What NOT to do when setting up in the UAE

Having laid out all that you would need to do in setting up a Business in the UAE in Part 1 and Part 2, here are some “DON’Ts” for setting up a business in the UAE:

Do not sign a lease contract in a location you have not personally inspected

Often, advertised offers are designed to give an impression, which exaggerates the real deal. The number of visas your business is eligible to some extent depends on the type of location you register. After registration, it is possible to find that your location is not big enough to permit the number of visas you require. Changing your mind at this point could throw your budget into disarray. So do not proceed until all aspects about the office are confirmed.

Do not rely on only one source for information

Truth is, everyone makes mistakes. All scholarly journals and newspapers contain “corrections” sections in which they acknowledge errors in their prior work. Furthermore, rules change in the Department of Economic Development and the country as a whole. Hence, prior to finalizing the business plans, it is prudent to confirm the validity of your information, especially if your sole source is published data. Repeatedly reach out to your country’s trade council in the region to validate he information you have and request for new information that you might require. By doing this, you may discover that some additional documents may be needed, or that some nationalities need special permissions, or that some requirements may be waived if you request or negotiate!

 Do not blindly choose license categories

There are literally hundreds of licenses available for businesses in the UAE. Given that you would be availed to higher discounts as the number of categories you select increase, one might be tempted to just rake in licenses that would end up being redundant. Take advantage of these discounts by choosing extra categories that allows you to grow and add products in the future. For instance, if your main business activity is urban waste management, you could also consider getting a license that allows you to manage farm waste. Do not take a sharp U-turn and get a license to a totally unrelated product. If it’s not your main business, or directly related to your business, the chances that you would get clients are very slim.

 Do not open a bank account without confirming the bank charges and mandatory minimum balances

 

In this region, it is not advisable to choose a bank based on general reputation. It is very important to speak directly with your to be account manager to clarify the bank charges and the monthly minimum balance requirement. These bank levies and required monthly balance might be insignificant to well-established companies but for a startup business, these could amount to a substantial sum for a bank dependent operation. There are quite a number of banking options available and each bank has its own requirement so make sure to check at least a couple before your finally decide. Whatever you do, always confirm beforehand that the requirements and charges would not hurt your business!

 

Do not agree to a Sponsorship arrangement without a written and notarized legal agreement

 

Registering a business outside the Free Zone would require a local sponsor who would own at least 51% of the business. Handing over majority shares of your company to a stranger is very daunting even more when you are doing business abroad. A local sponsor may want to charge separately for some services or deem it fit to change his/her mind after an understanding has been reached. As such, do not rely only on verbal understandings. Insist on all agreements to be written, no matter how insignificant the detail might seem. Do not go ahead with a sponsor until both sides have a written agreement on what to expect from each other.

 

And here is a “DO”:

 

Double and triple check everything

 

No matter how well you feel you have looked into everything, that one last check could prove to save you a lot of hassle in the long run. All too often we neglect details that we assume should be in place because of common sense and expect to be cleared out later. The fact is, common sense is subjective so make sure you clarify every little detail. You don’t want to end up taking weeks working on correcting something that would have taken 5 minutes in the beginning.

Starting a Business in UAE – Part 2

 

We continue with this article the list of procedures and documents required for setting up in the UAE (Part 1 can be found here):

5. Board Resolution: The Board Resolution is a one page document that states the decision to establish the company, its name and location, who the shareholders are and the percentage of shares. It also states the names of the Directors and who is appointed as the General Manager of the company.

 

 

6. Memorandum and Articles of Association: These along with the Board Resolution are arguably the most important documents in any business setup and hence one that requires a lot of attention. Before these are issued, all Directors of the company would have to be physically present for signatures at the Department of Economic Development or its associated licensing entity, in this case Masdar. In our case, unavailability of Directors greatly delayed the production of this document – it took about 3 weeks — so it is advisable to ensure that all directors are concurrently available during this period.

 7. Bank Account: Before a trade license is issued, the business must have a location, approved name and all necessary memorandums signed. In addition to these, the business must have an operational corporate bank account containing the minimum share capital, indicated by a Bank Letter. The process of opening a bank account can be done in a few hours but some banks would require up to 4 weeks to process the application. Make sure to enquire on the processing time before you decide to go with a specific bank. Also, be careful of excessive bank charges and “minimum balances” that banks may impose.

 

8. Power of Attorney: Any business that has more than one shareholder or the shareholders are corporate entities will require a notarized Power of Attorney detailing the responsibilities of the person nominated as the General Manager. Obtaining the PoA can feel like a catch 22 situation, you license isn’t valid without it but you cannot obtain it without the license being issued first. Once our license was issued, we went to the Notary Public in the Abu Dhabi Judicial Department. More tips on this step will follow in our next article.

