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.