Posted: September 9th, 2022

Business Structures and Processes

Introduction
Today Abu Dhabi ranks among the wealthiest and fastest-growing markets globally. This makes an ideal destination to start a new business enterprise in different industrial sectors. The fact that Abu Dhabi is UAE’s administrative capital makes it an ideal location to establish a business in the Middle East. One of the main reasons why Abu Dhabi has become a preferred destination for setting up business among foreigners is because of its flexible and transparent business setup procedures. The Government of Abu Dhabi, together with the private sector, has come up with a detailed roadmap aimed at the long-term diversification and transformation of the UAE’s economy. As such, there have been huge investments made in different industries such as real estate, retail, tourism and industrial development. These developments make it ideal for anyone seeking to establish a new business within the UAE. In this case, I’m an Emirati entrepreneur willing to establish a software design and development business in Abu Dhabi that is in line with the Economic Vision 2030. The business will seek to provide accounting software, real estate software, electronic reservation and booking systems, among other web-based applications because these are among the key industries that will support the realization of the Economic Vision 2030. As such, this assessment will determine the most appropriate business structure that will support this idea based on the relevant steps required to establish a business in Abu Dhabi.
Literature Review
The Provisions That Must Be Observed When Establishing a Business According To the Relevant Laws and Regulations in the UAE
To continue with the creation of a sustainable and competitive economy and develop a secure and confident society, the 2007 – 2008 Abu Dhabi Policy Agenda was established. This policy agenda formed the foundation which the Abu Dhabi Economic Vision 2030 was created to develop a roadmap that would spearhead the economic progress of the emirates (Low, 2012). Moreover, Low (2012) adds that a task force made up of stakeholders from both the private and public sectors was formed to come up with the Vision. The Vision made was that Abu Dhabi should work towards providing a sustainable and diversified economy that encourages both entrepreneurship and enterprises while integrating itself into the global economy to create better opportunities for everybody (Low, 2012). As such, the foundation of Abu Dhabi Economic Vision is based on sustainable economic development through diversification to promote economic distribution and stability via sound government policies and the empowerment of key economic sectors. By establishing a software design and development business in Abu Dhabi that seek to provide accounting software, real estate software, electronic reservation and booking systems, among other web-based applications will support the realization of the Economic Vision 2030.
Today numerous provisions must be observed when establishing a business according to the relevant laws and regulations in the UAE. For instance, according to Law No. 2009, various business licenses have to be obtained before establishing a business in Abu Dhabi. This legislation is concerned with the issuance of licenses, and it stipulates that no legal entity or person is allowed to engage in any form of economic activity within the UAE without obtaining the right licenses from concerned authorities (Mann & Roberts, 2019). The legislation demonstrates why it is important to have a solid understanding of the necessary legal and regulatory requirements for establishing a business in the UAE.
The Federal Company Law outlines the different types of company formations that are available in Abu Dhabi. These formations may include the establishment of limited liability companies, sole proprietors, partnerships or joint-stock companies, among others. According to this legislation, at least 51% ownership by an Emirati national must exist if these companies are to continue with their operations within the UAE (Oxford Business Group, 2017). Foreign companies looking to do their business in Abu Dhabi or establishes a branch in the city should have a UAE national serving as their service agent. This service agent should also be being an Abu Dhabi resident. For foreign companies that don’t wish to set up any branch but are willing to carry out their business within Abu Dhabi can consider the option of entering into a commercial agency agreement with national service agents (Oxford Business Group, 2017). In most cases, the rules or requirements of establishing any business tend to vary depending on the nature or type of activity involved.
Finally, Registered Commercial Agency agreements exist between companies and the agents who are already registered with the UAE’s Ministry of Economy. Under this setup, only companies that are 100% UAE owned or UAE nationals can be able to register as agents (Al-Tawil, 2019). The UAE Commercial Agencies Law gives a lot of protection to the established or registered agency agreement. This protection is inclusive of the exclusive right to sell or market-specific products within one or more emirates. Additionally, registered agents have been given the powers to prevent any parallel imports from taking place, especially when similar products exist within the UAE territory (Al-Tawil, 2019).
The Required Procedures for SMEs, according to the UAE Commercial Companies Law no 2 of 2015 and other Relevant Laws in the UAE.
The implementation of Commercial Companies Law (Law No. 2 of 2015) took place in July 2015 to replace the Federal Law No. 8 of 1984. This new legislation introduced several changes that had a significant impact on several companies across the UAE. For instance, it introduced various penalties that were to be issued on any companies that didn’t comply with the Commercial Companies Law (Al-Tawil, 2019). These fines include license suspensions, and in some severe cases, deregistration of a company or criminal charges were leveled against them. In most cases, the penalty imposed tends to be dependent on the level of severity of each breach. Under the Limited Liability Company (LLC), foreign investors are given a chance to conduct their business within the UAE (Al-Tawil, 2019). Today this has become a very popular technique that foreign companies are exploiting to carry out their business in different sectors of the UAE business environment, with the exception being only being in the insurance, banking and financial investment (Al-Tawil, 2019).
Finally, companies willing to undertake business within the UAE must be willing to comply with the fees, charges and tax legislations in place. Al-Tawil (2019) argues that Apart from foreign oil companies and banks, no individual or corporate income tax is levied within the UAE. Additionally, profits repatriation is not imposed. However, since January 2018, Value-Added Tax (VAT) was introduced on all companies and operated at a 5% rate across the UAE (Al-Tawil, 2019).
Other Methods of Partnering With a Foreign Investor Willing to Conduct Business in Abu Dhabi
Professional partnerships within the UAE can be done between individuals undertaking professional or non-commercial activities. Moreover, such engagements also exist through professional licenses that are issued in an individual or group’s name. Although this kind of business can have 100% foreign ownership, they must be able to appoint a UAE national to act as an agent, as is the case with a branch or representative office (Abuljebain, 2019). The law also requires that individuals carrying out business based on professional partnerships have to be liable based on their assets for any business liabilities. Among the common professional partnerships includes businesses that offer legal advice, economic or managerial consultancy, medical services, among others (Abuljebain, 2019).
The procedure for establishing Professional partnerships with foreign investors involves first obtaining special approval from the concerned ministries or relevant government departments based on the activities that have to be undertaken (Abuljebain, 2019). Another important procedural step that has to be taken is license application to the economic development department of the relevant licensing authority. During this process, several documents, such as the national service agent-agreement, work experience certificates, can be requested for submission before the business license can be issued (Abuljebain, 2019).
Analysis
The foundation of Abu Dhabi Economic Vision 2030 is based on sustainable economic development through diversification to promote economic distribution and stability via sound government policies and the empowerment of key economic sectors. As establishing a software design and development business in Abu Dhabi that seek to provide accounting software, real estate software, electronic reservation and booking systems, among other web-based applications will support the realization of this Vision.
Based on the Federal Company Law, at least 51% ownership by an Emirati national must exist if these companies are to continue with their operations within the UAE. In this case, the fact that I’m an Emirati entrepreneur willing to establish a software design and development business in Abu Dhabi that is line with the Economic Vision 2030 means that I pass the minimum requirements under this registration. Once this critical legal requirement has been established, the next crucial step is to ensure that the right business license is obtained as stipulated under Law No. 2009. This legislation is concerned with the issuance of licenses, and it stipulates that no legal entity or person is allowed to engage in any form of economic activity within the UAE without obtaining the right licenses from concerned authorities. These are the two critical steps that I will have to undertake to establish my software design and development business in Abu Dhabi. From this analysis, we can see that it is a straight forward process that doesn’t require a lot of bureaucracy.
Another important consideration that has to be made in regards to the various penalties that have to be issued on any companies that don’t comply with the Commercial Companies Law. These fines include license suspensions, and in some severe cases, deregistration of a company or criminal charges were leveled against them. This is an important consideration that will have to be made if this business structure and registration process is to become a success. Additionally, tax obligations and other relevant charges will also have to be met to ensure that the business avoids unnecessary heavy penalties.
Finally, the procedure of establishing professional partnerships with foreign companies is also straight forwards and clear on how to go about it. Although this kind of business can have 100% foreign ownership, they must be able to appoint a UAE national to act as an agent, as is the case with a branch or representative office. In this case, the fact that I’m an emirate means that this requirement will not be an issue. Although this provision can be seen to be a very useful tool for any foreign principal seeking to limit the sales of competing goods within the emirates, it has the potential to prevent principals from appointing other agents or selling their products directly into the market.
Conclusion
From the preceding, the proposed a software design and development business in Abu Dhabi that seek to provide accounting software, real estate software, electronic reservation and booking systems, among other web-based applications will support the realization of this Vision. The fact that I’m an Emirati entrepreneur means that I will easily pass the minimum requirements under this registration since it is a straight forward process that doesn’t require a lot of bureaucracy. Moreover, it is also an advantage in the sense that it will allow for engaging in partnerships with other foreign companies. However, various legal requirements, tax obligations and other relevant charges will have to be made to ensure that the business avoids incurring unnecessary heavy penalties. In conclusion, at a time when the UAE is seeking to diversify and expand its economy through the Abu Dhabi Economic Vision 2030, there can never be a better time to establish a business in software design and development like now because it is in line with this Vision.

