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Legal Pitfalls in Commercial Contracts and How to Avoid Them

Commercial contracts are the backbone of business dealings in the UAE, ensuring clarity, accountability, and legal protection for all parties involved. However, many businesses fall into costly legal traps due to vague terms, non-compliance with local laws, or poor contract management. A well-drafted contract can prevent disputes and safeguard financial interests, while a poorly structured one can lead to litigation, reputational damage, and financial loss.

Let us explore the most common legal pitfalls in commercial contracts in the UAE and offer practical strategies to avoid them.

Understanding Commercial Contracts in the UAE

The UAE follows a civil law system, heavily influenced by Sharia principles, with contract laws primarily governed by Federal Law No. 5 of 1985 (UAE Civil Code) and Federal Law No. 18 of 1993 (Commercial Transactions Law). Free zones such as DIFC (Dubai International Financial Centre) and ADGM (Abu Dhabi Global Market) operate under common law principles, providing alternative dispute resolution mechanisms.

Businesses must ensure that their contracts comply with UAE laws and international standards, particularly when dealing with cross-border agreements.

Common Legal Pitfalls in Commercial Contracts

Ambiguous or Incomplete Terms

One of the biggest sources of contractual disputes is vague or undefined terms. If clauses are open to multiple interpretations, it becomes difficult to enforce obligations.

How to Avoid This:

• Define key terms clearly, such as payment timelines, penalties, performance obligations, and delivery schedules.
• Use precise language to minimise ambiguity.
• Specify the governing law and jurisdiction for dispute resolution.

Ignoring UAE-Specific Legal Requirements

Many businesses fail to align their contracts with UAE laws, making certain clauses unenforceable. For example:

• Penalty Clauses: Under UAE law, excessive penalty clauses can be reduced by the court if deemed unfair.
• Non-Compete Clauses: These must be reasonable in scope, duration, and geographical reach to be legally enforceable.
• Force Majeure: UAE law recognises force majeure, but the contract must clearly define what qualifies as an event beyond control.

How to Avoid This:

• Seek legal review to ensure compliance with UAE commercial law.
• Tailor clauses to align with federal and free zone regulations.

Lack of Proper Dispute Resolution Mechanisms

If a dispute arises, the absence of a clear resolution clause can lead to prolonged and expensive litigation.

How to Avoid This:

• Include an arbitration clause, especially for high-value contracts. The Dubai International Arbitration Centre (DIAC) and DIFC-LCIA are commonly used for dispute resolution.
• Specify mediation and negotiation steps before initiating legal proceedings.
• Define the governing law to avoid jurisdictional conflicts.

Poorly Drafted Payment Terms and Penalties

Contracts that lack clear payment schedules, late payment penalties, and dispute handling for invoices often result in delayed or lost payments.

How to Avoid This:

• Clearly outline payment terms, due dates, and accepted methods.
• Specify interest rates or penalties for late payments, ensuring they are enforceable under UAE law.
• Include invoice dispute resolution mechanisms to handle discrepancies efficiently.

Failing to Address Termination and Exit Strategies

Contracts without well-defined termination clauses can lead to legal battles over liability and compensation.

How to Avoid This:

• Outline valid termination reasons, such as breach of contract, insolvency, or force majeure.
• Define exit obligations, including notice periods, settlement of outstanding payments, and return of intellectual property or assets.
• Include liability limitations to prevent excessive claims upon termination.

Overlooking Confidentiality and Intellectual Property Protection

Many businesses underestimate the importance of confidentiality clauses, leaving them vulnerable to data breaches or loss of proprietary information.

How to Avoid This:

• Include non-disclosure agreements (NDAs) and confidentiality clauses.
• Clearly define ownership rights for intellectual property, ensuring that proprietary data, trademarks, and patents are protected.
• In joint ventures or service contracts, specify who retains ownership of newly developed IP.

Failing to Review and Update Contracts Regularly

Contracts that remain unchanged despite evolving laws, business needs, or economic conditions can become outdated and unenforceable.

How to Avoid This:

• Conduct periodic contract reviews, particularly for long-term agreements.
• Update terms in response to regulatory changes or new UAE legal requirements.
• Ensure that amendments are documented and signed by all parties.

Best Practices for Drafting Secure Commercial Contracts

To minimise legal risks and enhance contract enforceability, businesses should adopt the following best practices:

Conduct Due Diligence on Contracting Parties

• Verify the legal status of the counterparty, especially in cross-border agreements.
• Confirm whether they have valid trade licences and authorisations in the UAE.

