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Company Act in Dubai

Company Act in Dubai

Dubai’s Company Act was first enabled in 1984 and ever since it has gone through several changes in order to provide local and foreign investors with a suitable business environment. At the beginning of the year, the UAE Government announced a new Company Law would be set in place. Federal Law No.2 of 2015 on Commercial Companies establishes new regulations for those opening companies in Dubai and the other Emirates.

For information about the most significant changes brought to the Company Act, you can ask our company formation agents in Dubai. Our specialists in Dubai can help you set up a business here under the provisions of the Company Law.

Regulations applied to companies in the UAE

The UAE is made of 7 emirates, however, those who want to open companies in Dubai or any other emirate is required to comply with the UAE Commercial Law but also with the laws applicable at the level of each emirate. Apart from these, free zones belonging to each emirate will also have specific laws and regulations which need to be observed by foreign investors opening companies.

We remind investors that Dubai has the greatest number of free zones in the country.

Requirements for starting a business in Dubai under the Company Law

The Dubai Company Law covers a wide range of requirements which need to be respected by the shareholders of businesses before and after a company is incorporated. Before the company registration procedure in Dubai, a local or foreign investor must respect the following requirements:

  1. to choose a business form acknowledged by the Company Law and register it in accordance with its provisions;
  2. to provide all the necessary documents to the Dubai Economic Department in accordance with the type of business selected;
  3. to obtain the necessary business licenses in accordance with the activity to be completed on the Dubai market;
  4. in the case of free zone companies, apart from the Dubai Company Law, one must also respect the provisions of Federal Law No.8 on Free Trade Zones in Dubai;
  5. there are also cases where free zones have complete separate laws, such as the Dubai International Financial Centre Free Zone.

Our company formation consultants in Dubai can offer more information on the requirements to comply with when opening a company in the mainland or in a free zone.

Starting a business according to the Dubai Company Act

The new Company Act only applies to companies operating in Dubai and the other Emirates, free zone companies being subject to different requirements. According to the Company Act 2015, any company registered in Dubai must have one or more UAE citizens as partners who will own at least 51% of the share capital in the company. All companies must have a Memorandum of Association which will be drafted in Arabic and legalized by a public notary. Foreign investors opening companies in Dubai may draft the Memorandum in another language provided that they also submit its version in Arabic when supplying the documents with the Trade Register.

From the 1st of July 2015 when the new Company Act was enabled, the shareholders can submit the capital in cash or kind. Companies will also be required to maintain accounting records which will serve as proof of all the company’s transactions. These records must be kept for at least five years at the company’s registered office in Dubai. Joint stock companies and limited liability companies must appoint independent auditors.

The video below presents the main modifications brought to the Company Act in Dubai: 

New provisions in the Dubai Company Act

Other modifications brought to the Dubai Company Act refer to the alteration of the share capital, which is now forbidden if the changes will affect the minimum 51% held by the UAE partner. Foreign investors will now be allowed to register limited liability companies and joint stock companies as holding companies in Dubai. One key provision of the new Dubai Company Act is that a single shareholder is allowed to set up a limited liability company. Also, in order to register a public joint stock company a minimum share capital of 30 million AED will be required, while for a private joint stock company a minimum share capital of 5 million AED was established.

Company Law provisions on companies in specific economic sectors in Dubai

The main reason for which the Dubai government amended the Company Law was to keep up with the changes in the economy at a worldwide level, which is why the authorities decided to apply the same regulations to local companies, but also to foreign companies operating through branches in Dubai.

One of the most important provisions enabled by 2015 Company Act in Dubai relates to companies in industries like oil exploration, energy transmission, and distribution and water desalinization which are required to prove that at least 25% of their share capital was provided by the federal or local government.

There are also a few exceptions to this rule, among which:

  • companies which are exempt from this rule by a federal decree, a ministerial or cabinet resolution;
  • companies incorporated in free zones where specific laws apply, including federal laws;
  • companies which fall under special laws imposed at a federal level in all seven emirates;
  • in the case of free zone companies operating outside the free zone, the provisions will need to be respected.

The Company Act of 2015 also provides for any company to have a diligent person who must have the experience to perform the role assigned.

Under the new law, companies must also ensure effective management of a Dubai company which must comply with the international standards imposed as corporate governance. Companies can also have strategic partners which help them in various operations.

Considering the changes brought to the Company Law are very important and that failing to respect them will attract penalties, feel free to talk to our Dubai company formation advisors if you have any questions.

Another important provision of the new Company Act in Dubai refers to the fact that companies are no longer required to have a minimum number of 5 managers. Also, notifications can now be sent by email, in order to ease and speed the communication between shareholders.

In general assemblies, in order for a decision or resolution to be adopted, the quorum is now set at 75% of the share capital, compared to the previous 50%.

The shareholders can change the notification date of general meetings from 21 days to 15 days under the new Dubai Company Law.

Why start a business in Dubai?

Dubai is by far one of the largest economic centers in the Middle East and the following data sustain this idea:

  • in 2018, Dubai’s economy grew by 1.9% after the investments made by the Government in Dubai Media Centre;
  • in the first 3 months of 2019, the Department of Economic Development issued more than 6,000 licenses for new companies, representing an increase of 29% from last year;
  • steady economic growth is expected to be registered by Dubai in 2019 and 2020 – 2.9%, respectively 3.8%;
  • Dubai’s Composite Business Confidence Index rose up to 10.2 points in 2019 from the 7.7 points of last year.

If you want to open a company in the UAE and need assistance you can contact our company registration agents in Dubai.