Business

Law

Nashwa Sherin
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 BTEC HND in Business
Explore Educational Institute
Table of Contents
1. LO-1: Nature of the Legal System
1.1 Definition of a Legal System
1.2 Purpose of Law
1.3 Sources and Evolution of Law
1.4 Classification of Law
1.5 Legal System of UAE
2. LO-2: Potential Impact of Law on Businesses
2.1 Company Law in UAE
2.2 Business License
2.3 Freezone, Mainland, and Offshore Companies
2.4 Contract Law in UAE
2.5 Competition Law in the UAE
2.6 Data Protection in the UAE
2.7 Consumer Protection in UAE
2.8 The Employment Contract Law in the UAE
2.9 Impact of Company, Employment and Contract Law on Business in the UAE (Case
Studies)
2.10 Analysis of potential impact on business through differentiation between
legislation, regulations and standards.
3. LO-3: Formation of Different Types of Business Organizations
3.1 Types of Business Structures in the UAE
4. LO-4: Legal Solutions to Resolve Areas of Dispute
4.1 Common Employment Contract Disputes

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 4.2 Common Corporate/Commercial Disputes
4.3 Common Commercial Property Disputes
4.4 Alternative Dispute Resolution (ADR)

1. Lo-1: Nature of the Legal System

1.1 Definition of a Legal System
A system is defined as a set of principles or procedures. Legal has also been defined as something of or
relating to law; falling under the province of the law. A legal system can thus be defined as the principles or
procedures for classifying laws, matters, or procedures related to them. It can also be defined as a body of
rules, along with guiding principles, regulations, or doctrines that apply to them and have the force of law in
a particular society (djetlawyer, 2017).

1.2 Purpose of Law

According to Holland, the purpose of the law is to ensure the well-being of society. Therefore, it is more than
just an institution that defends the rights of individuals. According to Roscoe Pound, the four main purposes
of law are to maintain law and order in society, maintain the status quo, ensure the greatest possible degree of
individual freedom, and meet the needs of people in general. He views the legal system as a form of social
engineering. The goal of law is to ensure justice. Justice can be either distributive or corrective. The goal of
distributive justice is to ensure that the community's members share social burdens and benefits fairly. On the
other hand, corrective justice aims to right the wrong. So, if someone wrongfully takes possession of
someone else's property, the court must order that person to return it to the rightful owner. This is corrective
justice. However, ensuring justice is not the only goal of law. The concept of law struggles between two
opposing needs, namely the need for uniformity and the need for flexibility. Uniformity is required to
provide certainty and predictability. When laws are generalized and fixed, people can plan their actions with
some degree of certainty and anticipate the legal consequences of their actions. This is even more necessary
when it comes to some laws, like the law of contracts or property. Social order becomes stable and secure
when laws are uniform and clear (Shitewi, 2017).
Main Purposes of Law:
 Social control - Members of a society may exhibit a variety of behaviors, interests, and social values.
Controlling these behaviors and promoting socially acceptable norms among members of society is
crucial. Social controls can be informal or formal. One type of formal social control is law. According
to Roscoe Pound, a developed, politically organized society uses law as a highly specialized form of
social control. According to Lawrence M. Freedman, there are two main ways that the law helps
achieve social control. Firstly, it outlines the rules and norms that are necessary for society and
punishes deviant behavior. Secondly, the legal system enforces numerous social control laws.
Burglars are arrested by the police, prosecuted, found guilty, sentenced, monitored by prison guards,
and released by parole officers.

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  Dispute Settlement: In society, disagreements and conflicts are inevitable, and it is the role of law to
resolve them. Therefore, disputes will be settled in court or outside of court using alternative conflict
resolution procedures.
 Social Change: Many scholars believe that law serves as a tool for social change in modern society.
Law enables us to have purposeful, planned, and directed social change. The flexibility of law
provides some degree of discretion in law, allowing it to adapt to social conditions. If the law is rigid
and unchangeable, it might not adapt to changes on its own, which could cause resentment and
dissatisfaction among the people and even lead to violence or revolution. Therefore, some flexibility
in the law is inevitable (Shitewi, 2017).

1.3 Sources and Evolution of Law

The following are the major sources of law that caused its evolution.
 Customs: Custom is one of the earliest sources of law. Social interactions in antiquity gave rise to a
variety of usages, traditions, and customs. These were used to settle disputes and pass judgment to the
people. Customs were routinely followed, and anyone who disobeyed them would face punishment
from society. Naturally, the state also started establishing and enforcing norms based on traditions
and customs as it gradually evolved into the people's organized political entity responsible for
upholding order, law, and peace.
 Religion and Morality: As soon as people began to observe, value, and fear natural forces, every
community adopted religion and religious laws. Gods and Goddesses were regarded as superior
heavenly beings. Then, religion started to exert control over people's behavior, using phrases like
"Godly sanction," "fear of hell," and "potential fruits of paradise" to advocate the upholding of
religious laws. They were compelled to adopt and abide by religious laws. Many different religions
have expressed an interest in creating clear norms for behavior.
 Legislation: Since the 13th century, legislatures have been the primary source of law. The state used
customs and the king's orders or decrees in the past to control the behavior of people. Eventually, the
legislature was incorporated into the government. It began by turning the existing social standards
into formal laws governing acceptable behavior. Legislation is today's most efficient, common, and
direct source of law.
 Delegated legislation: The legislature of a state finds it necessary to delegate some of its legislative
authority to the executive for a variety of pressing reasons, including lack of resources, lack of
knowledge, and an increase in the demand for laws. The executive then creates laws and regulations
under this system. It is known as delegated legislation. Legislation that has been delegated is now a
significant source of law. Ministers usually use delegated legislation to make changes to the law
under powers given to them in an Act of Parliament.
 Judicial Decisions: Judicial rulings have grown to be a significant source of law in the modern era.
The courts have the power to interpret laws and apply them in specific circumstances. The courts
settle disputes between parties in cases that are brought before them. The court's rulings or judicial
decisions must be followed by the parties involved. For future cases, these are also regarded as legal
precedents. However, every court ruling does not become legislation or turn into law. For example, in
India, only decisions made by the supreme court or other courts that have been designated as courts of
record, like the Supreme Court and High Courts of India, are recognized and can be applied as
legitimate laws. Lower courts can use these judicial decisions as a guide for settling their cases.
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  Equity: Equity implies justice and fairness. It also serves as a source of law. Judges reach decisions
by interpreting and applying the law to each case. However, laws might not always be completely
applicable and they might be silent in other circumstances. The judges rely on equity and act in
accordance with their sense of fairness and fair play in each of these situations. Equity is used to offer
justice to those who have been wronged, and the judgments serve as precedents moving forward
(Kumar, 2022)

1.4 Classification of Law

Firstly, law can be classified into 5 different categories:
1. Municipal (Domestic) and International Law
2. Public and Private Law
3. Substantive and Procedural Law
4. Civil and Criminal Law
5. Common Law and Equity
Municipal/Statute/Ordinary Law International Law
 Municipal law is the rule of law in that  International law is a body of rules that are
country; it is domestic law that controls the binding between nations and works to
citizens of the state. Municipal Law maintain security and peace. It is a separate
regulates the relations between individuals legal system that exists outside of a specific
subject to the jurisdiction of the respective state's legal system. Many nations have
State, as well as the relations between this incorporated international law into their
State and the respective individuals. The law national laws to the point where the United
is approved by the state. It is generally States has proclaimed that all international
regional in nature because it is used within law is now a part of American law (Kumar,
the country's borders (Kumar, 2022). 2022).
 Municipal Law can be divided into:  International Law can be divided into:
a) Public Law a) Customary International Law: These are
b) Private Law laws that have been in effect between
nations since ancient times, like the law of
the sea.
b) Treaty Law: Includes rules made by treaties
between two or more countries
c) Public International Law: rules that control
how the state behaves and interacts with
others.
d) Private International Law: rules and
principles that are used to oversee and
conclude cases involving foreign parties.

Public Law Private Law

 Public law governs relations between  The area of law known as private law is

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 individuals and the government, between concerned with the rights, responsibilities of
various institutions within a state, between private individuals and relationships
various branches of the government and between the individuals. Private law exists
between individuals that are directly related to help citizens resolve disputes involving
to society. Public law controls the actions of private matters and deals with the rights and
the state. It determines and controls the obligations of individuals, families,
organization and functioning of the state as businesses, and small groups.
well as the relations between the state and its  Private law can be divided into:
citizens. The term "public" refers to a state, a a) Civil Law (contract law, law of torts and
sovereign part of it, a body, a person holding property law)
a delegated authority under the state (Arya, b) Labour law
2021) c) Corporations Law
 Public law can be divided into: d) Commercial Law
a) Constitutional Law: Constitutional law is the e) Competiton Law
law that defines the nature of the state and f) Family Law (Divorce, Child Custody,
the structure of government. It is superior to Adoption etc.)
and above the country's general laws. It (Rawat, 2022)
describes the structure and function of the
organs of the state. Ordinary law (also
known as statutory law) derives its value
from constitutional law.
b) Administrative Law: Administrative law is
the body of law that authorizes the
establishment of public regulatory agencies
and includes all laws, judicial decisions, and
rules. Administrative agencies created this
law with the intention of carrying out their
responsibilities through rules, regulations,
orders, and decisions.
c) Criminal Law: It is the body of law that
recognizes criminal offenses, creates charges
and trials against suspects, and defines the
methods of punishment and treatment once
they have been found guilty. Its goal is to
stop crime and punish the perpetrator (Arya,
2021).