Use Clear and Concise Language

• Avoid unnecessary legal jargon to ensure all parties understand their rights and obligations.
• Use bullet points or structured formatting for complex terms.

Involve Legal Experts in Drafting and Review

• Engage specialist commercial lawyers to review contracts before execution.
• Ensure compliance with local and international regulations.

Ensure Proper Execution and Registration

• Contracts should be signed by authorised representatives.
• In Dubai, commercial contracts may need to be notarised or registered with relevant authorities to be enforceable.

Maintain Proper Documentation and Records

• Store signed contracts securely for future reference.
• Keep records of communications, modifications, and addendums to avoid disputes.

Protect Your Business with Well-Drafted Contracts

At Davidson & Co., we understand that well-structured commercial contracts are crucial for smooth business operations in the UAE. Poorly drafted agreements can expose companies to legal and financial risks, leading to costly disputes.

By ensuring clear terms, regulatory compliance, and strong dispute resolution mechanisms, businesses can protect their interests and avoid litigation. As one of Dubai’s top boutique law firms, Davidson & Co. provides expert contract drafting and legal advisory services through top lawyers to keep your agreements legally sound and enforceable.

Contact us today for professional guidance on commercial contracts!

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Davidson & Co: Tailored Corporate Services for DIFC Success

Davidson & Co Corporate Services specializes in delivering comprehensive, end-to-end corporate services within the Dubai International Financial Centre (DIFC). Whether you are a budding entrepreneur or a well-established enterprise, our dedicated team of legal, financial, and compliance experts is here to help you flourish in one of the world’s leading financial hubs.

How We Make Your DIFC Journey Easier

Company Formation & Licensing

• Business Setup Consultation: Evaluate your operational needs, choose the right legal structure (e.g., LLC, Branch, Representative Office), and identify licensing requirements.
• Name Reservation & Incorporation: Secure your preferred company name and handle all necessary documentation with the DIFC Registrar of Companies.
• Share Capital & Structuring Advice: Receive expert guidance on optimal share capital and shareholder arrangements that align with your long-term plans.

Corporate Secretarial & Governance

• Statutory Registers & Document Management: Maintain accurate registers of directors, shareholders, and beneficial owners, while safeguarding all corporate records.
• Annual Filings & Renewals: Ensure timely submissions of annual returns, financial statements, and license renewals to comply with DIFC regulations.
• Board & Shareholder Meetings: Coordinate, prepare agendas, draft minutes, and provide strategic advice on governance best practices.

Regulatory Compliance & DFSA Support

• DFSA License Applications: For financial services activities, we facilitate DFSA license applications, ensure ongoing compliance, and manage any required reporting.
• AML/CFT Advisory: Implement robust Anti-Money Laundering (AML) and Countering Financing of Terrorism (CFT) frameworks, including staff training and KYC procedures.
• Data Protection & ESR Compliance: Stay compliant with the DIFC Data Protection Law and UAE Economic Substance Regulations (ESR) through tailored assessments and policy implementation.

Registered Office & Administrative Support

• Registered Office Address in DIFC: Benefit from a prestigious business address for official communication and branding.
• Mail Handling & Document Forwarding: We handle incoming correspondence and ensure secure forwarding of critical documents to you.
• Administrative Services: Enjoy additional support services such as phone answering, document translation, and notary assistance.

Accounting, Bookkeeping & Financial Reporting

• Bookkeeping & Management Accounts: Maintain accurate financial records and gain real-time visibility into your business’s performance.
• Audit Coordination: Liaise with approved auditors to ensure a smooth and transparent auditing process in compliance with DIFC requirements.
• Tax & VAT Advisory: Leverage our expertise on UAE VAT and the new Corporate Tax regime to stay compliant and optimize your tax strategy.

Corporate Restructuring, Mergers & Acquisitions

• Group Structuring & Holding Companies: Establish or reorganize corporate structures to enhance operational efficiency and safeguard assets.
• M&A Support: Coordinate due diligence, share transfers, and other corporate actions for smooth mergers, acquisitions, or divestitures.
• Deregistration & Liquidation: Access specialized guidance on winding down operations, final account preparations, and de-registration procedures in the DIFC.

Ongoing Administration & Expansion

• License Renewals & Amendments: We proactively manage renewals, ensuring your trade license and other permits remain valid.
• Business Expansion Advisory: Explore additional licensing options, regional expansion, or new service lines within the DIFC framework.
• Networking & Growth Opportunities: Leverage our extensive local network to gain access to industry events, alliances, and potential partnerships.