 

9. Staffing: No single approach to this fits all organizations; business owners would have to design this process according to their requirement. The project to setup the Nordic Innovation Hub initiative was handed over to an already established team, with a lot of experience in aiding Scandinavian companies in the region. Hence, not much staffing was performed for the Hub; the only hiring that was done was for a native Arabic speaker, which would strengthen the Hub’s networking ability within the region. We took the direct referral approach to staffing; as this has always been the safest route out there.

 

10. Visas: In the UAE, Resident visas for non-citizens are usually tied to an employment or ownership of a property. Employees of all licensed businesses are eligible for Resident visas however, the number of visas varies according to a variety of criteria, which include; office size, business nature, and category of the employee or the investor. If the business is registered as a local company then liaison with the local sponsor is required to obtain employee visas – at least the first time. To process the visa, just passports and employment letters would be required. Medical insurance is mandatory for all employees in the UAE so this would have to be processed along with the visa.

Starting a Business in UAE – Part 1

According to doingbusiness.org, it takes 6 procedures, spanning across 8 days, to start up a business in the UAE. When all the required documents are available, and all shareholders/signatories are within close proximity, 8 days is truly what it takes to setup a functional business out here. Unfamiliarity with the local business terrain delays this procedure, and hence the major reason why most new businesses go with an agent for guidance. But if you fancy the intimacy of birthing your business with your own hands, sit back, grab some Arabic dates, and enjoy the ride through our most recent office set up adventure for the Nordic Innovation Hub. In part 1 we will cover some of the procedures and documents required for your business setup:

  1. Location: The aim for a location should be one that optimizes business objectives, convenience and costs. As the concept behind the Nordic Innovation Hub is to create a soft landing zone for Nordic clean tech companies in the region, we went with Masdar City Free Zone; a pioneering carbon neutral city, with a cluster of clean tech companies located within the premises. Typical Free Zones in the UAE offer a package, which includes trade licenses, an office space and utilities. So it is more like a one-stop–shop where you get all you need at the same location. Note that the Free Zone route is just one out of multiple options available to setup in the UAE. Details about the other available options can be found here. If the Hub were not being registered in a Free Zone, we would have had to source for a suitable location and get in a lease agreement with the landlord of the property. The Department of Economic Development (DED) would inspect this property during the license approval process so it is of your interest to ensure your inspect it in accordance with the DED’s requirement prior.
  1. Name Reservation: Most entrepreneurs already have a name before reaching a decision to incorporate, so this step is usually a pretty straightforward one. However, be prepared to present an alternate name incase your first choice is already taken. Also, be aware that the UAE is a reserved country so do not to include offensive or controversial words in your business name, as these would be immediately rejected. Country names, word repetitions and names of already established brands would also not be approved. We originally went for Nordic Innovation Incubator but this was rejected as the Masdar City Free Zone is internally called the Masdar City Incubator; having incubator in the business name would have been a classic case of word repetition in the address.
  1. Trade License Application: The application process for the license basically entails the identification of license categories required by the business. Be careful to select the exact number and classes of categories required so you don’t end up with a license, which your business can’t operate under or pay too much for licenses your business does not require. The main business activity the hub was designed for is to give business assistance to incubatees in the clean tech industry. This falls under the Business Consultation license category, which is the license the Nordic Innovation Hub is currently running under.
  1. Business Plan: It only makes good business sense to have a plan that outlines what your business does, who its main customers are and projections for the future. It’s also handy to have it in place as you will need it while applying for your license.
  1. Board Resolution: The Board Resolution is a one page document that states the decision to establish the company, its name and location, who the shareholders are and the percentage of shares. It also states the names of the Directors and who is appointed as the General Manager of the company.

Part 2 of Starting a Business in the UAE can be found here!

Fundamentals of Doing Business in the UAE

DUBAI, UAE - OKTOBER 10: Modern buildings in Dubai Marina, Dubai

The UAE is undoubtedly a booming hub with a lot of business opportunities. To top it, the country inspires risk taking — a term every successful entrepreneur is too familiar with. You see this everywhere; from constructing the tallest building in the world to celebrating with extravagant fireworks.

Combining the country’s adventurist aura with the notion that every resident seems to be very rich, new businesses come into the country with the opinion that success would come easy. Not quite so! As a matter of fact, “easy” is not an appropriate word to describe any business. For instance, in the US (ranked by World Bank as the 7th easiest economy to do business), only 1 out of 10 start-ups succeed on the long run. The same statistics ranks UAE as 31st, which highlights how “not-so-easy” it could be to sustain a business in the country. So should this discourage you? Well, according to entrepreneurship 101, not at all. Interpreting odds with the entrepreneurial mind only tells you why everyone else is not in your line of job; if success were high, everyone would be a businessman.

