Dubai: The business community on Monday hailed an amendment to the UAE Company Law that eliminates the minimum capital requirement, allowing partners in limited liability companies (LLC) to decide how much capital is required to achieve their purposes.
The move is aimed at attracting new inward investment and will help boost the country's economy.
President His Highness Shaikh Khalifa Bin Zayed Al Nahyan has issued a federal law amending some articles of the federal Company Law, according to a report by WAM.
The amending decree, which affects some articles of federal law No 8 of 1984 by reducing the cost of setting up new companies, reflects the federal government's intention to boost investment.
The law also aims at reducing bureaucratic procedures for establishing new companies. Investors no longer need any bank certificates, which cuts the time required to establish a business in the UAE, and thus enhances the investment atmosphere and attracts foreign capital.
The small and medium enterprise (SME) sector will be the main beneficiary of the amendment because of the extra flexibility it offers.
Sultan Bin Saeed Al Mansouri, Minister of Economy, praised the decree, adding that it is a positive step to encourage investment in the UAE.
"The decree reflects the wise leadership's vision, which aims to develop the investment atmosphere in the UAE and diversity of investment sectors to guarantee ongoing economic development and prosperity for UAE nationals and residents," he said.
The business community yesterday hailed the move, saying it will help the economy in a big way.
Hussain Al Mahmoudi, director-general of the Sharjah Chamber of Commerce and Industry and chairman of Sharjah Tatweer Forum, the emirates' economic growth programme, said: "In principle, this will help more companies to start up by lowering the restrictions for small and medium enterprises. It will ease the process of establishing a business and will help to launch more businesses. That is the objective of this new law".
Yousuf Ali M.A., managing director of Emke Group and board member of the Abu Dhabi Chamber of Commerce and Industry, said: "This decree will act like a catalyst for further enhancing the role of the small and medium enterprises sector in the economic development of the UAE. No doubt this will lure in more foreign investors as well as encourage the youth to come forward and realise their dreams. The new generation of educated local youth have lots of creative business plans but many were hesitant to venture out because of the minimum capital requirement. Now with that issue out of way we will see many new concepts and budding entrepreneurs making meaningful and significant contribution to the growth of UAE's economy.
"This decision will also further enhance UAE's image as the most investor friendly and pro-active economy in the region with major thrust on the non-oil related business development. I wish many people come forward to take advantage this opportunity and make the SME sector a key contributor to the GDP of this country."
Mark Beer, chairman of the British Business Group in Dubai, said: "The British Business Group supports all developments which increase the efficiency of starting a business in the UAE. This change in the law will make the country more competitive, and promote inward investment, generating jobs and business. However, the removal of the requirement for companies to have a minimum amount of capital exposes everybody to greater risk when doing business with those companies, and as such it becomes even more important for the UAE to release comprehensive insolvency laws and regulations to protect its citizens, residents and businesses".
Abid Junaid, executive director of ETA Star Property Developers, said: "It's a welcome step but coupled with this, it will pave the way for more legislation for private companies, for example majority ownership for UAE nationals and bankruptcy laws. But there must be a requirement for the LLC companies to mention what their capital is. If this is followed, then everyone will know the exact strength and share capital of that company".
Kamal Vachani, director of Al Maya Group, said: "This gives investors more confidence in investing in the UAE, which already has a good investment environment and will continue to encourage the investors to invest more in the UAE and further boost the economy of the country. The federal government's stance to boost the investment environment and leverage the UAE's standing as a highly competitive economy is commendable. Dubai commands a greater position on the world map as it has a more friendly business atmosphere as compared to other countries".
Natasha Gangaramani, director of Al Fara'a Properties, said: "We applaud this initiative of President His Highness Shaikh Khalifa Bin Zayed Al Nahyan, which complements the movement of the entire UAE towards becoming a haven not only for multinationals but for business start-ups as well. This new directive holds much promise in terms of opening up excellent opportunities for individuals - from young and aspiring Emirati entrepreneurs to companies seeking to expand their operations by establishing new businesses. Most importantly, the update made in the legislation is reflective of the UAE Government's vision, thereby providing the opportunity to further drive the economic development of the nation".
Jitendra Gianchandi, managing director, Jitendra Business Consultants, said: "In many parts of the world, capital requirement by partners of start-up companies ranges from as little as Dh25,000 to Dh75,000. The UAE's capital requirement was very high and used to put off many ventures. The new decree will have a triple effect: one, it will simplify bank procedures to a certain extent, thereby speeding the entire process; two, entrepreneurs will have more cash in hand to run their operations; and three, the UAE will now align with global standards of capital requirement".
By Suzanne Fenton, Nadia Saleem and Rachna Uppal
© Gulf News 2009
