There are a number of precautions that ought to be taken into consideration prior to investing in a UAE business.
With Expo 2020 Dubai fast approaching, many businesses are looking to enter the UAE market and existing businesses are looking to expand their presence. With that said, there are a number of precautions that ought to be taken into consideration prior to investing in a UAE business. We have highlighted five of those considerations below.
Despite the recent implementation of regulatory instruments that "on their face" permit direct foreign ownership of "onshore" UAE companies, the issuance of licenses, and more importantly, the ownership restrictions, remain at the discretion of the emirate specific economic departments. Although certain sectors now permit direct foreign investment, it is important to conduct the necessary due diligence to determine if your (proposed or existing) company falls within the purview and implementation of the direct foreign investment regulations.
This is generally an industry specific consideration, whereby certain companies within designated industries are required to deposit significant funds to satisfy their minimum capital requirements. With that being said, there are certain regulatory bodies within the UAE that permit the investment of those funds provided that the investments are in accordance with their regulatory parameters.
The primary labour law within the UAE was implemented in 1980, however, there have been several amendments and by-laws implemented since then that employers' need to be aware of in the UAE. The more important considerations are:
There are several emirates and "free zones" within the UAE, some of which have implemented their own labour laws; hence, it is important to identify which laws are applicable for your business.
Before commencing employment, all non-UAE nationals are required to hold a work permit and residency visa. Furthermore, as a pre-condition for obtaining a visa, employers within Dubai and Abu Dhabi are required to provide health insurance coverage for their employees.
As a means of encouraging the employment of UAE citizens, the UAE government implemented the Emiratisation programme in 2004. As part of the program, employers within designated sectors are required to employ a regulatory specified "quota" of UAE citizens. Furthermore, the statutory benefits owing to UAE citizens are governed by a separate set of regulations, hence care should be taken to ensure compliance with the applicable laws.
The typical employment considerations are also applicable within the UAE, such as implications related to the hiring and firing of employees, severance entitlements, holiday/sick/ maternity leave, working hours, and the like.
If you intend to take out business loans within the UAE, the bank or finance facility will request that cheque(s) be issued in their favour as a means of security. Although, the laws in the UAE have recently changed regarding dishonoured cheques, whereby the criminal implications have been softened for low value cheques, if the value exceeds the regulatory thresholds the issuer of the cheque will remain subject to civil claim(s) and criminal prosecution.
There is no consolidated federal data protection law within the UAE, unlike the GDPR for the European Union members states, however, there are several separate and industry specific data protection laws to be aware of. Data breaches within the UAE are treated seriously and in circumstances can result in criminal prosecution, hence the importance of implementing appropriate safeguards.
The UAE has a dynamic and fast evolving legal landscape, which allows businesses to prosper provided that they implement the appropriate resources to ensure compliance with the local laws and customs.
This article was originally published for BSA in Arabian Business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.