Why Choose Davidson & Co Corporate Services?

Expert Guidance in DIFC Regulations

Our seasoned consultants have in-depth knowledge of DIFC Companies Law and Dubai Financial Services Authority (DFSA) requirements. We simplify complex regulatory frameworks so you can focus on achieving your business objectives.

Full-Service Offering

From DIFC formation and licensing to accounting and ongoing compliance, we offer a complete suite of services under one roof. Our integrated approach ensures efficiency and consistency at every stage of your business journey.

Tailored Solutions

We understand that each business is unique. Our team crafts bespoke solutions to match your specific requirements deliver outcomes that support your strategic goals and keep you fully compliant with DIFC rules.

Fast & Efficient Processes

Speed to market can make all the difference in today’s competitive environment. We leverage our strong relationships with DIFC authorities to streamline approvals and reduce turnaround times.

Partner with Us for Success in DIFC

At Davidson & Co Corporate Services, our mission is to act as your trusted ally in the DIFC. We merge local expertise with global best practices to deliver dependable, high-quality solutions for your corporate needs. By entrusting your compliance, administration, and strategic requirements to us, you can remain focused on what matters most, growing your business.

Davidson & Co Corporate Services can handle much of the operational, regulatory, and administrative burden that companies face when establishing and running a business in the DIFC. From pre-incorporation advice and ongoing secretarial services to comprehensive compliance, HR, and financial management solutions, our role is to ensure that entrepreneurs and management teams can focus on strategic growth while remaining fully compliant with local laws and regulations.

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End of Service Calculator: Gratuity and Leave Salary in UAE Labour Law

Understanding your end-of-service benefits is crucial when working in the UAE’s private sector. These benefits represent a significant portion of your total compensation and are protected by UAE labour law. This article provides a comprehensive guide to end-of-service entitlements, covering the traditional gratuity system, the new Savings scheme, and variations for different employment types. 

We’ll cover the end-of-service calculator in UAE labour law, framework, and key considerations for both employees and employers.

Traditional End-of-Service Gratuity

UAE Nationals

Emirati employees in the private sector are covered by a separate system of pensions and social security, governed by specific legislation. For detailed information on these benefits, consult the relevant government resources.

Foreign Workers

• Eligibility: To qualify for end-of-service gratuity, foreign workers must complete at least one year of continuous service with their employer.
• Calculating “Last Wage”: The gratuity calculation is based on your “last wage,” which refers to your basic salary. Allowances such as housing, transport, and utilities are not included in this figure.
• Employer Deductions: If you owe any outstanding debts to your employer, they have the right to deduct these amounts from your gratuity payment.
• Payment Deadline: Your employer is legally obligated to pay your end-of-service benefits within 14 days of your employment contract’s termination date.

Gratuity Calculation Breakdown

• Less than 1 year of service: No gratuity payment.
• 1 to 5 years of service: 21 days’ salary for each year of service.
• Over 5 years of service: 21 days’ salary for each of the first 5 years, plus 30 days’ salary for each year of service beyond the first 5 years.
• Maximum Limit: The total gratuity payment cannot exceed the equivalent of two years’ salary.

Illustrative Examples

• Example 1: An employee with a basic salary of AED 10,000 who has worked for 3 years would receive a gratuity of AED 63,000 (10,000 / 30 x 21 x 3).
• Example 2: An employee with a basic salary of AED 15,000 who has worked for 7 years would receive a gratuity of AED 135,000 [(15,000 / 30 x 21 x 5) + (15,000 / 30 x 30 x 2)].

The New Savings Scheme

The UAE government recently introduced the Savings scheme, a voluntary alternative to the traditional end-of-service gratuity system. This scheme allows employees to invest their end-of-service benefits in approved funds, potentially earning returns and safeguarding their savings from inflation.

Objectives and Scope

The Savings scheme aims to:

• Protect employees from the risks of inflation, employer default, and bankruptcy.
• Encourage employee participation in the UAE’s economic growth through investment.

This scheme applies to both private sector and free zone employees.

Investment Options

The Savings scheme offers a range of investment options to cater to different risk appetites and preferences. These include:

• Sharia-compliant funds
• Capital guarantee portfolios (risk-free investments suitable for unskilled workers)
• Various other investment portfolios with varying levels of risk and potential return

Daman Investments is one of the approved providers under the Savings scheme. You can learn more about their End of Service Programme on their website.