Substantive Law Procedural Law

 Substantive law establishes the rights and  Procedural law defines the legal rules by
obligations that govern individuals and which substantive law is created, applied,
organizations; it includes all general and and implemented, particularly in a court of
specific laws. Substantive law can be law. Procedural law refers to the different
derived from common law, statutes, or a processes that a case goes through. These
constitution. An example of a common law laws define the rules by which substantive
substantive right would be a claim for laws can be implemented (Samajpati, 2022).
compensation for contract breach,  It has no independent authority to decide the
negligence, or fraud (Samajpati, 2022).
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  It has independent powers to decide the fate fate of each case (Samajpati, 2022).
of each case (Samajpati, 2022).

Civil Law Criminal Law

 Civil law deals with conflicts involving  Criminal law deals with crimes committed
individuals, organizations, between the two, against society. Criminal law is the body of
in which the victim receives compensation. law that governs crimes and suitable
 According to civil law, the wrongdoer must punishments.
pay compensation to the affected.  There are varying degrees of punishment
 Civil law is initiated by a person or depending on the crime committed.
organization known as the plaintiff.  Only the federal or state government (the
 Judges usually decide cases, though juries prosecution) may initiate criminal cases.
may be involved in significant cases.  Juries almost always decide cases.
 Property, money, housing, divorce, child  Criminal law deals with serious offenses like
custody in the event of a divorce, etc. are all murder, rape, arson, robbery, assault, and
subjects of civil law (Duignan, 2016). other similar crimes (Duignan, 2016).

Common Law Equity Law

 Common law typically refers to laws based  Equity refers to laws that are similarly
on precedents and the decisions made by established by court rulings but make
judges after a case is heard in court. judgments through equitable decisions.
 This is referred to as "case law", and  Equity law comes from a sense of "natural
precedents like these are important in a legal law" which refers to judgments that deal
system that is based on common law. with fairness in justice.
 The majority of common law cases are  Equity cases are usually heard only by a
handled by juries, with judges serving as the judge who makes a decision that may result
final arbiters; penalties may include in one party taking action or the cessation of
punishment or monetary compensation. action.
 A common law court might, for instance,  As a more equitable course of action, a court
order someone who steals a computer to pay of equity might order that the computer be
back the value of the computer to the party given back to its owner (Wiesen, 2023).
who was wronged. This would be just but
maybe unfair (Wiesen, 2023).

1.5 Legal System of UAE

The United Arab Emirates follows a dual legal system of civil and Sharia (Religious) law, and more recently
added, the common law as it is applied in the Dubai International Financial Center Courts (DIFC). The basic
principles of UAE law are largely derived from Islamic Sharia (the religious system of law). However, the
majority of the UAE's codified laws are a mixture of Islamic law and other civil law, such as French and
Egyptian civil law. The UAE civil law system includes all relevant laws, which have been largely codified
and adapted to meet the evolving needs of business demands, both locally and internationally. The UAE
adopts the Sharia law system in addition to the civil dominating jurisdiction, which works together with the
criminal and civil courts, particularly in personal status courts (u.ae, 2023).
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Influence of Sharia Laws on the Businesses in UAE
The UAE's business sector is also regulated by Islamic law. For instance, the UAE has passed laws
prohibiting transactions involving excessive risk or speculation as well as unjustified enrichment. The
standard for Islamic economics is based on three Sharia principles:
 Prohibition of interest (Riba)
 Profit and loss sharing
 Uncertainty and speculation (Gharar).
These three guiding principles have given the UAE the chance to develop Islamic finance.
Other ways that the Sharia principles are reflected in the UAE's business laws include:
 The prerequisites relating to legal capacity for contract
 The conditions for clear contractual terms
 The absence of restrictions
 The particular conditions that apply to sales and purchases.
Additionally, there are many Sharia-compliant products available from the Islamic financial institutions in
the UAE. These products are complemented by standard supplementary services such as the provision of
cheque books, internet banking, and Sharia compliant credit cards (u.ae, 2023).

Court Structure
The UAE's legal system is divided into two parts: the Federal Judiciary, which is controlled by the Federal
Supreme Court, the country's highest court, and the local judicial departments, which are part of local
governments. At the federal level, the Ministry of Justice oversees all UAE courts and prosecution
departments. It also grants licenses to experts, lawyers, legal translators and appoints judges.
The general principles of these two systems are described in Articles 94 to 109 of the Constitution of the
UAE, but the specifics are left to the local judiciaries' discretion. The seven emirates each have the option of
either maintaining their own local judicial system or participating in the federal judiciary. Sharjah, Ajman
Fujairah, and Umm Al Quwain all use the federal judicial system. At the local level, Ras Al Khaimah Courts,
Dubai Courts, and Abu Dhabi Judicial Department all maintain their own independent judicial departments
with jurisdiction over cases that were not assigned to the Federal Judiciary according to the constitution
(u.ae, 2023).
Federal Judiciary Authority
According to the UAE Constitution, the Federal Judiciary is completely independent. Everyone is equal
before the law, regardless of race, nationality, or religion. The Constitution forbids arbitrary arrest, cruel
treatment, and unlawful entry into private property. The Federal Judiciary of the UAE consists of Federal
courts, Federal Supreme Court, and, Public prosecution (u.ae, 2023).
The Federal Supreme Court

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The Supreme Court consists of five judges appointed by the President of the UAE after approval by the
Federal Supreme Council. The President and the Supreme Court judges cannot be removed or have their
services stopped with the exception of the following circumstances:
 Death
 Resignation
 completion of the term of employment for those on a contract or completion of the term of a
secondment
 Retirement
 permanent incapacity to carry out their responsibilities due to ill health.
 Disciplinary discharge based on reasons and procedures specified in the law appointment to other
positions with their approval (u.ae, 2023).
The supreme court handles:
 Conflicts between member emirates or between any one or more emirates and the federal
government.
 The constitutionality of federal laws and the legality of local emirate’s legislation if they are
challenged by the federal laws or the Constitution.
 Interrogation of Ministers and senior federal officials based on request by the Federal Supreme
Council.
 Crimes directly affecting the interests of the federation, such as crimes relating to internal or external
security, forging official records or seals.
 Conflict of jurisdiction between federal and local judicial authorities.
 Examination of the constitutional legality of laws if requested by any state court
 Constitutional interpretations if requested by federal entity or any emirate
 Conflict of jurisdiction between the judicial authorities of two emirates and the classification of the
underlying legal principles in federal law (u.ae, 2023).
The judgements of the Supreme Court are final and binding upon all (u.ae, 2023).
Federal Courts
The UAE maintains one or more federal courts of first instance in the federation's permanent capital or in the
capitals of some of the emirates to exercise their judicial authority in the following cases:
 Crimes committed within the boundaries of the permanent capital of the Federation
 Personal status actions, civil actions, commercial actions, and other actions between individuals that
arise in the permanent capital of the Federation.
 Civil, commercial, and administrative disputes between the Federation and the individuals, whether
the Federation is the plaintiff or defendant.
The law controls every aspect of the federal courts of first instance, including their structure, creation,
departments, local jurisdiction, procedures to be followed before them, the oaths that their judges must take,
terms of service for judges, and the means for appealing against their decisions (u.ae, 2023).
Public Prosecution
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Another element of the UAE's Federal Judiciary system is the Public Prosecution. According to the
Constitution, the Public Prosecutor for the Federation is chosen by a federal decree with approval from the
Cabinet. The Federal Law No. 35 of 1992 concerning the Criminal Procedural Law, as amended, specifies
the jurisdiction of this entity, its methods, and the authority of its assistants over the police and other security
services (u.ae, 2023).

