Under current rules, when a firm decides to float on the stock market, it must list at least 55% of its shares, leaving its former owners holding a minority stake. This has led many family-owned enterprises to avoid listing.

However, the proposed legislation would bring the listing threshold as low as 25%.

Al Habtoor, who consulted on the law during its development phase, confirmed that:

"The federal government is revising the company law which will bring down the listing ceiling, making it flexible for us...A change in this, offering flexibility, will help the UAE's family businesses to go public."

Since 1984, steps have been taken to introduce a codified companies law applicable throughout the UAE. Federal Law No. 8 of 1984, as amended by Federal Law No. 13 of 1988 - the "Commercial Companies Law" - and its by-laws have been issued. In broad terms the provisions of the Law are as follows:

The Federal Law stipulates a total local equity of not less than 51% in any commercial company and defines seven categories of business organisation which can be established in the UAE. It sets out the requirements in terms of shareholders, directors, minimum capital levels and incorporation procedures. It further lays down provisions governing conversion, merger and dissolution of companies.

The categories of business organisation defined by the law are:

General partnership company

Partnership-en-commandite

Joint venture company

Public shareholding company

Private shareholding company

Limited liability company

Share partnership company

Partnerships

Partnership companies are limited to UAE nationals only. The Dubai government does not presently encourage the establishment of partnerships-en-commandite or share partnership companies.

updated: 16.07.07