Business Setup Laws- (U.AE)

Business Setup Laws- (U.AE)

Awareness of business laws

The UAE has several regulations in place for smooth and fair conducting of businesses. As a responsible entrepreneur, you are obliged to comply with laws that

  • govern your business
  • protect labour rights, consumer rights and intellectual property rights
  • protect health and environment and ensure safety
  • govern the free zone in which your business is set up in.

This page provides an overview of commercial regulations that govern the business enterprises and activities in the UAE, in terms of formation, practice and application.

The Economic Substance Regulations

The Economic Substance Regulations (ESR) is in line with UAE’s commitment to the international tax cooperation and transparency. The regulations require UAE's onshore and free zone companies and other business forms that carry out any of the 'Relevant Activities' listed in the regulations' framework to maintain an adequate ‘economic presence’ in the UAE relative to the activities they undertake 'Economic Substance Test.' Find more information about the 'Economic Substance Regulations' on the website of Ministry of Finance.

Business regulations related to mainland companies

The UAE Federal Law No. 2 of 2015 on Commercial Companies , as amended applies on any economic entity which practice any commercial, financial, industrial, agricultural, real estate or other kinds of economic activity on the mainland except the following:

  • companies excluded by resolution of the UAE Cabinet
  • companies wholly owned by federal or local governments and companies held in full by such companies, if a special provision to this effect mentioned in the company's memorandum
  • companies operating in certain oil, gas and power sectors in which the federal or local government directly or indirectly holds 25per cent , provided a provision to this effect is mentioned in its MoA.

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Business regulations related to free zone companies

Your business will be governed by the free zone authority in which your business is set up and in some cases might be additionally governed by another government entity.

Specific laws relating to the type of business activity you conduct will also govern your business.

 

FAQs

What laws apply to businesses in the free zones?

General business/commercial laws except the Federal Law No. 2 of 2015 regarding Commercial Companies Law apply.

In addition, your business shall be governed by laws relating to your specific business activity, in terms of practice, observance of property rights, QHSE compliance and those of the respective free zone authorities.

Law on Bankruptcy

Business bankruptcy in the UAE is governed by Federal Law by Decree No. 9 of 2016 on Bankruptcy which came into force on December 2016. The law provides a legal framework to help distressed companies in the UAE to avoid bankruptcy and liquidation through different mechanisms which include:

  • consensual out-of-court financial restructuring
  • composition procedures
  • financial restructuring
  • the potential to secure new loans under terms set by the law
  • conversion to declaration of bankruptcy and liquidation of the debtor’s assets.

 

The law does not apply to natural individuals. It applies to:

  • companies governed by the Commercial Companies Law
  • companies which are not established under the Commercial Companies Law and which are wholly or partly owned by the federal or local government, stipulating that Federal Law by Decree No. 9 of 2016 on Bankruptcy applies
  • companies and establishments in the free zones that are subject to the provisions of Federal Law No. 8 of 2004 on Financial Free Zones and which are not governed by particular provisions regulating protective composition procedures, financial restructuring and/or bankruptcy
  • any individual who is a trader as defined in the Commercial Transactions Law (Available in Arabic only).
  • licensed civil companies carrying out professional activities. 

The law aims to increase business stability in the UAE and investors’ confidence in the UAE market.

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