Interviewed: Anastasia Lelyukh
LEGAL COMPANY AHMED IBRAHIM ADVOCATES & LEGAL CONSULTANTS CONTINUES TO KNOW OUR READERS WITH THE LEGISLATION OF THE ARAB EMIRATES, PROVIDING VALUABLE ADVICE AND EXPLANATIONS TO THEM. TODAY'S OUR NEIGHBOR IS RAMI MUHAMMED AL BEDERY, LEGAL CONSULTANT AHMED IBRAHIM ADVOCATES & LEGAL CONSULTANTS.
TODAY I WOULD LIKE TO AFFECT AN SUCH TOPIC AS THE “LAW ON UAE COMPANIES”. THE MOST EASY WAY TO OPEN A PRIVATE COMPANY IN THE UAE - DO IT IN ONE OF THE FREE ECONOMIC ZONES THAT ARE AVAILABLE IN ALL EMIRATES OF THE COUNTRY. WHEN OPENING A COMPANY IN THE SEZ, A FOREIGN BUSINESSMAN WILL NOT NEED HELP AND PARTICIPATION, SO THE CALLED ONE, OF THE “SPONSOR” WHICH OTHER UAE CITIZENS MAY APPEAR. THEREFORE, THE FOREIGN ENTREPRENEUR HAS "UNLOCKED HANDS". HE CAN DO BUSINESS AS WELL AS WITHOUT INFORMING THIS "SPONSOR" AT THIS, NOT "SHAKING" WITH IT EVERY TIME OF CHANGE OR INNOVATION. THE ONLY PROBLEM WITH WHICH HE CAN FACE - THIS HOW SUCCESSFULLY WILL BE HIS BUSINESS IN THE EMIRATES, HOW MUCH DEMANDED WILL BE ITS SERVICES OR GOODS.
However, not all businessmen want to open companies in the SEZ, some of them want, for various reasons, to work in the emirate. In this case, his actions will be under the control of the "Law on the UAE Companies No. 8 of 1984".
In accordance with this law, a company operating outside the SEZ is required to have a “sponsor,” an UAE citizen who will control 51% of its shares or who will own most of it. In cases where a citizen of the UAE only “passively” participates in the creation of a company, he usually does not receive a percentage of its profits. He will receive only a certain and fixed amount during the year and no more. Depending on the agreement between the owner of the company and the "sponsor". I am sure that the majority of companies have such relations between foreign businessmen and emiratrats who are “sponsors”, despite the fact that the emirates are referred to as “partners” in legal documents.
It should be noted that sometimes because of this, various kinds of conflicts and misunderstandings arise. After all, according to the documents, the local citizen passes in one capacity, but in fact, often, he is neither the owner of the company, nor its investor, but he wants to make a profit as specified in the constituent documents of the company. In my practice, I have come across such cases quite often.
It would seem that in such cases the investor can prove his case? However, there is a way out. A defrauded investor may file a complaint against a “sponsor,” guided by Article 404, “Deception of Confidence” of the UAE's Criminal Code. Unfortunately, problems of this kind cannot always be solved with the help of criminal law. From the point of view of the consideration of such problems by civil law - this is difficult. In addition, a legislative act has recently entered into force in the UAE that if a person falsifies documents or the information in them is false, then both the investor and the sponsor will be punished in court.
Given all these facts, I would, of course, advise foreign investors to open companies in the SEZ if possible. Of course, this is not a universal solution to problems, because there are such types of businesses that are prohibited by law in the free economic zone. In SEZ, the creation of companies that work in the field of import, export, and logistics is allowed. If it comes to trade, then this type of business should be organized already through companies located outside the SEZ.
It should also be noted that the country's authorities only allow their citizens to engage in certain types of activity and doing business. For example, in real estate, not all land plots and real estate are sold on a freehold basis and are available for purchase by foreigners. Therefore, sometimes there are cases when transactions are executed in the name of a local citizen, but a foreign investor pays for it. Acting as a commercial agent or real estate agency is also permitted only to local citizens.
In this regard, I strongly recommend that foreign investors and businessmen who are true owners of capital protect themselves, their capital, their time and nerves in advance, having secured professional legal assistance before the company opens.
For example, our company has rich experience in preparing documents of this kind, papers that can help businessmen avoid problems. They, legally, will stipulate information about who actually owns the company and who owns its fixed capital. There were times when a local "sponsor" unexpectedly died, his family members, not knowing that he was not really the true owner of the capital, demanded that the foreign investor immediately pay all the money, without any right to it. In order to avoid such situations, it is important for a foreign investor to have a document in their hands that clearly stipulates who and what role plays in the company.
In addition, I would like to note that an investor should never trust anyone's promises. All documents or promises must be made in writing and, preferably, before signing them, consult with a professional lawyer. In the event of disputes, conflicts, and if the matter comes to trial, the court will consider and recognize only a written document signed and correctly executed.
Do you think it is possible to cancel the "sponsorship" system in the UAE?
For example, in Bahrain and Jordan, this has already happened. I think that in the UAE there is such a possibility. After all, the law on companies, which everyone is now guided by, was written and adopted more than 20 years ago. Some of its provisions, of course, are outdated and do not meet modern realities. Many of the changes that have occurred over the years have not been reflected in this law. Business and entrepreneurship in the country have evolved and have grown since then in a significant way. Therefore, yes, this is not only possible, but necessary.
Areas of activity in which sponsorship can be canceled should include all those areas that are not directly related and cannot affect the country's security.
How would you comment on reducing the validity of resident visas from three to two years? How can this affect business activity and business in the country?
I think that reducing the validity of resident visas can adversely affect business. My opinion is that their effect, on the contrary, should be extended to five years, or even more. Why should a foreign investor, investing in the development of the country and business, have to burden themselves with the problem of updating their resident visa? Businessmen and entrepreneurs, as a rule, are extremely busy people, their work schedule is scheduled for many months in advance. A two-year visa for them is extremely inconvenient.
It seems to me that the best way would be to create several categories of visas for businessmen. So, employees can get a visa valid for one year to three years. This will depend on their work contract.
The duration of a visa for small and medium-sized investors who invest from one to five million dollars in the development of their companies in the UAE should, in my opinion, be at least five years. Visas for investors attracting capital of more than five million dollars to the country should be issued to them for a period of at least ten years, which will become a very good incentive for them to invest more and more funds.
LAW COMPANY AHMED IBRAHIM ADVOCATES & LEGAL CONSULTANTS
The company specializes in such areas of law as: banking; resolving issues related to debt and its collection; rent, real estate, insurance, intellectual property, trademarks, commercial institutions, offshore companies, electronic commerce, international sales, maritime law, as well as criminal law and its aspects related to money laundering, criminal offenses, drugs, customs crimes, crimes in the field of information technology, violations of immigration law and much, much more.