This article has been researched and written by Rehan Abid and the team at Creation Business Consultants and has not used AI in generating this article.
The United Arab Emirates (UAE) legal and regulatory system has a major effect on how companies are structured. The creation, management, and liquidation of legal entities are governed by a clear legal framework in the country. Some of the key features that affect business structure are as follows:
The country has three major jurisdictions, including onshore, free zone, and offshore to choose from. Each jurisdiction has its own set of regulations with respect to ownership, capital and legal requirements. Companies can leverage unique benefits of these jurisdictions and choose the optimum structure.
LIMITATIONS ON FOREIGN OWNERSHIP
Prior to the enforcement of Federal Law No. 26 of 2020, foreign investors were required to have a local UAE partner to incorporate an onshore firm. The current situation, however, allows foreigners to own 100% of the shares in an onshore firm for most of the business sectors. Whereas free zones and offshore jurisdictions typically allow 100% foreign ownership.
GLOBAL BEST PRACTICES
The UAE aims to implement global best practices for conducting business while fostering corporate governance, transparency, and regulatory compliance amongst businesses within its corporate eco-system. Companies must adhere to accounting standards, financial reporting and compliance regulations (e.g., Anti-Money Laundering (AML)), and corporate governance principles, according to the UAE regulators. These rules seek to increase accountability, safeguard the interests of all stakeholders, and guarantee effective corporate governance.
LAWS GOVERNING EMPLOYMENT
The UAE Labour Law which came into force in February 2022, also known as Federal Decree Law No. 33 of 2021 regarding the Regulation of Employment Relationships and its Amendments, covers the labor rights of employees in the private sector. Employment contracts, working hours, employee perks, and termination processes are all governed by the law. Companies must follow these regulations while dealing with employment-related issues.
In recent years, the UAE has adopted tax changes, including the implementation of Value-Added Tax (VAT) and Corporate Income Tax legislation. Furthermore, the UAE has signed double taxation treaties with several countries to give tax relief and prevent double taxation.