• One owner
• Unincorporated
• Personal income tax on profits
• Unlimited liability

Often referred to as a sole trader, a sole proprietorship is an unincorporated business with just one owner who pays personal income tax on profits earned. Any debts or losses incurred cannot be shared with other individuals.

It is the cheapest and easiest business structure to establish, with the individual legally responsible for all aspects of the business.

Simplest and most cost-effective structure, but comes with full personal liability for business debts.

• For professionals
• Partnership structure

A business partnership for professionals like doctors, lawyers, engineers and accountants.

Suitable for specific professional services, allowing collaboration while maintaining individual practice.

• Corporate structure
• Limited liability for owners

An LLC is a corporate structure which protects its owners from being personally responsible for any liabilities.

Offers personal asset protection while maintaining flexibility in management and taxation.

• Two or more owners
• Shared responsibilities and liabilities
• Unlimited liability

A general partnership is a business arrangement whereby two or more individuals agree to share responsibilities, assets, profits, financial and legal liabilities of a jointly owned business; granting unlimited liability.

Allows for shared management and resources, but all partners are fully liable for business debts.

• Limited number of shareholders
• Private share sales
• Limited liability

A Private Limited Company is owned by a relatively small number of shareholders, and the sale of company shares is handled privately. An individual/owner is only responsible for the business's financial liabilities to the extent that they invested in the company.

Offers limited liability and control over ownership, suitable for small to medium-sized businesses.

• Public ownership
• Publicly traded shares
• Limited liability

A public company is a corporation whose ownership is open to the public. Anyone can buy shares in the company's stocks. A limited company is a corporation in which an individual's financial liability for the company is restricted to the capital investment.

Allows for public investment and growth potential, but comes with increased regulatory requirements.

• Chamber of Commerce and Industry websites
• Specific websites for each Emirate

Corporate information is available at the Directory section of the relevant Chamber of Commerce and Industry site:

• Abu Dhabi: www.abudhabichamber.ae
• Ajman: www.ajmanchamber.ae
• Dubai: www.dubaichamber.com
• Fujairah: www.iccuae.com
• Ras Al Khaimah: www.rak.ae
• Sharjah: www.sharjah.gov.ae
• Umm al-Quwain: www.uaqchamber.ae

Use the appropriate Chamber of Commerce and Industry website for each Emirate to access corporate information.

• Chamber of Commerce and Industry websites
• Private reporting agencies

You can obtain information on the financial state of affairs for companies and industry at the relevant Chamber of Commerce and Industry site. There are also numerous private reporting agencies offering credit checks.

Combine Chamber of Commerce data with reports from private agencies for comprehensive financial information.

• Credit reports
• Online services

Normally you find this information in a credit report. Credit reports are offered as a service online.

Utilize online credit report services to check for existing judgments against businesses.

• Litigation is document-focused
• Little oral advocacy
• Case must be proved on paper

Litigation in the Middle East tends to be almost completely document focused. There is little oral advocacy, and it is vital that a case can be proved on paper. In order to substantiate any claim, each stage of the contract must be evidenced.

Maintain comprehensive documentation for all stages of a contract. Be prepared to prove your case primarily through documents.

• Original contract
• Original invoices and credit notes
• Original orders and order confirmation
• Clear statement of account
• Proof of delivery

A claimant is free to choose which evidence it wishes to submit in support of the claim, but as a minimum, it is advisable to have at least the following available:

• Original contract
• Original invoices and credit notes
• Original orders and order confirmation
• Clear statement of account
• Proof of delivery

Documents must be original, as copies carry far less weight with the court and, if denied by the defendant, can be ignored by the court.

Always keep original documents. Copies may be disregarded by the court if challenged by the defendant.

• All documents must be translated to Arabic
• Court-approved translator required
• Translation costs generally not recoverable

Any document submitted to the court will need to be translated into Arabic by a court-approved translator, for which there will be translation costs. Those costs are generally not recoverable in the proceedings.

Budget for translation costs when considering litigation. These costs are typically not recoverable even if you win the case.

