9 Laws You Need to Know to Start a Business in the UAE

On Civil Transactions — Federal Law No. 5 of 1985

Federal Law No. 5 of 1985 Civil Transactions Law of the United Arab Emirates State (as amended on September 27, 2020)

This law regulates general civil transactions in the UAE and contracts between individuals and legal entities. It covers all types of contracts: lease agreements, sale and purchase agreements, contracts for services and other civil obligations. The law helps to correctly draft and execute contracts, protects the rights of the parties and resolves disputes that may arise between business partners.

Example:

Suppose that company "K" rents an office space for its business in Dubai. It signs a lease agreement with the building owner. The contract includes the terms of the lease, duration of the agreement, payment details and other important conditions. After some time, "K" discovers that the office roof is leaking, causing damage to office equipment. The company contacts the landlord to fix the issue, but the landlord ignores the requests and takes no action.

How the law will help:

• Proper contract formation. The law regulates what conditions must be included in a contract to protect your interests.

• Understanding procedural matters. The law sets out rules for defending your rights, including the use of written evidence, witness testimonies and admissions.

• Protection of property rights. The law outlines different types of property rights, including personal and real rights, as well as intellectual property rights. It establishes rules for the acquisition, transfer and protection of property rights.

Commercial Transactions — Federal Decree-Law No. 50 of 2022

Federal Decree by Law No. 50 of 2022 Commercial Transactions Law

This law is very similar to the previous one but it regulates commercial transactions and trade operations conducted by commercial enterprises and individuals engaged in trade. It covers all aspects of commerce, commercial contracts, corporate law and financial operations.

Example:

Imagine there is a company "A" that produces unique smartphone accessories under the trademark SmartStyle. The company has invested significant time and resources in promoting this trademark, making it recognizable and popular in the market. One day, "A" discovers that another company has started manufacturing and selling smartphone accessories under the name SmartStyleTech, using a similar logo and packaging. This causes customer confusion and leads to a decline in sales for company "A".

How the law will help:

• Regulation of trademark usage. The law regulates the use of trademarks and protects intellectual property rights.

• Protection from unfair competition. The management can take prompt action to protect the company’s reputation and claim compensation for damages.

• Dispute resolution and debt recovery in commercial transactions. The management will know what steps to take for quick and effective dispute resolution, minimizing losses for the company.

Additionally, the law includes the following provisions:

• Proper conclusion and execution of commercial contracts. Knowledge of the law allows to draft contracts that are difficult to challenge in court, reducing the risks of financial losses and misunderstandings with partners.

• Interest calculation on commercial loans. The management will understand what interest rates can be legally applied to loans, helping to avoid overpayments and unlawful claims from creditors.

• Maintaining commercial records and financial reporting. The management will be able to organize proper documentation, preventing legal issues and fines related to incorrect accounting and reporting.

The penalty for providing false information about the balance sheet, profits and losses, financial statements or concealing the financial situation is imprisonment for a period of 6 months to 3 years and/or a fine ranging from AED 100,000 to 500,000. This is specified in our next law — Federal Decree-Law No. 32 of 2021 On Commercial Companies.

On Commercial Companies — Federal Decree-Law No. 32 of 2021

Federal Decree-Law No. 32 of 2021 on Commercial Companies

The establishment, operation and closure of a company in the mainland UAE are regulated by this law. It outlines the requirements for company formation, capital and management structure. It is important to note that company documents can be prepared in any language but must be accompanied by a certified translation into Arabic. Violations of the requirements, such as improper financial reporting, can result in heavy fines and imprisonment.

The penalty for providing false or legally contradictory information in documents is imprisonment for a period ranging from 6 months to 3 years and/or a fine ranging from 200,000 dirhams to 1 million dirhams.

Example:

Company ABC Tech Solutions LLC, engaged in software development, faced significant financial difficulties due to the loss of key clients and unsuccessful investments. After several failed attempts at restructuring, the company's management decided that the only solution was to liquidate the company.

How the Law Helps:

• Attracting Investors. To attract foreign investors or go public, it is necessary to familiarize yourself with the provisions of the law regarding public offerings and shareholder rights protection.

• Changing the Company Structure. If there is a need to change the company's share capital or reorganize the company (e.g., mergers or demergers), it is important to follow the procedures and rules described in the law.

