28 Nov Doing business in Dubai: Trading System
International manufacturers and exporters may freely conduct business with importers and traders based in Dubai. This may be suitable for low-volume trade. However, for a consistent business relationship, overseas companies may want to consider a more stable form of representation.
Business practices in the UAE are in line with international standards, technical specifications must be supplied complete with the CIF prices (Cost, Insurance and Freight). The United Arab Emirates are are WTO members. Only importers who have an appropriate trade license can import into the United Arab Emirates.
Prior to 1984, each emirate had autonomous procedures that regulated foreign business operations. Federal Law No. 8 of 1984 and its amendment by Federal Law No. 13 of 1988
– the so-called Commercial Companies Law – makes it mandatory that companies must be wholly owned by UAE nationals or citizens themselves must possess at least 51% of the share capital, while the remaining 49% may belong to foreign entities.
THE LEGAL FORMS FOR BUSINESS
General Partnership Company
It consists of a company formed by two or more partners who are jointly and severally liable for all obligations of the business.
General Partnership Companies are intended only for citizens of the United Arab Emirates because the partners are liable for the debts of the company with all their assets. It cannot be applied to foreigners because they hold most of their assets abroad.
Public Joint Stock Company (PJSC)
A Public Joint Stock Company is a company similar a UK Public Limited Company or a German Aktiengesellschaft.
In such societies, the liability of a shareholder is limited by the number of shares held. The minimum capital required to form a Public Joint Stock Company is AED 10 million. Among other requirements for a PJSC to be formed there is the preparation of a contract between the founders, a prospectus or invitation for public subscription supported by a comprehensive business plan or feasibility study certified by an auditor, due diligence and a memorandum and articles of association.
A PJSC must have at least 10 founders and its management should be entrusted to a Board of Directors formed by a minimum of 3 to a maximum of 15 persons whose term of office shall not exceed 3 years.
The Chairman and the majority of the Directors must be citizens of the United Arab Emirates. In addition, at least 51% of the shares of the PJSC must be held by UAE nationals. The founders may hold only 45% of the share capital and 65% must be offered to the public. The law stipulates that a company engaged in banking, insurance or financial activities should be a Public Joint Stock Company.
Private Shareholding Company (PSC)
A privately owned company consists of no less than 3 persons.
Unlike the Public Joint Stock Company, a private corporation cannot invite the public to subscribe for its shares. The minimum share capital required to set up a private shareholding company is AED 2,000,000. The Chairman and the majority of the Directors in a Private Shareholding Company must be citizens of the United Arab Emirates.
Joint Venture (Consortium Company)
A Joint Venture is a type of company where 2 or more partners agree to share the profits or
losses of one or more commercial enterprises.
A Joint Venture contract can be written and does not require a public contract. However, if the Joint Venture is disclosed to third parties, all partners are jointly and severally liable. The existence of the Joint Venture may be proven by any test method.
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