Setting up a business in the UAE

Generally speaking, in order conduct business in the UAE, it is necessary to establish a legal presence in the UAE. This means entrepreneurs will have to consider the option of setting up onshore in the UAE or in one of the UAE's free zones. As with any other business, the choice between establishing onshore or in a free zone will depend on many factors, including: the cost of setting up; where the business' customers are located; the type of business activity that will be carried on and any regulatory factors that may affect the business. One example of a regulatory limitation is the UAE Central Bank's Regulatory Framework for Stored Values and Electronic Payment Systems, which prohibits payment service providers, or PSPs, from incorporating in financial free zones, such as the Dubai International Financial Centre (the DIFC).

When setting up a limited liability company onshore, foreign businesses will need to be mindful of the requirement for 51 per cent of the shares to be owned by a UAE national partner. This is not required for free zones companies which permit 100 per cent foreign ownership. Neither of these options is particularly seamless or economical when compared to setting up a limited liability company in jurisdictions such as England.


It is often said that there is a financing gap for small and medium enterprises (SMEs), which many fintech businesses will be here in the UAE in the period between seed/angel funding (which could be loans/equity from friends and family in the region of US$50,000) and the larger venture capitalist firms (that may only be interested in dealing in investments of US$5 million and above). Although we are still a long way behind our colleagues in Silicon Valley, the UAE ecosystem has been developing rapidly over the last few years and there are now a mix of financing options for SMEs. Examples include government/free zone authority funds or incubator schemes, angel/seed investors, venture capitalists/private equity, traditional banks and crowd funding.

An equity-based fundraise gives investors proportionate ownership in the business, in the form of shares, in exchange for capital. As the number of investors in a business grows, so too does the number of shareholders. It is important for entrepreneurs to consider the kinds of rights shareholders will be afforded and how such rights will fit into the corporate legal framework in the UAE.

In addition to raising capital through equity, entrepreneurs may also consider more traditional forms of fundraising, such as credit facilities offered by large financial institutions. While financial institutions are able to offer sizeable loans, entrepreneurs will need to consider whether the cost of such loans can be absorbed by the new company, and whether entrepreneurs themselves are willing to give personal guarantees and therefore take on the risk of repaying loans in the event that the business is unsuccessful.

Lastly, as crowdfunding gains popularity as a fundraising mechanism in all industries, entrepreneurs considering crowdfunding in the UAE need to be aware of UAE charity and fundraising laws. For example, in Dubai, all fundraising and advertisement of fundraising activity needs to be authorised by the Islamic Affairs and Charitable Activities Department. Raising funds for a business, where donors contribute money and do not receive anything in return, would fall within the scope of the charity and fundraising rules.


The financial free zones have developed programs to alleviate some of the challenges and risks associated with starting new fintech businesses in the UAE.

The Abu Dhabi Global Market (ADGM) introduced RegLab as a means for entrepreneurs to test their business ideas in a controlled environment. RegLab allows entrepreneurs to develop and test their business ideas in a safe environment with a reduced regulatory burden. RegLab authorises participants to operate under a safe or incubator regulatory environment before graduating to the full regulatory regime of the ADGM.

The DIFC has partnered with Accenture to develop a 12-week program for entrepreneurs, FinTech Hive, which helps new business owners refine and test their business proposition. In addition to assisting businesses transform an innovative idea into a commercially viable business, FinTech Hive also facilitates access to potential investors, including global financial institutions, venture capital companies and other investors.

Seeking legal counsel

Fintech activity across the region is gaining momentum and the accelerator programs highlighted above show a clear commitment on the part of UAE authorities to develop and grow this sector. Navigating the complex set-up process and regulations in the UAE can be a challenge for any business, especially for fintech companies where many of the relevant regulations are new and have not been tested.

Entrepreneurs should consider seeking legal counsel to ensure that the appropriate entity is selected in line with the business' goals and that the set-up process is carried out in a smooth and efficient manner.

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