The system of courts

The UAE has three levels of courts for legal proceedings. Affected parties may challenge the case and
provide additional evidence in accordance with the law as per this system. The UAE courts have the
following degrees:
 Court of First-instance (federal and local)
 Court of appeals (federal and local)
 Both the Federal Supreme Court (at the federal level) and the Court of Cassation (at the local level)
are independent judicial departments in the emirates.
According to the provisions of Federal Law No. 11 of 1992, as amended by Law No. 10 of 2014 concerning
the Civil Procedural Law, if the decision of the Court of First Instance is not satisfactory, it may be
challenged before the Court of Appeal and then the Court of Cassation (u.ae, 2023).
Court of First Instance: The Court of First Instance is the initial level of court proceedings, and it has the
authority to hear all civil, business, administrative, labor, and personal status lawsuits. Its role includes
examining claims, document authentication, all urgent matters relating to disputes between people, and
defending their legal rights. Additionally, it is responsible for carrying out deeds of judicial execution as well
as executions by deputation or reference (u.ae, 2023).
Court of Appeals: According to the terms of the UAE's current civil and criminal procedural laws, the Court
of Appeal is the second level of litigation, allowing the party impacted by the Court of First Instance to
appeal their case before a higher court. Only those who have been convicted may file an appeal against the
court's decision. Anyone who has implicitly or explicitly accepted the decision is therefore not eligible to
appeal. Unless the law specifies otherwise, the deadline for appealing a decision begins the day after the
ruling is issued. The appeal period is 30 days; in urgent situations, it is 10 days. The right to appeal is lost if
the deadlines are not followed (u.ae, 2023).
Court of Cassation: The Court of Cassation is the higher court with the authority to hear cases that the Court
of Appeals has rejected. It oversees how laws are interpreted and their application. At this court, only legal
issues, such as legal violations or improper application or interpretation, are subject to appeal. If the value
claimed in the action is greater than AED 200,000 or cannot be evaluated, the appeal must be filed within 60
days of the Court of Appeal's ruling. All decisions made by the Court of Cassation are final, binding, and are
not subject to appeal (u.ae, 2023).
Court Circuits
Judicial circuits are divisions of the court based on specialty and jurisdiction. There is a circuit for each type
of case, including civil, criminal, and personal status cases, in each level of court. The division is made based
on the judges' expertise and according to the case. Each court has a president who presides over it, as well as
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a judge or judges, and administrative staff. Each court also has judicial circuits for personal status, criminal,
civil, business, labor, and real estate. In order to determine which court circuit would hear his case, the
litigant should be aware of the category under which his lawsuit falls (u.ae, 2023).
Minor Circuits: According to Federal Law No. 11 of 1992, as amended by Law No. 10 of 2014 concerning
the Civil Procedural Law (PDF), Article 30, the minor circuits are made up of a single judge who makes first-
instance judgments on civil, commercial, and labor actions whose value does not exceed AED 500,000 and
counterclaims whatever was their value. It also evaluates actions on:
 Personal status
 Division of common property
 Those related to the claim and specification of wages and salaries regardless of their value.
In all cases, minor circuits' judgments are final if the value of the lawsuit does not exceed AED 20,000 (u.ae,
2023).
Major Circuits: Three judges make up the major circuits. All civil, commercial, and labor disputes that are
not covered by the minor circuits are subject to their jurisdiction. Additionally, they deal with:
 Any temporary or summary claims and other counterclaims as well as claims related to the original
request.
 Administrative and real estate actions, regardless of their value
 Lawsuits for preventive composition and bankruptcy (u.ae, 2023).
Labor Courts: Cases involving labor disputes in the private sector are handled by labor courts. They abide
by Cabinet Regulation No. 1 of 2022 and Federal Decree Law No. 33 of 2021 Regarding the Regulation of
Employment Relationships. Labor disputes typically involve the non-payment of wages and benefits at the
end of employment, the rejection of leave, and compensation for unfair dismissal. For claims under AED
100,000, employees are exempt from paying legal fees (u.ae, 2023).
Personal Status Court (Sharia): The personal status court handles all family cases involving marriage,
divorce, alimony, guardianship, custody and visitation, proof of maturity, proof of lineage, and inheritance.
Cases involving personal status are governed by Federal Law No. 28 of 2005. According to Article 1 of the
Law, all UAE citizens must abide by the Law, with the exception of non-Muslims, who are subject to
additional rules based on their specific creed or sect. Personal status cases are typically handled without
charge by the Family Guidance Section before being sent to the Court of First Instance for trial. After paying
any applicable court costs, the dispute will be referred to the Court of First Instance if the parties are unable
to come to a mutually agreeable resolution (u.ae, 2023).
Civil Courts: Civil courts handle cases involving the financial rights of individuals and legal entities like
government agencies, businesses, and institutions. Cases may involve disagreements over the legality,
execution, cancellation, or termination of contracts, intellectual property, real estate, and mortgages. Cases
with a claimed value of more than AED 100,000 are heard by the Court of First Instance's major circuit;
those with a claim value of less than AED 100,000 are brought before the minor circuit. Civil cases are
governed by Federal Law No. 5 of 1985 (u.ae, 2023).

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Commercial Courts: Commercial courts deal with business agreements and commitments, financial
transactions, commercial papers, bankruptcy, and related issues. Cases involving the previously mentioned
issues are governed by Federal Law No. 18 of 1993 regarding commercial transactions (u.ae, 2023).
Criminal Courts: These courts deal with criminal cases that have been brought by the local or federal
prosecution in each emirate (u.ae, 2023).
The value of court decisions as precedents in the UAE
Judgments/precedents are not judicially binding, but they can be used as persuasive arguments in court. As a
result, judges in the UAE are not required to consider earlier court decisions as precedents. Judges are
unbiased and only influenced by the law and their own conscience. There is also no jury system in the UAE
(u.ae, 2023).

Smart Transformation of the Judicial System

As of May 2015, the Ministry of Justice had converted 95% of its services into electronic services in an effort
to speed up court cases. Some of these services allow users to view the hearing schedule online by searching
for the status of a case. It also includes engines for:
 eSessions
 searching lawyers
 eNotary public
 eFiling
 eMarriage
 eRefund
The Case Management System (CMS), makes information more readily available to all parties, assists people
in filing documents electronically, shortens the wait time for civil court cases, and increases efficiency. The
Ministry of Justice also introduced the legislation's ePortal, which includes all general legal texts published in
the Official Gazette since the UAE's founding in 1971. It is available in Arabic and English. Additionally, it
offers access to the following:
 The UAE Legislation (in Arabic)
 The UAE laws in English
 The UAE High Court case decisions (both civil and criminal)
 The consultations of the department of consultations (Fatwa) and legislations of Ministry of Justice
 The International Treaties signed and ratified by the UAE classified by countries and subjects.

2. LO-2: Potential Impact of Law on Businesses

2.1 Company Law in UAE
Corporate law, commonly referred to as business, enterprise, or company law, is the area of law that deals
with companies and how they are structured. It oversees the formation, management, and operation of
companies and addresses matters like mergers and acquisitions, shareholder rights, reorganization, and
restructuring.

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The UAE has a number of laws in place to ensure that business is conducted fairly and efficiently.
Entrepreneurs must abide by laws that:
 Govern their business
 Safeguard labor rights, consumer rights, and intellectual property rights.
 Protect the health and the environment, as well as ensure safety
 Govern the free zone in which their business is established.
2.2 Business License
The legal form and type of license, whether commercial, industrial, or professional, etc., are chosen based on
the business activity. There are six different kinds of licenses: commercial, professional, agricultural,
industrial, tourism, and occupational. A business or investment may engage in multiple commercial
activities. In the UAE, there are more than 2,000 business activities to choose from.
2.3 Freezone, Mainland, and Offshore Companies
Freezone Entity Mainland Entity Offshore Entity
Overview Free zones are Mainland (or onshore) In the UAE, offshore
commercial locations companies gain from businesses are not
where investors can having access to both the permitted to conduct any
exchange goods and UAE's local and direct business
services at preferential international markets. A operations. They may,
tax and customs rates. license from the however, be a
Benefits include 100% Department of shareholder in any
foreign ownership, 0% Economic Development mainland or free zone
corporate tax, and 100% (DED) of the relevant company in the UAE,
capital and profit emirate is required for allowing them to enter
repatriation. Over 40 the registration of a that market and carry out
free zones can be found Mainland LLC business operations
in the UAE. company. through those subsidiary
companies.
Ownership 100% ownership of the Prior to the new UAE Although an offshore
business is guaranteed laws, foreign company may own
for free zone companies. entrepreneurs could only 100% of the business, it
A local sponsor or own 49% of the shares is not permitted to
service agent is not in mainland companies; maintain a physical
required to launch a the remaining 51% were presence in the UAE.
business in a free zone. owned by a local
sponsor. However, the
UAE recently passed a
new law allowing
mainland companies to
have 100% foreign
ownership as of
December 1st, 2020.
Business Activity Free zone businesses are A mainland company is An offshore company
prohibited from free to conduct business can conduct business
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 operating on the anywhere in the UAE, both on the mainland
mainland. including any free zone. and in any of the UAE's
free zones.
Cost of Setup Medium-High: The cost High: Initial startup Low: Establishing an
to establish and operate expenses that business offshore company is the
a company in one of the owners on the mainland least expensive option
free zones varies greatly. can expect: because there are no
Depending on the free  License cost minimum capital
zone selected, setup  Initial approval deposits needed before
costs may vary. The from DED incorporation, no office
following four costs are  Dubai Chamber space expenses, and no
involved in setup and of Commerce visa costs.
operation:  Trade name
 License Cost approval
 Office costs  Office rent
 Equity Capital  Attestation of the
Memorandum of
Association
(MoA)
 Contract drafting
and court
agreement
attestation
 Registration with
the Ministry of
Economy
 Trade license cost
 UAE Local
sponsorship fees
Capital Requirements The minimum capital The minimum capital No minimum capital
required for a free zone requirements for requirements exist for
company formation forming a mainland offshore businesses in
varies depending on the company also vary the UAE.
emirate in which it is depending on the legal
established. form of business chosen.
Office requirements Each free zone offers a There is a mandatory There can be no physical
variety of office space office space requirement offices for offshore
options, including for mainland businesses. businesses in the UAE.
virtual desks, offices, The minimum office Their office can only be
and flexi-desks. space requirement, located outside of the
according to DED, is to UAE.
lease a minimum of 200
square feet of office
space. For mainland
businesses, virtual
offices are not permitted.
Visa Requirements The number of visas A mainland company Offshore companies are
14
 granted varies by free does not have any visa not permitted to issue
zone and the size of the restrictions. The resident visas.
office space leased. Free maximum number of
zones typically permit 3- residency visas is
6 visas. determined by the size
of the leased office
space or other business
facility. One visa is
typically allowed per 80
square feet.
Audit Requirements Audits are not necessary Mainland businesses are Offshore companies are
for all free zone required to conduct an not required to conduct
businesses. The audit at the end of every audits. They can do so if
requirement for an audit financial year. they want to stay
of accounts only applies financially updated.
to certain types of
entities.
(Creative Zone, 2022)