• Allowed under UAE Civil Code
• Provides security against buyer's default or insolvency
• Right extinguished if possession is lost

Article 415 of the UAE Civil Code sets out that either party to a contract can retain the things contracted until they receive the consideration due.

Retention of title allows the seller to retain ownership over the goods supplied until certain contractually defined conditions are met, therefore providing the seller with a form of security against the buyer's default or insolvency.

The party that retains the property must preserve it for the time being and must give to the debtor any additional benefit derived from such property (Article 417, UAE Civil Code). However, the right of retention will be extinguished if possession is lost (Article 419, UAE Civil Code).

Consider including retention of title clauses in contracts, but be aware of the obligation to preserve the property and the risk of losing the right if possession is lost.

• Mandatory warning notice
• Specific content requirements
• Two-week notice period

A warning notice to the debtor is mandatory before filing any enforcement claims. The warning notice should include:

• Creditor name and overview of the claim
• The total amount of the claim, including penalties (interest)
• Payment method required
• A warning that the claim will be enforced through the enforcement authority in case the claim is not settled by the required date
• Information on how to dispute the claim

If this measure has been taken and the payment still has not been made after the two-week notice period (according to the law), the creditor may file for enforcement.

Always send a comprehensive warning notice before initiating legal proceedings. Ensure all required information is included and allow for the two-week notice period.

• Interest can be considered as damages
• Cultural reluctance to pay interest

The chief justice of the Supreme Court in a suit filed by a bank for recovery ruled that 'ordering the borrower to pay interest for late payments can be considered as damages, which is compliant with both UAE law and Sharia's, however, from a cultural point of view and in practice, debtors in the UAE do not pay interest on delayed payments.

While interest can be legally justified, be aware of cultural resistance to paying interest on delayed payments in the UAE.

Law No. 5 of 1985 regarding civil transactions (Civil Code) contains general rules relating to limitation periods. Unless stated otherwise, the litigation period is fifteen years from the clause of action, - usually the date on which a debt falls due.

Be aware of the different limitation periods for various types of claims. Act within the appropriate timeframe to preserve your right to legal action.

15 years

Three years

Three years

Ten years

One year

Primary method for resolving commercial disputes in the UAE.

Consider including arbitration clauses in contracts. Be aware of mandatory mediation for smaller claims in Dubai.

The UAE is a signatory to the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (New York Convention). Parties may submit any dispute for settlement assuming this is stated within signed contracts between the affected parties. Parties must agree on dispute settlement and obtain a judgement from the arbitration court which would hence be granted an enforcement clause.

Less common. Certain cases in Dubai which are less than the value of AED 100,000 must undergo mediation before litigation can commence.

In the UAE litigation is entirely court-driven, and the courts have control over scheduling of hearings, appointment of experts, etc.

Understand that UAE courts operate differently from Western legal systems. Be prepared for a judge-driven process with less emphasis on precedent.

Such courts do not follow the expectations of the "balance of probability" test in civil claims or the "beyond all reasonable doubt" test in criminal matters.

Any final decision is at the discretion of the involved judge.

The legal system in the UAE is based on the Constitution of the United Arab Emirates 1971 (Constitution).

Understand the complex legal system in the UAE, with federal and individual Emirate jurisdictions. Be prepared for proceedings in Arabic.

The federation has sovereignty in all matters assigned to it under the Constitution. The individual member Emirates have sovereignty over their own territories in all matters not in the exclusive jurisdiction of the federation, as set out in the Constitution.

The collective ruling of the UAE is executed by the seven rulers of each member state.

Emirates members, excluding Abu Dhabi, Dubai and Ras Al Khaimah, are part of a federal judicial system. Others have independent judicial systems.

All court procedures are in Arabic and the courts are split into: Court of First Instance, Court of Appeal, Court of Cassation (Ras Al Khaimah does not have a Court of Cassation).

UAE (excluding free zones) operates under a civil law system and statutes are the primary source of law. Higher court judgements are not binding on lower courts.

Be prepared for a civil law system based on written pleadings and documentary evidence. Understand the role of court-appointed experts in technical matters.

Each court decision is taken by the responsible judge who will investigate the case evidence and apply the necessary laws to supporting arguments. There is no concept of a jury trial.