All that being said, just like every endeavor in life, the basics form the building blocks for a solid foundation. The fundamental in relation to establishing a business in the UAE is what this post is all about. Majority of businesses that fail in the UAE do so because they build their foundation with bricks made from “general opinion” of the region. So whether you are planning for a startup, a branch, or thinking to test the UAE waters before you finally decide to fully establish a company, don’t contribute to the statistics of the odds—use these basics as your stepping stone to success.

  1. Be aware of the laws. Business laws in this region is very unique so regardless of how seasoned you are in your home country’s laws, establishing out here would require you to go back to the books. For a start, you have to be aware that as a foreign entity interested in a formal presence, you have five options: a permanent establishment, a branch office, an entity in a UAE free zone, a civil company (currently limited to Sharjah and Dubai), or a commercial agency agreement. Of all these, only the free zone allows you to own 100% of the establishments; every other option would typically require at least 51% ownership by a UAE national. But mind you, free zones are usually located in remote areas, so you would not be able to locate your establishment in city centers if you decide to take this route.
  2. Always have someone else on ground. The need to work “ON” not “IN” your business cannot be stressed enough. To succeed in the UAE, it is very important to always maintain a broad perspective of the whole business in order to navigate your strategy according to the vision of the country. The country’s leadership is very keen on meeting their targets so aligning your business with their goals can facilitate success. Don’t get caught up in rendering services, writing proposals, ordering supplies etc. The business needs you to focus on the “deeper why” i.e. assess strategies, decide on new products and develop ideas inline with trends. On the other hand, down here, nothing gets done when you don’t have an active presence. If you don’t have a competent representative dedicated to the daily requirements of the business, it would only be a matter of time before it all comes crumbling down.
  3. Culture is everything. Arabs take their culture very seriously. Including an Arabic flavor to your product or service would definitely be an attraction. If you are involved in servicing an industry, you might want to infuse an Arab flavor to peak the interest of the decision makers who are most often locals. However, as the UAE contains a large proportion of foreigners, this strategy does not directly apply to consumer goods. For such products, a target market would have to be decided upon and infusing flavors inline with the cultural inclination of this subset of people should be the focus.

There you go! The ABCs of doing business in the UAE. Keep your eyes on this blog as we are soon to launch our guide on doing business in the UAE. Whatever you do, make sure it puts you on the profitable lane.

The Nordic Innovation Hub is now fully operational!

During Abu Dhabi Sustainability Week we celebrated the opening of the “Hub” and the cooperation between Green Business Norway and Nordic Innovation.

Nordic Innovation Hub was formed after the Nordic Council of Ministers provided a mandate to assist Nordic companies within the Cleantech sector in exploring their opportunities to the UAE and wider Gulf region. The “Hub” provides a collaboration arena where experience can shared and a space managed by specialists in the clean technology industry is available. Nordic Innovation Hub is based in Masdar City, Abu Dhabi’s growing cluster for cleantech companies.

More importantly, the hub provides support for companies to assess their opportunities in the green technology market in the UAE. With this blog, we aim to reach out and maintain communication with companies internationally and form an online arena to exchange ideas and news on the topics of innovation and sustainability. Click on the follow us button on the right and keep up to date with news and our progress. If you have any comments, ideas or just want to say hello and pop in the office for a coffee, send us an email on info@ni-hub.com, we’ll be happy to meet you!

Our work now is to continue strengthening the Nordic network and foster Cooperation with the aim of minimizing the risk taking for companies internationalization effort. We are also excited today that our kick-off event has resulted in 3 companies already signing up to join the “Hub”!

Among those, and celebrated in the second event, is Green Business Norway (GBN), whose Business Intelligence Programme (BIP) has been instrumental in bringing Nordic Technologies to the UAE. The GBN BIP programme aims to proactively identify market opportunities in the UAE and wider Gulf region and engage Nordic companies within the cleantech industries in providing solutions tailor made for the local market. The programme for the Gulf region already holds great promise and has major success in China and Poland.

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Mr. Thor Sverre Minnesjord presenting GBN’s Business Intelligence Programme

The events hosted 30 participants from small and large Nordic and UAE companies including ABB and Aqualyng and we were honoured by the presence of 3 Nordic Ambassadors, H.E. Mrs. Riitta Swan, Ambassador of Finland, H.E. Mr. Jan Thesleff, Ambassador of Sweden and H.E. Mr. Jens Eikaas, Ambassador of Norway who all expressed their enthusiasm and willingness to support the “Hub”!

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The three Ambassadors taking photos and tweeting about the opening!

Representatives from Innovation Norway, Finnpro and Business Sweden, were also present and keen to collaborate for the success of Nordic business expansion in the region! We look forward to keeping up this momentum in working with Nordic companies and in being part of their journey in exploring and becoming established in the UAE!

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Participants were given a tour of Masdar City
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The event concluded with lunch and networking at our office