Employer Participation

Employers wishing to participate in the Savings scheme must:

• Submit a request to the Ministry of Human Resources and Emiratisation (MoHRE).
• Select and contract with an investment fund licensed by the Securities and Commodities Authority (SCA).
• Determine which employee categories and levels will be included in the scheme.

Once enrolled in the scheme, employers must:

• Discontinue the traditional gratuity system for participating employees.
• Ensure the preservation of employees’ accrued entitlements from the previous system.
• Make monthly contributions to the chosen investment fund on behalf of their employees.

Contribution Structure

• Basic Subscription Fees:
  • 5.83% of the employee’s monthly basic salary for employees with less than 5 years of service.
  • 8.33% of the employee’s monthly basic salary for employees with 5 or more years of service.
• Payment Deadline: Contributions must be transferred to the investment fund within 15 days of the beginning of each calendar month.
• Voluntary Contributions: Employees can choose to make additional voluntary contributions to their investment fund, either through regular instalments or lump sum payments. These contributions cannot exceed 25% of their total annual salary.

Employee Entitlements

Upon termination of employment, employees are entitled to:

• All basic subscription amounts contributed by their employer.
• Any investment returns generated during their participation in the scheme.

These funds must be paid to the employee within 14 days of their last day of work. Employees also have the option to continue investing in the scheme after leaving their employment.

Employees can withdraw part or all of their voluntary contributions and their investment returns at any time during their employment, subject to the terms and conditions set by the fund manager.

Scheme Supervision

The Savings scheme is jointly monitored and supervised by:

• MoHRE: Responsible for receiving and investigating labour complaints related to the scheme.
• SCA: Addresses complaints regarding the performance of investment fund providers.
• Financial free zone authorities: Oversee and resolve complaints within their respective jurisdictions.

End-of-Service Benefits for Other Employment Types

Part-Time and Other Arrangements

For employees working under part-time contracts or other non-standard work arrangements, the end-of-service gratuity is calculated on a pro-rata basis. This calculation considers the proportion of working hours in the employee’s contract compared to a full-time contract.

Example

An employee with a part-time contract working 20 hours per week, where a full-time contract is 40 hours per week, would receive 50% of the gratuity entitlement calculated for a full-time employee with the same basic salary and length of service.

Summing Up

Understanding your end-of-service benefits is essential for securing your financial future in the UAE. Whether you are covered by the traditional gratuity system or opt for the new Savings scheme, it’s crucial to familiarise yourself with the applicable laws, calculations, and your rights as an employee. Planning for your financial future is a significant undertaking. Don’t hesitate to seek professional advice to ensure you make informed decisions and maximise your benefits.

Do you have further questions about end-of-service benefits in the UAE? Contact the expert lawyers at Davidson & Co. for personalised guidance and support. Our team of legal professionals can help you navigate the complexities of UAE labour law and ensure you receive your full entitlements.

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Rental Dispute Center Dubai: Your Path to Conflict-Free Tenancy

Rental disputes are a common occurrence, not only in Dubai but across the globe. Such disagreements can stem from issues on the part of either the landlord, the tenant, or both, often arising when the terms of the tenancy agreement are not fully adhered to. Fortunately, resolving rental disputes in Dubai need not be a daunting or stressful experience. With the right approach, landlord-tenant conflicts can often be resolved amicably.

Today, we provide an insightful overview of rental disputes in Dubai and explore various resolution methods, including how we can seek assistance from the Rental Disputes Centre (RDC).

Understanding Common Rental Disputes in Dubai

Although there is no definitive list of potential landlord-tenant disputes, certain issues frequently lead to disagreements in Dubai’s rental market. Being aware of these common disputes can empower both landlords and tenants to strengthen their tenancy agreements, reducing the likelihood of conflicts and fostering smoother rental relationships in the future.

Common Types of Rental Disputes Between Tenants and Landlords

Landlord-tenant disputes in Dubai often arise from a variety of issues. Here are some of the most frequent conflicts:

• Unlawful rent increases: A landlord imposes a sudden rent hike that does not comply with Dubai’s rent increase regulations.
• Unjustified eviction demands: A landlord attempts to evict a tenant without reasonable grounds or in violation of tenancy laws.
• Disruption of essential services: A landlord cuts off utilities such as water or electricity, causing significant inconvenience to the tenant.
• Substandard property conditions: A rented property is infested with pests or has other serious defects that were not disclosed beforehand.
• Disputes over security deposits: Unreasonable or excessive deductions from a tenant’s security deposit, often referred to as move-out charge disputes.
• Late rent payments: The tenant repeatedly fails to pay rent on time, breaching the terms of the tenancy agreement.
• Property damage: The tenant causes extensive damage to the property beyond normal wear and tear.
• Tenant misconduct: Complaints against the tenant for inappropriate behaviour, such as disregarding Dubai’s cultural norms or engaging in illegal activities within the property.