• Ensuring Corporate Governance. The law contains corporate governance rules that help to properly organize company management, ensure transparency and protect the interests of all business participants.

• Company Liquidation. If the decision is made to close the company, it is necessary to follow the liquidation procedures outlined in the law to avoid legal issues and fines.

Additionally, in the law:

Establishing a New Company. You will find a description of the requirements for registration and the types of companies that can be established, such as Limited Liability Companies (LLC) or Joint Stock Companies (JSC).

On Financial Free Zones — Federal Law No. 8 of 2004

Federal Law No. 8 of 2004 on Financial Free Zones

This law regulates Financial Free Zones (FSZ) in the UAE — free zones. It is important to understand it for those who want to start a business in a free zone and for those who have partners there.

Example:

A company plans to open a branch in a financial free zone and encounters the fact that there are different free zones.

How the Law Helps:

• According to the law, a separate decree is issued for the establishment of each free zone. These decrees, with details about the creation of the zone, help to choose the right free zone for the business.

• The law provides unified rules for companies in free zones. For example, while company’s activities should be limited to the zone, operations outside the zone are also permitted.

• According to the law, all provisions of federal legislation apply to free zones, except for civil and commercial laws.

On the Regulation of Employment Relationships — Federal Decree-Law No. 33 of 2021

Federal Decree-Law No. 33 of 2021 Regulation of Employment Relationships (as amended on July 29, 2024)

This law covers the rights and obligations of employers and employees in the private sector. It outlines probation periods, working hours and non-compete conditions. The law also guarantees equal pay for equal work and protects against unjustified dismissals.

Example:

In company "A", an employee wants to resign but claims that he/she has not received all due payments. In such a situation, company "A" should refer to this law to properly address the issue and comply with all legal requirements.

How the Law Helps:

• Compliance with legislation and avoiding fines. Knowledge of the law helps employers to avoid violations that could lead to fines and other legal sanctions.

• Managing labor disputes. The law provides clear procedures for resolving employment disputes, helping to address conflicts with employees fairly and efficiently.

On Emiratisation

Ministerial Decision No. 279 of 2022 Monitoring Mechanisms of Emiratisation Rates in the Private Sector and Contributions Imposed on Non-compliant Establishments (as amended on December 15, 2022)

Ministerial Decision No. 455 of 2023 Process for Implementing the Emiratisation Targets for Private Sector Establishments that employ between 20 and 49 employees in selected Economic Activities

Emiratisation is an initiative of the UAE government. The program aims to increase the number of Emirati citizens working in the private sector. Learn more about Emiratisation in our article How Businesses in the UAE with Teams of 20+ Employees Can Avoid Fines.

Example:

A company has 22 employees. The manager has heard about Emiratisation but thinks that it only applies to large companies. However, companies with 20–49 employees must hire at least one UAE national by 2024 and another one by 2025.

Why You Need to Know the Law:

• Compliance with requirements. The law sets mandatory quotas for hiring UAE nationals that must be followed.

• Avoiding fines. Failure to meet Emiratisation requirements will lead to financial penalties, which can significantly impact the business.

• Workforce planning. It is important for managers to know these requirements for proper hiring and staff development planning.

• Regulatory oversight by government authorities. The law provides for regular monitoring and inspections by the Ministry of Human Resources and Emiratisation.

For companies with 20–49 employees, starting January 2025, an annual contribution of AED 96,000 will be required. The contribution will increase to AED 108,000 per unfilled position if the company fails to hire the required two Emirati nationals.

On Consumer Protection — Federal Law No. 15 of 2020

Federal Law No. 15 of 2020 on Consumer Protection (as amended on August 8, 2023)

This law is mandatory for companies dealing with consumer goods and services and applies only to transactions with individuals. According to the law, if a product is defective, it must be repaired, replaced or refunded, and if a service is poorly provided, it must be redone free of charge.

Example:

Company "A" sells electronics. One of its customers purchased a smartphone. Four months after the purchase, the smartphone stopped working. The customer contacted the company, demanding repair or replacement of the device under the warranty.

Why You Need to Know the Law:

Consumer rights in the UAE are strictly protected, with huge fines and even prison sentences for violations. For example, Article 10 states that suppliers are required to provide warranty service, including repair of goods, product replacement or a refund in case of defects.

For violations of the Consumer Protection Law, penalties range from AED 10,000 to 2 million AED or imprisonment for up to 2 years.