Contract Law
Contracts are legally binding agreements between two or more parties, and they are at the core of every
professional relationship. Whether it's a new lease, sales agreement, or renewal, a contract will outline the
terms and conditions that have been agreed upon by the parties. Whether a contract is 200 pages or only 10
pages long, it must include the following six vital elements in order to be enforceable:
1. Offer: Every contract begins with an offer. An offer is a declaration of intent to enter into a contract
with specific conditions. It is crucial to clarify what qualifies as an offer and what does not. Offers
must be specific, not vague or ambiguous.
Treat to invitation: An invitation to treat is different from an offer. When a person lists their home for sale,
they are not making an offer but an offer to treat. They are requesting offers from potential buyers to
purchase their house. This is also true for most advertising cases. The stores are offering to treat. If one
agrees to pay their asking price, they are indicating their willingness to sell something. However, they are not
obligated to accept the offer.
Counteroffer: A counteroffer invalidates the initial offer. It modifies the initial offer, releasing the original
offerer from any obligation as a result.
2. Acceptance: Acceptance is the second element of a contract. When a contract is signed, it is
considered to have been accepted. Any conditional acceptance or negotiation of additional terms is a
counter-offer.
3. Awareness: Both parties must be aware that they are entering into a new agreement for a contract to
be considered legally binding. The parties must reach what is known as "a meeting of the minds," in
which they acknowledge the existence of the contract and their consent to be bound by its terms. The
contract is void if one of the parties can show that they or the other party was forced into signing it, or
if fraud, misinterpretation, or undue influence was involved.

15
 4. Consideration: Contracts are not considered binding unless something of value is exchanged between
the parties. Contractual considerations include things like insurance, property, and services. It's
important to keep in mind that a contractual consideration can exist without monetary exchange as
well. However, the payment of money in a one-time or ongoing manner is regarded as a
consideration.
5. Capacity: A new contract can only be entered into by parties who can prove their legal capacity.
Legal capacity is demonstrated when the parties show that they understand the obligations, terms, and
consequences of the contract before signing. The contract will be void if it is determined that one
party lacked the necessary capacity. For example, a party lacks capacity, if they are thought to be
minors, are intoxicated, or if they signed the contract under threats.
6. Legality: All contracts are governed by the laws of the country in which they are signed, and they
must follow these laws in order to justify legality (Marshall, 2023).

2.4 Contract Law in UAE

In the UAE, the UAE Commercial Code or UAE Civil Code governs the contractual relationship.
Additionally, other regulations like real estate, rental, ship, financial, etc. must be followed depending on the
type of contractual relationship. For contracts signed using the DIFC or ADGM Legal Arrangements,
common law jurisdictions are in effect. Every contract must meet certain requirements, including those for
the offer, acceptance, subject matter, parties' qualifications, consideration (with the exception of gratuitous
contracts), terms and conditions, etc. To ensure that a rental agreement complies with UAE civil code, one
must seek the counsel of real estate lawyers in Dubai or the UAE (Woods, 2018).
The contract's subject matter must not violate local laws. A contract may be declared void or voidable based
on the existence of invalidating factors within the contract or during its execution. The contract may be oral
or written, and under UAE law, a verbal contract is recognized as valid so long as it is supported by
circumstantial evidence. A written contract can be signed in front of witnesses. (Woods, 2018).
A party has an obligation to act honestly and fairly when entering into a contract. This is an automatically
implied obligation that is strongly codified in the Civil Code. It is also firmly rooted in every contract
governed by UAE law, and it is a crucial factor to take into account before signing a contract in the UAE
(Woods, 2018).
According to the Civil Code, there are only three ways to end a contract in the UAE legally:
 By mutual agreement
 Through Litigation
 As permitted by law
The dispute resolution clause in any written contract is a critical component that requires careful
consideration and drafting, regardless of the agreed-upon process, choice of law, and forum. When creating
an appropriate dispute resolution clause, one should take into account:
 The contract's value and, consequently, the likely value of claims.
 Whether confidentiality of the matter is a key concern because court decisions frequently make
details of the dispute public.

16
  The location of your counterparty's assets (for enforcement purposes). If you win your dispute, can
you enforce it against your counterparty's assets in another country?
 Whether or not the contract is highly technical or specialized, potentially requiring expert input
(Woods, 2018).

Competition Law
The body of legislation known as competition law aims to stop market distortion brought on by businesses'
anti-competitive conduct. Competition law is also referred to as antitrust law in the US, Canada, and the EU.
The goal of competition law is to guarantee a fair market for consumers and producers by outlawing
unethical tactics used to gain a larger market share than what would be possible through fair competition.
This unlawful conduct does not only make it difficult for smaller businesses to enter or succeed in a market,
it also results in higher consumer prices, poor service, and a lack of innovation.
Anti-competitive behavior includes predatory pricing, which occurs when a monopoly or oligopoly charges a
high price for something that consumers have little choice but to buy; price fixing, which involves collusion
between would-be competitors to set similar prices for products; bid rigging, which involves collusion to
determine the winner of a contract in advance; and dumping, which involves selling a product at such a low
price that smaller companies are unable to compete and forced out of the market.

2.5 Competition Law in the UAE

All businesses with operations in the UAE or supplying goods and services to the UAE market must make
sure they focus on and comply with the provisions of UAE Federal Law No. 4 of 2012 Concerning
Regulation of Competition (the "Law"), which was published on October 23, 2012.
The Law includes the concept of "dominant position" in the UAE's competition regulation. According to
Article 6 of the Law, it is unlawful for a company to act in a way that abuses its dominant position in a
market sector to damage, restrict, or prevent competition. The Law specifies a variety of non-exclusive
actions that are unlawful, including those with the following objectives:
 Imposing the prices or terms of reselling commodities or services, either directly or indirectly.
 Selling a good or providing a service for less than what it actually costs with the intention of
preventing competitors from entering the market, keeping them out, or causing them losses that
prevent them from carrying on with their operations.
 Discriminating between clients in identical contracts with regard to the prices of goods and services
or the terms of purchase and sale.
 Obliging a customer not to do business with a rival company.
 A total or partial rejection of a deal under the usual commercial conditions.
 Unjustified refraining from purchasing or selling goods and services, as well as restricting or
preventing such activity, may result in the imposition of a higher price on those goods and services.
 Suspending the signing of a purchase or sale agreement in exchange for accepting obligations for
other goods or services unrelated to the original agreement.
 Deliberately spread inaccurate information about the products or their prices.
 Decrease or increase the existing supply of commodities to artificially create scarcity or abundance
(Steyn, 2020)

17
2.6 Data Protection in the UAE
The Personal Data Protection Law, Federal Decree Law No. 45 of 2021 regarding the Protection of Personal
Data, provides a comprehensive framework for guaranteeing confidentiality of information and protecting
individual privacy in the UAE. Some provisions of the law are:
1. The provisions of the law apply to the processing of personal data, whether done entirely or partially
through electronic systems, inside or outside the country.
2. The law specifies the measures for the processing of personal data as well as the general duties of
businesses that handle personal data to keep it secure, confidential, and private. It prohibits the
processing of personal data without the owner's consent, with some exceptions for situations where
the processing is required to carry out any legal procedures and rights or protect the public interest.
3. The law gives the owner of the data, the right to request that inaccurate personal data be corrected and
to request that the processing of his personal data be limited or stopped.
4. It lays out the conditions for the international sharing and transfer of personal data for processing
(u.ae, 2023).
Other laws related to data protection and privacy include:
Protection of health information and data: Information and communication technology (ICT) use in the
UAE's health care industry, including its free zones, is governed by Federal Law No. 2 of 2019 Concerning
the Use of Information and Communication Technology (ICT) in Health Fields.
Protecting data and privacy online:
a) Law on combatting rumors and cybercrimes: A comprehensive legal framework is provided by
Federal Decree Law No. 34 of 2021 on Combatting Rumors and Cybercrimes, which addresses issues
relating to the abuse and misuse of online technologies. It aims to increase protection against online
crimes committed using networks, platforms, and information technology.
b) Internet Access Management (IAM) policy: The Internet Access Management (IAM) policy is put
into effect in the UAE in collaboration with the National Media Council, Etisalat, and Du, the
country's two authorized internet service providers. According to this policy, Etisalat and Du can be
notified to remove any online content that is used for impersonation, fraud, phishing, and/or invasion
of privacy.
c) Electronic Transactions and Trust Service Law: The law governs the legality of electronic
documents and increases the legal significance and level of security of digital signatures. It outlines
the requirements for valid eTransactions, eDocuments that should be sent, received, and saved. It also
establishes licensing requirements for companies offering trust services that have the licenses to
produce, verify, and store e-signatures, eSeals, and digital certification (u.ae, 2023).