References
Abuljebain, R. D. (2019). A guide to setting up a business in the UAE – the legal requirements. Retrieved from https://www.hfw.com/A-guide-to-setting-up-a-business-in-the-UAE-the-legal-requirements
Al-Tawil, T. N. (2019). Piercing the corporate veil: When LLCs and corporations may be at risk. International Journal of Law and Management, 61(2), 328-344. DOI:10.1108/ijlma-07-2018-0140
Kothari. (2019). UAE Commercial Companies Law 2015 (Federal Law no 2 of 2015). Retrieved from http://www.kothariauditors.com/UAE-CommercialCompaniesLawOf2015-KeyFeatures.pdf
Low, L. (2012). Abu Dhabi’s vision 2030: An ongoing journey of economic development. World Scientific.
Mann, R. A., & Roberts, B. S. (2019). Essentials of business law and the legal environment (13th ed.). Cengage Learning. OECD & International Development Research Centre. (2013). Undefined. OECD Publishing.
Oxford Business Group. (2017, July 20). A guide to Abu Dhabi’s legal framework and most relevant laws. Retrieved from https://oxfordbusinessgroup.com/overview/inward-investment-guidelines-setting-company-and-carrying-out-business-0
Oxford. (2010). The report: Abu Dhabi 2010. Oxford Business Group.

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