Company legal documents
Proper legal documentation plays a crucial role in protecting the business and its owners over the course of a company’s lifetime. Here are some key legal documents, essential for every company formed in the UAE:
Founding documents: Considered to be the most important legal documents of any company. They establish the objectives of the company, its name, location, structure of capital and management, the duties and responsibilities of key members of the organisation along with detailed descriptions of how they can be amended and so on. Usually, these documents include Memorandum of Association, Shareholders Agreement, Board Resolutions, and other company bylaws.
Trade license: Trade license is proof that the company is duly registered and is officially allowed to operate in the UAE. It can be of different types depending on the type of business and contains the information about the form of company, its trade name, permitted activities, registered address, partners, and managers of the company. It is important to timely amend the license according to any current changes in the business (new office address, new manager, etc.) and renew the license in time to keep it valid.
Employment contracts: Appropriate labour contracts with employees ensure that a legally binding connection has been established with those who work for the company. The terms and conditions of the employment should be mentioned in the contracts with absolute clarity to minimise chances of future disputes. The labour contracts for mainland and free zone companies should be registered with the UAE Ministry of Labour and the concerned free zone authorities respectively.
Trademark registration certificate: Trademarks and copyrights are protected in the UAE by national laws and widely accepted international conventions, but many startups do not pay enough attention to their trademark protection. There is a common misunderstanding that registration of the company in the UAE gives automatic rights for the trademark associated with the registered trade name, which is profoundly untrue. Trademark owners have to apply for a registration certificate in order to get exclusive rights to the trademark. Ignoring the process can later cause issues with the intellectual property rights.
Some other considerations
Companies in the UAE should adhere to the visa and work permit requirements. Employees who work for a mainland company would require labour cards and work permits to be issued by Ministry of Labour (Ministry of Human Resources & Emiratisation). The employees who work in free zone companies would require work permits or employment cards issued by the respective free zone authority. Residency visas for expat employees have to be sponsored by their employers. A female employee, however, in some cases may be sponsored by her father or husband.
In a situation where there is a dispute between the contracting parties, it is important to know how the disputes will be resolved. As a civil law jurisdiction, the UAE legislation recognises the right of freedom of contract. This permits many contractual arrangements, especially related to international transactions, to be governed by English law, with disputes heard not in the UAE courts, but through international arbitration centres or before DIFC Courts in Dubai or ADGM Courts in Abu Dhabi.
Entrepreneurs in the UAE can choose the binding arbitration as a preferred method to resolve disputes. Arbitration decisions made in other nations also can be recognised in the UAE since recently UAE sanctioned the New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards. Furthermore, the London Court of International Arbitration (LCIA) is often selected by international business parties who have business in the UAE. Among local business entities, entrepreneurs may choose the Dubai International Arbitration Centre (DIAC) or the Abu Dhabi Commercial Conciliation and Arbitration Centre (ADCCAC).
The new federal law on bankruptcy has been issued in September last year and came into force on 29th of December 2016. The law deals with one of the problems that entrepreneurs in the region face: financial defaults. It helps to ease the process of dealing with such cases and promote investments due to the flexibility and ease brought about. The new bankruptcy law lowers risks for new startups by many ways, like allowing entrepreneurs to skip jail term, even if they are not able to repay a debt. It gives debtors some comfort to stay in the country by restructuring their debts. Another objective of the new law is to provide a much safer legal framework that will help indebted firms in avoiding bankruptcy and dissolution.
The UAE Government has taken many steps in these years to make the legal proceedings involved in registration, operation and liquidation of companies in the UAE, much more convenient and comfortable, for any business, and has encouraged entrepreneurs from all over the globe to set up a business in the country. At the same time, there are various options available for entrepreneurs to set up business entities, and it is essential to clarify the necessary aspects before establishing a business in the UAE. It is advisable for startup founders to consult experienced lawyers who can provide the advice regarding all the legal procedures to start a business. All things considered, the UAE is still a much more flexible country for those with novel ideas to turn their visions into a tangible reality.
- According to the World Bank’s 2016 report, the UAE has ranked 31st in the global index of ease of doing business
- The Dubai International Financial Centre (“DIFC”) and the recently opened Abu Dhabi Global Market (“ADGM”) are two autonomous free zones that have their own set of laws (other than criminal laws), which are not governed by the laws of the UAE. DIFC Courts and ADGM Courts resolve commercial disputes concerning the respective free zones.
- The UAE currently has no system of federal income taxation. Hence, it is not a matter of much concern for new business
- Local laws and regulations can be passed by the government of each individual emirate in relation to matters not covered by the federal laws
Key UAE laws entrepreneurs should be aware of:
- Federal Law No. (2) of 2015 On Commercial Companies
- Federal Law No. (5) of 1985 On the Civil Transactions Law of the United Arab Emirates
- Federal Law No. (18) of 1993 Issuing the Commercial Transactions Law
- Federal Law No. (8) of 1980 Concerning the Regulation of Labor Relations
- Federal Law No. (4) of 2012 On the Regulation of Competition
- Federal Law No. (37) of 1992 Concerning Trademarks
- Federal Law No. (24) of 2006 On Consumer Protection