2.7 Consumer Protection in UAE

The Federal Law No. 24 of 2006 has been replaced by the Federal Law No. 15 of 2020 on Consumer
Protection. The new law seeks to protect all consumer rights, including the right to get goods and services of
a certain standard of quality and at the price stated. Additionally, it aims to protect the consumer's health and
safety while they use the products or services. The law protects consumer data and prohibits suppliers from
using it for marketing purposes (u.ae, 2023).

18
Consumers in the UAE are ensured the following rights by law:
 To be given the right information about the products they buy, use, or consume, or the services they
receive
 To receive fair compensation for losses that customers suffer as a result of using or purchasing
defective goods or receiving insufficient or unprofessional services.
 The right to be informed of their rights and obligations.
 The right to choose the best product and service available on the market in accordance with their
preferences (u.ae, 2023).
The supplier is required to:
 Protect the privacy and security of consumer's data, and avoid using it for advertising and marketing.
 Respect the religious beliefs, customs, and traditions of customers when offering them goods or
services
 Handle consumer complaints
 Give the customer a dated invoice that includes the business's name, address, the kind of goods or
services sold or provided, the price, the quantity, and any other information specified by the
Executive Regulation of this law (u.ae, 2023).
Suppliers who fail to provide accurate information and labeling, advertise false prices and information about
the products and services, or fail to replace or repair a defective product could face up to two years in prison
and a fine of up to AED 2 million (u.ae, 2023).
Ministry of Economy
The Ministry of Economy has a Department for Consumer Protection. The department's functions include:
 Monitoring the implementation of the overall consumer protection policy in cooperation with the
concerned authorities.
 Coordinating with the relevant authorities to combat unfair business practices that harm consumers
 Coordinating and collaborating with the relevant authorities to raise consumer awareness on the
consumption of goods and services, as well as to inform them of their rights and how to exercise
those rights.
 Regulating prices and attempting to limit the increase.
 Aiming to create fair competition and prevent monopolies.
 Receiving customer complaints, addressing them, or referring them to appropriate authorities
 Publishing discussions and suggestions that raise consumer awareness (u.ae, 2023).
DED
The Department of Economic Development (DED) in each emirate deals with consumer rights issues and
implements plans and procedures related to consumer protection laws. It receives customer complaints and
educates customers about their rights and responsibilities (u.ae, 2023).
Abu Dhabi Quality and Conformity Council

19
The Abu Dhabi Quality and Conformity Council is in charge of creating a quality infrastructure and
promoting quality standards in the Abu Dhabi Emirate. The Council established the 'Manaa' system of
consumer safety services, which offers reliable information on any product and its compatibility with safety
standards. A "Quality Partner Program" was also introduced by the Council to encourage companies to
follow quality, safety, and technical standards and laws through self-evaluation and voluntary commitment
programs (u.ae, 2023).
The Abu Dhabi Agriculture & Food Safety Authority
The Abu Dhabi Agriculture & Food Safety Authority is in charge of agriculture, food safety, and animal
wealth in the emirate of Abu Dhabi. It encourages and funds agricultural and food safety research, resulting
in the creation of guidelines, standards, and specifications that are in line with the most recent findings (u.ae,
2023).

2.8 The Employment Contract Law in the UAE

An employee may be hired under a fixed-term employment contract in accordance with Federal Decree Law
No. 33 of 2021 on the Regulation of Labour Relations in the Private Sector, or the "UAE Labour Law"
(which took effect on 2 February 2022). The term could be prolonged or renewed for a similar or shorter
time. If the parties continue to fulfill their obligations under the contract after it expires without being
renewed or extended, the contract is deemed renewed under the same terms and conditions as the original
contract. Any extension or renewal of the terms of the employment contract will be included in the
calculation of an employee's end-of-service benefits (u.ae, 2023).
According to the law, unlimited employment contracts must be converted into fixed-term employment
contracts in accordance with this decree law within a year of the current contract. The Cabinet may also
decide to extend the contract for additional time periods if it is necessary and in the public interest. The
provisions of this decree law will also be applicable to contracts for unlimited employment signed in
accordance with Federal Law No. 8 of 1980 (u.ae, 2023).
Probation
The employee's probationary period cannot last longer than six months or be extended for an additional
period. When the employee completes his probation period and continues to work, the probation period will
be calculated as part of his service. During the probationary period, the employer may terminate the
employee for any reason with 14 days' prior written notice. If an employee wants to change jobs while on
probation to work for another employer in the UAE, he must give the employer at least one month's written
notice. Unless the current employer and the employee agree otherwise, the new employer in this situation
must pay the current employer for the cost of hiring the employee (u.ae, 2023).
However, if an employee resigns from his job during the probation period with the intention of leaving the
job and the UAE, he must provide 14 days prior written notice. If the departing employee obtains a new work
permit and returns to the UAE within three months of his departure, the new employer will be responsible for
paying the employee's recruitment costs unless the current employer and the employee have made other
arrangements (u.ae, 2023).
Types of work arrangements:

20
  Full-time - under this system, an employee works full-time for one employer.
 Part-time - when an employee signs a contract to work a set number of hours or days for one or more
employers.
 Temporary employment - in this arrangement, an employee completes a specific task, and the
contract is then over.
 Flexible working -Working hours or days may vary under this system, depending on the needs of the
employer's business.
 Remote work- Working remotely means doing some or all of your work outside of the workplace.
 Job sharing - Under such a contract, the tasks and responsibilities are allocated among the workers
according to the agreement made in advance. The rules of a part-time work model apply to job-
sharing contracts (u.ae, 2023).
Duties of Employers as per UAE Labour Law
 A copy of the employment contract should be extracted by the employer and given to the employee.
 The employer must make it possible for the employee to carry out their duties.
 Employees should be provided with working hours and salary by the employer.
 When presenting any complaints or notices against an employee, the employer should make sure they
are accurate.
 The employer shouldn't force the employee to purchase goods from specific retailers or the employer.
 Working time shouldn't be more than eight hours per day or 48 hours per week.
 Employees should be given their annual leave by the employer.
 While an employee is on vacation, an employer shouldn't fire them or give them notice.
 Employers must provide employees with the necessary occupational health and safety means.
 The Employer should secure a return ticket if the employee does not join another workplace in the
country while abroad.
 The employer is required to compensate the employee for occupational risks and injuries (Deena,
2022).
Duties of Employees as per UAE Labour Law
 Do not assume a false identity, a false nationality, or present false documents.
 Do not make a mistake that could cause the employer to suffer a significant financial loss.
 Do not violate the safety regulations at the workplace.
 During working hours, do not be under the influence of alcohol or drugs.
 Do not harass your manager, coworkers, or employer.
 Do not skip more than 20 intermittent days or seven straight days of work without a valid reason
during a year (Deena, 2022).
Laws and Initiatives to Protect Immigrant Workers:
The UAE is a significant recipient of foreign labour. The UAE has reevaluated each step of the employment
process, from hiring to housing, to make sure that all foreign workers are treated with respect and are easily
able to report cases of mistreatment. In the UAE, it is against the law to charge recruitment fees to

