Dubai describes itself as the fastest-growing metropolis on the
planet and there is no disputing the fact that it is one of the world's most
desirable business centers, with very low or zero taxation, attractive
investment incentives, a stable economy, superb communications, well-educated
workforce, state-of-art infrastructure, robust economic cluster of technology,
media, finance and healthcare hubs. All these make Dubai a viable and
attractive proposition for any business and providing investors with a unique
and comprehensive value added platform.
Legal Structures for Business
The Federal Law stipulates a total local equity of not less than
51% in any commercial company and defines seven categories of business
organisation, which can be established in the UAE. It sets out the requirements
in terms of shareholders, directors, minimum capital levels and incorporation
procedures. The seven categories of business organisation defined by the Law
are:
• General partnership company
• Partnership-en-commendam
• Joint venture company
• Public shareholding company
• Private shareholding company
• Limited liability company (LLC)
• Share partnership company
Out of these seven
activities LLCs are more commonly used by the foreign investors.
Apart from these seven
categories, FDIs are encouraged through Branches and representative offices of
foreign companies and 100% foreign owned professional firms. 100% foreign
ownership is permitted in the Free Trade Zones too.
Limited Liability Company
A Limited Liability Company
can be formed by a minimum of two and a maximum of 50 persons whose liability
is limited to their shares in the Company's capital. Most Companies with
expatriate partners have opted for this Limited Liability Company, due to the
fact that this is the only option which will give maximum legal ownership i.e.
49% to the expatriates for a trading license.
51% participation by UAE
nationals is the general requirement for the Limited Liability Companies.
Therefore the normal shareholding pattern for an LLC will be:
Local sponsor - 51% and
Foreign Shareholder (s) -
49%
The minimum capital
requirement is AED 300,000 (US$ 82,000), contributed in cash. While foreign
equity in the Company may not exceed 49%, profit and loss distribution can be
mutually agreed. Responsibility for the management of a Limited Liability
Company can be vested in the foreign or national partners or a third party.
The time required to form a
company will be approximate 1-2 weeks from the date of receipt of all the
documents. The procedure and cost break up will be given upon request.
Except for foreign companies operating under special licences
within duty-free areas in the State, foreign companies shall not practice their
main activities or establish offices or
Branches thereof in the State until permit to this effect be
obtained from the Ministry after prior approval of the Concerned Authority had
been obtained. The issued permit shall specify the activity which a company is
authorized to carry out.
Such permit shall be issued if the company engages an agent to be a
natural person holding the state nationality or a company fully owned by natural
citizens, and whose entire partners be nationals too.
The Agent's responsibilities towards the company and third parties
shall be limited to rendering necessary services to the company without his
h\bearing any financial liabilities or obligations related to the company or
its branches and offices inside and outside the State.
Foreign Companies licensed to operate within the state, under the
preceding para, shall not start their business except after registration at the
Ministry in the Foreign Companies
Commercial Register.
Entries in the said Commercial Register as well as control of same
Foreign Companies' accounts & balance-sheets shall be regularized vide a
ministerial decision to be issued in this respect.
The Foreign Company's
officer or branches shall be governed by the laws applied within the State.
ARTICLE (315)
- 90 -
A foreign company or its offices or branches referred to in the
preceding Article shall not
commence their activities in the State except after entry in the
Register of commerce.
They shall have a separate balance-sheet, a separate profit a-and
loss account and shall appoint auditors.
Now what
happen if you need to trade in UAE while you are a foreign entity?
Say you are a foreign entity
trying to relocate your Commercial Business in Dubai; only companies who are
into professional activities can only get a license in Dubai. But if you are a
commercial trade company targeting Local exposure like DHL, Coco Cola, channel,
Adobe to say the few you need to Franchise.
A franchise acts like a
license for rapid expansion, a brand’s recognition and provides a consistent
method to deliver your brand‘s promise. Franchises are based on a financial
relationship between the franchisor and franchisee.
This guide summary looks at what is franchising, how it works, why
franchising is growing as a way of doing business and what makes a good
franchise. Aside from a basic understanding of franchising, the guide considers
the benefits given by a franchise and provides basic guidance to allow businesses
to benefit from innovation.
Franchising is not restricted just to fast food outlets and
gardening contractors. There are now franchises for mentoring managers and
sportspeople and franchises for internet shopping.
In the future the Dubai economy will more likely be filled by
innovative and creative franchises which seek to capitalize on their market
lead and intellectual property advantage. Franchises fill a market need and
therefore, are the fastest growing way of doing business.
The 1980’s and 1990’s brought radical changes to the employment
market and the way people work. The oil-shocks and stock market corrections,
the opening up of the world economy, reduction in subsidies, government
deregulation and downsizing thrust into the job market capable, energetic and
resourceful people who work on their own.
Franchisees are people who have been employed in the past by
someone else and a franchise opportunity is seen as a more relaxed way of
making the transition from working for an employer to being self-employed. The
risk factor of a proven business is also seen as a better option than breaking
totally new ground. Thus, franchises are taken up by people prepared to invest
in themselves, their personality and their skills who look for freedom and the
rewards of hard work. Franchises are a personal investment, in the equity
invested in the business, in the time and energy required to achieve success.
Therefore, it is important to take a few commonsense precautions when selecting
a franchise.
For more information please client here
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