All proceedings in UAE civil matters are based on the written pleadings of the parties, supported by documentary evidence, and hence not executed verbally.

Often court-appointed experts are required to be drafted into cases relating to finance, accounting, and other technical matters.

Reports from field experts are not decisive in hearings and may be challenged by their party. Verbal evidence can only be given to establish a fact in a civil case with the permission of the court and the right to cross-examine witnesses is severely restricted.

The Sharia is a body of religious, ethical, and legal rules. The Islamic Sharia follows the fundamental roots of: The Koran (a collection of divinely ordained rules) and The Sunna (which consists of the precepts, actions, and sayings of the Prophet (Hadith)).

While Sharia influences the legal system, commercial outcomes are generally similar to those under Western law.

Sharia is based upon justice and equity and commercial outcomes are generally the same as those which would be attained under Western law.

Legal action taken before the court of first instance may last anywhere between twelve to eighteen months subject to the case and availability of the relevant parties.

Be prepared for potentially lengthy court proceedings, lasting up to 18 months or more.

Court costs in Dubai:

For claims less than AED 500,000:

• 6% of the claim value
• Maximum cost: AED 20,000

For claims between AED 500,000 and AED 1,000,000:

• Cost capped at AED 30,000

For claims greater than AED 1,000,000:

• Cost capped at AED 40,000

Additional fees for provisional orders:

50% of the initial filing fee, with caps based on claim value:

• Claims less than AED 500,000: Cap of AED 10,000
• Claims between AED 500,000 and AED 1,000,000: Cap of AED 15,000
• Claims more than AED 1,000,000: Cap of AED 20,000

Consider potential costs when deciding to pursue legal action. Be prepared for high court fees, but understand that a significant portion of costs may be recoverable if successful.

The cost is 4% of the claim for the first AED 100,000 submitted, and 5% of the amount over AED 100,000 (capped at AED 30,000).

The court fee for civil or commercial claims is 5% of the claim value (capped at AED 40,000).

• Attachment and sale of moveable assets
• Attachment of debtor's income sources
• Attachment and sale of immoveable assets
• Bankruptcy proceedings
• Imprisonment of defaulting debtor (exceptional circumstances)

A creditor may enforce a judgement before an execution judge assisted by court officials. Such enforcement may be done through:

• Attachment and sale of the debtor's moveable assets
• Attachment of debtor's income sources (stocks, bonds and shares)
• Attachment and sale of immoveable assets such as real estate
• Bankruptcy proceedings
• Imprisonment of the defaulting debtor (in exceptional circumstances)

Be aware of the various enforcement options available, including attachment and sale of assets, bankruptcy proceedings, and imprisonment (in exceptional circumstances).

Insolvency laws in the UAE cover reorganisation, liquidation, and bankruptcy of insolvent debtors. The UAE bankruptcy regime is set out in Book Five of the Commercial Transaction Law (Federal Law No. 18 of 1993). The UAE government have issued Federal Decree Law No. 9 of 2016 on Bankruptcy (the New Law) which was published in the official gazette.

Bankruptcy declaration may be done voluntarily by the debtor or by the creditor. A creditor may submit a claim to a court detailing the situation and supporting documents which evidence a debtor's inability to settle open debts due to financial difficulties.

Understand the insolvency process, including:

• The role of the trustee or insolvency practitioner
• The impact on creditors
• The duration of insolvency proceedings

Upon submission of a bankruptcy claim, a court must investigate the financial affairs of the debtor to understand the reasons for default. After resolution of preliminary disputes, the court establishes a bankruptcy hearing date and notifies all affected creditors.

The hearing may result in the declaration of bankruptcy of a debtor, at which point a trustee or insolvency practitioner is appointed to manage the debtor's assets with a view to their sale in order to settle open debts to creditors.

During this period, creditors are no longer able to pursue debt collection claims against the debtor, with the exception of secured creditors who may be permitted to enforce their security interests via the appointed trustee.

• 2-3 years
• Subject to the case

Bankruptcy proceedings may last anywhere between two to three years subject to the case.

Prepare for potentially lengthy insolvency proceedings.