21
prospective employees. The confiscation of workers' passports is prohibited, and workers do not need their
employer's permission to leave the country (u.ae, 2023).
Other reforms for immigrant employees include:
 Approving a number of ILO conventions pertaining to workers' rights.
 Passing numerous laws and resolutions that regulate employment relationships and fairly define each
party's rights and obligations. The "UAE Labour law," also known as Federal Decree Law No. 33 of
2021 on the Regulation of Labour Relations in the Private Sector, addresses issues relating to
harassment, bullying, physical violence, and psychological abuse against employees. Forced labor
and discrimination based on a person's gender, race, color, sex, religion, national or social origin, or
disability are prohibited under the law. It also outlines employers' responsibilities to employees and
prohibits hiring anyone under the age of 15 (u.ae, 2023).
 Issuing Federal Decree Law No. 13 of 2022 Concerning the Unemployment Insurance Scheme, which
makes six specific commitments available for adoption in the Global Compact for Migration. These
include:
a) Implementation of recruitment processes that adhere to international standards.
b) Access to information about rights and obligations for all migrant workers both before and after arrival.
c) Ensuring that all migrant workers—especially domestic workers—work in safe and decent conditions.
 Holding the Abu Dhabi Dialogue (ADD) and cooperating closely with the countries of origin to
address specific challenges confronting migrant labor in the Asia-Gulf migration corridors
 Establishing a domestic law that upholds the principle of informed consent, ensuring that employees
are aware of the contract's terms, the nature of their work, the location of their workplace, the
compensation they will receive, and the time allotted for daily and weekly rest.
 Ensuring that the wages protection system is enforced to make sure that workers are paid fully and on
time.
 Establishing an insurance system to protect the rights and benefits of domestic workers and private
sector employees
 Enforcing laws regarding worker safety and health and allocating more than USD $5 billion to ensure
that temporary worker accommodation meets or exceeds international standards.
 Putting in place a standard employment contract that outlines how contracts can be terminated and
make it simpler for employees to change employers
 Supporting the rights of people of determination by ensuring that they have an equal opportunity to
work and by providing them with suitable working and healthy environment.
 Promoting gender equality in the workplace
 Combating human trafficking at the regional and international levels (u.ae, 2023).
The UAE made significant efforts to improve working conditions for all employees and increase job
opportunities. Some of these initiatives include:
 The UAE government invested AED 300 billion in 2015 to promote a knowledge economy that is
driven by innovation and prepare the UAE for a world after oil.

22
  It created a number of strategies to increase employment opportunities and diversify its national
income based on a sustainable economy (u.ae, 2023)

2.9 Impact of Company, Employment and Contract Law on Business in the UAE (Case
Studies)
Impact of Company Law on Businesses in the UAE: The UAE implemented new laws governing foreign
ownership of companies in 2021. The laws allow foreign investors to own up to 100% of companies in
certain industries, including manufacturing, agriculture, and renewable energy. Businesses in the UAE have
been significantly impacted by this change, especially those in the affected industries. Some companies have
benefited from the new regulations to draw in foreign investment and grow their businesses. However, the
regulations have also increased competition in these industries, which has put pressure on some businesses.
Dispute over contract: In the UAE, a dispute took place in 2019 between a real estate company and a
construction company. The two companies disagreed over the contract's terms after the real estate company
hired the construction company to build a luxurious apartment complex. The construction company claimed
that the real estate business had broken the agreement by not paying for certain goods and services. On the
other hand, the real estate company claimed that the construction company was not entitled to payment
because it had not completed the work to the required standard. In the end, the dispute resulted in a lawsuit
that was heard in UAE courts. The real estate company was ordered by the court to pay for the materials and
services in question after the court ruled in favor of the construction company. This situation demonstrates
the value of clear and precise contracts in the UAE as well as the possible consequences of contractual
misconduct. Contract disputes can impact businesses by tying up resources and leading to financial losses. In
this case, the dispute over the terms of their contract led to a lawsuit, which likely resulted in legal fees and
other costs for both parties. This kind of dispute can be time-consuming and can distract businesses from
their core operations.
Impact of Employment Law on the Businesses in UAE: A new labor law was put into effect in the UAE in
2020 with the intention of improving worker protection. Standard working hours, annual leave, and end-of-
service compensation are all covered by the law. The law also mandates companies give employees a safe
and healthy working environment. Businesses in the UAE have been significantly impacted by this law,
especially those that depend heavily on low-wage workers. For example, in order to comply with the new
law, some businesses had to change their policies regarding working hours and overtime, which increased
labor costs. Additionally, some businesses have been fined for failing to provide a safe work environment or
for breaking other regulations.

2.10 Analysis of potential impact on business through differentiation between

legislation, regulations and standards.
The UAE's business environment is heavily influenced by regulations, legislation, and standards, all of which
have different effects on businesses. Legislation refers to laws and regulations passed by the federal or state
governments. The government enforces these laws, which have several effects on businesses. For instance,
the UAE Companies Law mandates that businesses register with the Ministry of Economy and have at least
51% of their share capital held by UAE nationals. Failure to comply with this requirement may result in
penalties and legal action. Labor laws, tax laws, and laws relating to intellectual property are additional
examples of legislation that has an impact on businesses in the UAE.
23
On the other hand, regulations are the rules and guidelines that are issued by regulatory bodies to carry out
laws. For instance, the Dubai Municipality issues rules for food safety and hygiene, while the Dubai Health
Authority issues rules for healthcare facilities. These rules may affect businesses by adding new demands,
such as the need to obtain licenses or permits, adhere to certain standards, or report on certain activities. If
these rules are not followed, the business may be subject to fines, penalties, or even closure.
Standards are a set of rules that companies can voluntarily follow to guarantee quality, safety, and efficiency.
For instance, HACCP standards provide guidelines for food safety while ISO standards provide guidelines
for quality management. By maintaining these standards, businesses can increase the quality of their
operations, goods, and services, as well as their competitiveness and reputation.

3. LO-3: Formation of Different Types of Business Organizations

3.1 Types of Business Structures in the UAE
A) Sole Proprietorship: As the name implies, a sole proprietorship is owned by a single person who
controls all aspects of its operations and owns 100% of any profits. This structure is the simplest corporate
structure in the UAE, with no special requirements other than having a residence permit in the case of a
foreign citizen. Features of a Sole Proprietorship in the UAE:
 A professional sole proprietorship can be owned by anyone of any nationality.
 If the owner is not a UAE national, an LSA or Local Service Agent is appointed to open this type of
company.
 Commercial and industrial sole proprietorships may only be owned by UAE and GCC nationals, and
they must be 100% owned.
 The LSA is supposed to take care of the business's government-related issues and license
requirements.
 There is no minimum amount of startup capital required for a sole proprietorship.
 The company's name must reflect the nature of its business.
 A sole proprietorship may only have one manager (Danburite, 2021).
A sole proprietorship is the simplest type of business. It is simple and inexpensive to get started because the
sole proprietor only has to start doing business. Additionally, it enables a business owner to test an idea
before forming a more formal business. This structure is also easy to run. Since there is only one owner, that
person also makes all decisions. These decisions can be made without meetings or votes (Bishop, 2021).
Another benefit is that all profits and losses belong to the owner and become a part of their income tax return
(Greene, 2022). This structure is best effective for low-risk, home-based, or retail businesses.
One disadvantage of this structure is that the owner has unlimited liability for debts because there is no legal
distinction between private and business assets. Additionally, the ability to raise capital is limited and the
owner alone is responsible for all day-to-day business decisions. It can also be difficult to retain high-caliber
employees (Woodruff, 2019)
B) Limited Liability Company: The most popular type of business entity in the UAE is an LLC. In an LLC,
the partners' liability is limited to the amount of their invested capital in the business. Features of an LLC in
the UAE are:

24
  Except for banking, insurance, or investment, this type of company cannot engage in professional or
consulting activities.
 An LLC may engage in any commercial or industrial activity.
 The UAE national should own 51% of the company, with the remaining 49% being owned by the
owner.
 A UAE-accredited auditor is required for an LLC formation.
 As an operational business structure, LLCs must appoint one to five managers, who can also be
chosen from among the legal partners (Danburite, 2021).
Owners of LLCs are not held personally liable for the company's debts or lawsuits because the LLC is a
separate legal entity. Since an LLC is a pass-through entity, its profits are distributed directly to its members
rather than being taxed by the government on the corporate level. Instead, members pay tax on their profits
on their own federal income tax returns. As a result, filing taxes is easier than if the company were subject to
corporate tax. Compared to a corporation, which employs officers to run day-to-day operations and a board
of directors to oversee policy, this structure offers more flexibility in management. An LLC can choose how
to distribute its profits among shareholders, unlike a corporation. For example, a shareholder who contributed
significant funding during the startup process may receive more profits, even if they have equal shares as
another participant (Wang, 2022)
Setting up an LLC requires more legal paperwork (and therefore more expenses) than operating as a sole
proprietorship. Even though having an LLC reduces personal liability in the event of a lawsuit, owners still
run the risk of losing their company and all of its assets. For instance, if you own a landscaping company and
injure a client or damage his property, he may file a lawsuit against you. Depending on how much he
recovers in damages, he might be able to take everything you have, including money and equipment (Milano,
2022).
C) Private Shareholding Company: In the UAE, this kind of business is also known as a Private Joint
Shareholding Company. It can be created through a partnership with a minimum investment of AED
5,000,000 from at least three investors. In addition to professional business, these legal structures are
compatible with all forms of commercial and industrial activity. A Private Joint-Stock Company is subject to
all of the rules and regulations that apply to Public Joint Stock Companies, with the exception of the rules
and regulations regarding public share subscriptions. Features of a PJSC in the UAE include:
 To establish a PJSC, approval from the Ministry of Economy is required.
 The company must appoint one manager.
 The minimum capital required is AED 5,000,000.
 The company may have multiple branches. Each may carry out some or all of the tasks listed in the
business's main license.
 At least 51% of the shares must be owned by a UAE national.
 A GCC national may own up to 100% of the shares (Danburite, 2021).
A private joint shareholding company (PJSC) in the UAE offers benefits like the capacity to raise significant
amounts of capital, ownership diversification, and access to a larger pool of expertise. But creating a PJSC
has drawbacks as well, such as longer and more challenging decision-making processes, vulnerability to

25
internal power struggles, required disclosure of financial information, and the requirement to follow legal
formalities and regulations.
D) Public Joint Stock Companies: A Public Share Holding Company is a legal entity with a minimum
capital of AED 30,000,000, transferable shares of equal value, and limited liability for each shareholder to
the amount of their capital. It is also known as a Public Joint Stock Company (PJSC) in the UAE. The
company's trade name cannot come from any partnering investors, unless it is the result of a shareholder's
patent or if the name is entitled to store belonging to the shareholder. Features are:
 Partners may engage in any commercial, professional, or industrial activity in accordance with DED
business regulations.
 According to DED business regulations, the company can only have a maximum of 5 appointed
managers.
 A PJSC must have at least five founders who are UAE Nationals, with their ownership percentage
ranging from 30% to 70% of the capital shares.
 The business may have multiple branches. Each may carry out some or all of the tasks listed in the
business's main license (Danburite, 2021).
A public joint shareholding company (PJSC) in the UAE has benefits such as increased visibility, access to
more capital, and a diverse shareholder base. However, establishing a public PJSC has drawbacks, including
increased regulatory oversight and disclosure requirements, slower decision-making, a chance of shareholder
conflicts, and vulnerability to takeover attempts.
E) Civil Company: A civil company is a business partnership for professionals like doctors, lawyers,
engineers, and accountants. A civil company is 100% owned by professional partners (except for engineering
civil companies), but a UAE National Local Service Agent is usually required. The civil company is only
permitted to engage in activities from a professional business. More precisely, such activities are described as
being either physical or intellectual and being carried out by one or more natural persons under a specified
capital. Features include:
 Like the case of a sole proprietorship, an LSA is necessary for the company incorporation process if
the owner is a foreign national.
 If a foreign company invests as a partner, it must be from the same type of business activity.
 This company can be set up by partners of any nationality.
 If the company is involved in engineering activities, one of the partners should be a UAE national
who owns at least 51% of the company.
 If the company is engaged in consulting activities, it must be owned entirely by professional partners
practicing the same activity (Danburite, 2021).
A civil company is not a limited liability company, in which the company's liability is limited by law. The
advantage of a civil company over an LLC is that there is no limit on the number of visas that can be granted.
The only prerequisite is that if more work visas are required, one needs to acquire additional office space. As
a general rule, every additional visa requires an additional 100 square feet of office space. However, the
number of Managers a Civil Company can have is limited (A&A, 2023).
F) Partnership: In this type of business entity, two or more partners jointly own the business and split profits
and losses according to a predetermined ratio. Partnerships can be divided into two categories:
26
 1. General Partnership: The partnership's debts are owed by the general partners, who must be UAE
nationals.
2. Limited Partnership: Partners in a limited partnership are only responsible for the debts of the
entity to the extent of their capital contributions. Additionally, the limited partner can neither be part of the
management nor have his name appear in the partnership's name (Danburite, 2021).
Features of a Partnership Company in the UAE are:
 A simple limited partnership must have UAE nationals as general partners.
 Partners of other nationalities must be limited partners.
 There are no restrictions on general or limited partners' share of ownership.
 Limited partners shouldn't get involved in general partners' managerial or administrative decisions. If
they do, they might become liable for all of the business obligations (Danburite, 2021).
A general partnership or the formation of a partnership business can be done easily, and the associated
paperwork is easy to keep up with. The most significant advantage of a general partnership business is the
simplified tax filing process because no corporate forms or double taxation are required. A U.S. Return of
Partnership Income is filed by each partner. This form specifies the partner's responsibility for the General
Partnership's profits and/or losses, which the partner can then claim on his or her U.S. Individual Income Tax
Return (Danburite, 2021).
Due to the General Partnership's lack of corporate structure, it does not exist as a separate entity from its
partners. This means that the partners are totally vulnerable to any lawsuits against the business, and their
assets may be seized at any time to pay the company's unpaid debts. So, if one partner comes to an agreement
without informing the other partners, each partner has the right to be bound by the terms of the agreement.
The same goes for credit. If any partner obtains credit in the business, all partners become equally obligated
to the terms of that debt (Danburite, 2021).
G) Branch of a Foreign Company: A branch of a foreign company must have a UAE national. The branch
must engage in the same type of business as the parent company. It has the ability to sign local legal
contracts, issue sales invoices to clients in the UAE and abroad, and lease offices in the premises. A branch
cannot manufacture, import, or export goods to or from the UAE. A branch office is incorporated by
submitting an application through the Ministry of Economic and Commerce with the assistance of a local
service agent (Danburite, 2021).
Foreign companies own 100% of the full shares in areas outside the UAE and within the parent company's
region. Additionally, this business type does not require the capital that most commercial companies require,
but it may need the parent company's budgets for the previous two years. There are no restrictions on foreign
companies submitting bids for governmental or formal entity tenders. Most importantly, this is the best legal
structure for people who want to make use of the parent company's commercial goodwill (Nour, 2022).
Some procedures may require board decisions from the parent company if the company manager or the
foreign company's agent is not authorized to do so. Furthermore, certain activities are prohibited for foreign
companies, while others, such as trading and selling products, restaurants and cafes, commercial agency
activity, and other activities, are allowed (Nour, 2022).

27
4. LO-4: Legal Solutions to Resolve Areas of Dispute
4.1 Common Employment Contract Disputes
a) Wrongful termination: Some of the most difficult cases in employment law can involve wrongful
termination. The work of an employee is frequently put on trial in these cases. In at-will employment states,
an employer may fire any employee for any reason, provided there is no contract in place and provided the
employer does not break any laws relating to discrimination or retaliation (Hue, 2023).
b) Wage Disputes: This type of lawsuit arises when an employer is accused of undercompensating an
employee for their time spent working. This may involve refusing overtime pay, tips, or regular paid breaks.
As of 2023, UAE labor law does not include any minimum salary requirements, there is no national
minimum wage or salary. However, it is required that workers' salaries and wages meet their basic needs.
Wage disputes may also involve worker misclassification, which happens when an employer wrongly defines
a worker as an independent contractor rather than an employee. This can have an impact on a worker's pay,
protections, and benefits, and cause tax issues for both parties (Hue, 2023).
c) Discrimination and Harassment Claims: Federal and state laws protect employees and job seekers from:
 Discrimination, harassment, or unfair treatment because of a person's race, religion, national origin,
sex (including sexual orientation or gender identity), pregnancy, age, or disability.
 Denial of reasonable accommodations in the workplace for an employee's disability or religious
beliefs
 Retaliation against a worker who filed a complaint about discrimination or helped with a related
probe or lawsuit
 Most employers must meet certain size requirements in order to provide employee protection.
 Discrimination complaints must carefully follow legal procedures (Hue, 2023).
d) Severance Agreements: Employers may offer certain types of compensation to departing employees in
exchange for an agreement to a contract that contains non-disclosure or non-compete conditions. These
severance agreement types usually become the focus of legal disputes. If a company is providing such an
agreement or if an employee has received one, speaking with an attorney will help them understand their
rights as stated in the contract and address any problems that might arise (Hue, 2023).

4.2 Common Corporate/Commercial Disputes

a) Real Estate Disputes: Real estate disputes include disagreements over leases, property agreements,
development, settlements, landlord-tenant relationships, acquisitions, and other issues (Durlak, 2021).
b) Contractual Disputes: Disputes can also arise as a result of misinterpretation or breach of contract. This
can happen if the contract is not performed in a timely manner if the payment is delayed, or if the terms of
the agreement are violated (Durlak, 2021).
c) Lease Disputes: Lease disputes involve any issue involving a landlord and tenant. These could be issues
with contract negotiations, failure to perform obligations during the lease term, issues with the return of the
security deposit, problems with contract rectification, or problems with the termination of the agreement
(Durlak, 2021).

28
d) Supply Chain Disputes: Conflicts between buyers and suppliers may also arise because of non-
performance, inconsistent payments, and other disruptions caused by trade and supply agreements (Durlak,
2021).
e) Conflicts over intellectual property (IP): Intellectual property disputes can involve licensing, ownership,
passing off, misleading and deceptive conduct, copyright issues, etc (Durlak, 2021).
f) Business acquisition and sale disputes: Disputes involving the sale or purchase of a business typically
result from unclear or undisclosed contracts, unforeseen liabilities, or even outright fraud on the seller's part
(Durlak, 2021).
g) Shareholder/director disputes: Conflict among shareholders or directors can arise from breaches of
directors' duties, claims of oppression, breaches of fiduciary duty, misappropriation of funds, division of
assets, etc (Durlak, 2021).
H) Breach of Confidentiality: We frequently see disputes when an employee quits their job to work for a
company that is a direct competitor and uses the contacts and knowledge they acquired there. Without a
confidentiality or non-compete agreement, the owner or director exposes the company to serious damage
(Durlak, 2021).

4.3 Common Commercial Property Disputes

 Rent and Service Charge Arrears: Business tenants sometimes face financial difficulties and fail to
cover the rent or service charges due under a lease. This issue was common during the economic
disruption caused by the COVID-19 pandemic. Landlords have a variety of options when dealing
with unpaid rent or service charges, but they should seek legal advice as soon as possible to make
sure any enforcement action doesn't conflict with their other contractual and statutory rights.
 Breach of Lease Obligations: The commercial lease has a number of conditions, requiring the parties
to abide by rules pertaining to the use of the property, subletting, insurance, alterations, payment of
rent and service charges, and regulatory compliance. Legal action is advised in cases where a
covenant has been breached. Failure to address the issue may be interpreted as consent to the breach,
and the landlord may lose the right to enforce the lease terms in the future if they choose to do so.
 Dilapidations: The tenant is generally required to keep the property in good repair and condition,
including when it is returned. This can lead to some serious disputes, especially if expensive and
significant repairs are required. Disputes can also arise over liability for specific areas if this is not
clearly stated from the start. If the property is not returned to a good state of repair, the landlord must
take legal action to claim damages from the tenant.
 Ending a Lease: If a tenant wants to end the lease, they may have options like subletting or assigning
the lease available to them. To protect the landlord's rights and interests, it is crucial that this is
handled carefully. A tenant who has reached the end of their lease may want to discuss a renewal. To
deal with the negotiating and signing of the new lease, both parties should have legal representation.
A dispute over the termination of a lease can be expensive for the losing party.

4.4 Alternative Dispute Resolution (ADR)

A) Negotiation: Negotiation is usually the first step taken before resorting to other ADR methods. It allows
for greater flexibility for the parties and is more informal. In essence, negotiation is just the parties
29
identifying a problem and meeting to resolve it—they are in control of the process and the outcome. This
may seem obvious given that business owners negotiate when it comes to relationships and disagreements all
day, every day. However, when a problem becomes severe enough, it can be useful to understand informal
negotiation as a first step in the ADR process (Waks, 2022).
 For example, a business partnership dispute where parties negotiate the terms of a buyout agreement,
with the assistance of their lawyers, to avoid litigation.
 Fast and informal dispute resolution methods, such as negotiation, are typically less stressful.
Additionally, it saves money and time. This ADR technique ensures confidentiality while preventing
publicity. This technique might also help parties communicate better, by maintaining or even
strengthening relationships between them.
 However, some organizations might employ this method as a stalling strategy. Parties are also under
no obligation to continue negotiations or mediation. This method also does not produce legal
precedents. Lack of neutrality in negotiations may lower the chances of reaching an agreement,
especially in complex disputes or those involving multiple parties.
B) Mediation: Mediation is a type of assisted negotiation. Parties seek the assistance of a neutral third party
(the mediator) to assist them in resolving their conflict. Mediation necessitates a lot of involvement from both
parties. Mediation can be informal, with the mediator being a friend, family member, or trusted advisor. In
the case of informal mediation, it is crucial to choose a person who both parties agree on and who can bring
some kind of expertise to the table. Mediation can also be formal, in which case the parties hire a
professional, neutral third party. Formal mediators are skilled in negotiations and assist parties in resolving
conflicts in a way that pleases both parties (Waks, 2022).
 Example: A landlord and tenant dispute over unpaid rent. The parties can engage the services of a
mediator to help them reach a payment plan or to negotiate a settlement agreement.
 The mediator allows the parties to reach an agreement on their own, resulting in greater party
autonomy. The agreement becomes binding once an agreement is signed consenting to the settlement,
and the parties are only required to abide by it if they agree to it. Mediation involves a private
meeting known as a private caucus, which allows parties to maintain confidentiality while providing
the mediator with complete information to suggest a suitable solution. Additionally, it keeps the
parties on good terms and settles the conflict quickly (Mathur, 2022).
 The drawback of this approach is that since it is up to the parties to reach a settlement, there is no
guarantee that the mediation process will actually resolve the conflict. There is also a lack of formal
procedure in mediation, which can make it difficult for disputed parties to reach an agreement. The
outcome of dispute resolution is determined by the parties' will, not by the legality of the issues.
Additionally, not every dispute issue will come up for discussion during mediation. Mediation is not
appropriate when the relationships between the parties are such that they are unable to communicate
with each other because it involves the parties talking and negotiating with each other to resolve the
dispute (Mathur, 2022).
C) Conciliation: Like mediation, conciliation is a confidential and flexible process. It also aims to resolve
disputes in a way that both parties find acceptable and is facilitated by a neutral third party (a conciliator). In
contrast to mediation, the conciliator presents a proposed solution to the parties, and the parties take it from

30
there. The proposed solution is not binding, but any formal agreements reached following conciliation may
be made legally binding, just like in mediation (Waks, 2022).
 Example: A family dispute over child custody, where parties engage the services of a conciliator to
help them reach an agreement on a parenting plan.
 The informality and flexibility of the conciliation process can be an advantage. The conciliator is
usually an expert in the area of dispute. Like all other forms of ADR, conciliation proceedings are less
expensive than courtroom litigation and if unhappy with the process, the parties have the liberty to
approach the court of law (STA, 2019).
 The disadvantage is that the process is not binding on the parties to the dispute. The parties may be
unable to resolve their dispute, and there is no means of appeal (STA, 2019).
D) Arbitration: Compared to negotiation, mediation, or conciliation, arbitration is more formal and can
resemble litigation. An arbitrator hears the dispute from the parties and then issues a ruling. Parties can agree
to arbitrate before or after a conflict occurs (Waks, 2022).
 Example: A dispute between two construction companies over a breach of contract. The parties can
agree to submit the dispute to an arbitrator, who will make a binding decision on the issue.
 The real advantage of arbitration over formal litigation (aside from cost and efficiency) is that the
parties are free to establish the arbitration's rules, which can be much more flexible than the formal
civil procedure required in court. For example, parties may choose the number of arbitrators, the
forum, and the fees. Additionally, unlike judges, arbitrators have a great deal of flexibility to work
with the parties before them (Waks, 2022).
 The drawback of arbitration is that both parties lose their right to appeal, which may leave one party
feeling treated unfairly. When compared to litigation, arbitration is generally thought of as a more
cost-effective process. However, in situations where little money is at stake, this feature is
meaningless. A judge must adhere to certain rules and guidelines when accepting evidence in a court
of law but arbitrators can use any information provided to them. The confidentiality of arbitrary
hearings can be an advantage and a drawback because a lack of transparency could lead to bias in the
process and, ultimately, injustice (Kumari, 2022).
E) Litigation: Civil litigation, the most well-known form of dispute resolution, usually involves a defendant
vs. a plaintiff in front of a judge or a judge and jury. The judge or jury is responsible for weighing the
evidence and making a decision. The information shared during hearings and trials typically becomes part of
the public record and remains there. Lawyers generally dominate litigation, which frequently ends in a
settlement agreement during the pretrial period of discovery and preparation (Harvard, 2014)
 Example: A dispute between two companies over intellectual property rights. The parties can hire
lawyers to file a lawsuit and represent them in court to protect their legal rights.
 Litigation can help protect intellectual property, which means it can help owners and creators of
inventions, music, and writing enforce their legal rights. This can apply to trade secrets, patents,
trademarks, and copyright. Litigation can provide long-term benefits in the form of precedent. This
means that businesses can profit from other earlier rulings in cases that are similar to their own, which
can support their case. Comparable disputes can be measured rather than starting from scratch, which
can be helpful. The decision made in a legal proceeding will be made public. This can help limit

31
 damage and prevent rumors or false information from circulating. This might limit speculative posts
on social media (James, 2022).
 The disadvantage is that it can be a lengthy process. Due to the large number of cases waiting to be
considered in courts, there often exists a huge backlog waiting to be assigned a court date. This means
more expenses in addition to the emotional stress that comes with awaiting the lawsuit's start date.
Litigation can make it difficult for business and personal relationships to endure the effects of a court
appearance where a ruling has been made. Litigation usually takes a long time to reach an end. A
resolution and judgment can sometimes take several years. With Litigation, it is usually impossible to
use opportunities for communication by developing personal relationships (James, 2022).

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