Legal Grounds for Filing a Rental Dispute in Dubai

The reasons outlined above are recognised as valid grounds for filing a rental dispute in Dubai. Both tenants and landlords can use these circumstances to pursue legal action if necessary.

It is generally advisable to attempt to resolve any disagreements amicably between both parties. Open communication can often lead to a mutually acceptable solution without the need for legal intervention. However, if no resolution can be reached, either party may approach the Rental Disputes Centre (RDC) in Dubai to formally lodge a complaint and seek a legal judgement.

Steps to Resolve Rental Disputes in Dubai

In Dubai, rental disputes can typically be resolved through one of two main approaches: an amicable resolution between the landlord and tenant or by seeking intervention from the appropriate legal authority.

Here are the steps to effectively address rental disputes in Dubai:

How to Approach Your Landlord or Tenant for Dispute Resolution

Whether you are a landlord or tenant, the first step in resolving a rental dispute is to thoroughly verify the issue at hand.

Start by identifying the category your particular issue falls under. Conduct thorough research on Dubai tenancy law to determine if your situation provides valid grounds for filing a case. Having a clear understanding of your rights and obligations will guide your next steps.

If your issue qualifies as grounds for legal action, your first course of action should be to approach the other party to discuss the matter. It is always advisable to prioritise negotiation and allow ample opportunity for conflict resolution before escalating the situation.

You can initiate this discussion by sending an email or message to the other party. Written communication not only demonstrates professionalism but also serves as evidence that you attempted to resolve the dispute amicably, should you need to involve higher authorities later.

If the issue remains unresolved after negotiation, the next step is to register your case with the Rental Disputes Centre (RDC) in Dubai. This formal approach ensures the matter is addressed in accordance with the law.

Key Documents Required for Filing a Rental Dispute

When filing a rental dispute case with the Rental Disputes Centre (RDC) in Dubai, you have the option to file your case online or visit the RDC head office in person. Regardless of the method, ensuring you have the necessary documents is crucial to strengthening your case.

Here is a checklist of essential documents you should prepare:

• Passport copies: For both the landlord and the tenant.
• Residence visa: A valid copy for the tenant.
• Emirates ID: A copy for identification purposes.
• Ejari certificate: Proof of the registered tenancy agreement.
• Tenancy contract: A signed copy of the lease agreement.
• Recent DEWA bills: To establish occupancy and utility usage.
• Rental deposit slip: Evidence of the security deposit.
• Title deed: To confirm the landlord’s ownership of the property.
• Correspondence records: Copies of emails, messages, or any communication between the landlord and tenant related to the dispute.
• Additional supporting documents: Any other evidence that may substantiate your claim and strengthen your case.

Navigating the Rental Dispute Settlement Centre Dubai (RDSC)

The Rental Disputes Centre (RDC), also known as the Rental Dispute Settlement Centre Dubai (RDSC), is the official body for resolving landlord-tenant disputes in Dubai. Approaching the RDSC for the first time can feel daunting, but understanding the process and knowing what to expect can make the experience far smoother.

Here are some key points to bear in mind when filing a case at the RDSC:

Filing a Case at the RDC: A Step-by-Step Guide

If you have chosen to file your rental dispute case online, follow these steps:

• Visit the Dubai Land Department (DLD) website: Navigate to the official portal.
• Access the ‘Rent Dispute Resolution Portal’: Locate this section on the website.
• Complete the required fields: Enter all necessary information accurately.
• Upload the required documents: Ensure all supporting documents are included.
• Pay the fees online: Settle the applicable filing charges through the platform.
• Attend the hearing (if applicable): The tele-litigation system allows you to attend hearings virtually. Alternatively, the verdict will be made available on the website.

If you prefer to visit the Rental Disputes Centre (RDC) in person to file your case, here’s what to expect:

• Document submission: Present your documents to an assigned RDC typist.
• Translation to Arabic: As Arabic is the official court language, any documents not in Arabic will be translated by the RDC.
• Case preparation: The typist will gather additional details about your dispute, guide you through the process, and formalise your complaint.

Understanding the RDSC Decision-Making Process

Once you’ve submitted your landlord-tenant dispute case along with the necessary documentation, the process begins with an initial review, followed by a waiting period. Here’s an overview of what to expect:

1. Arbitration Phase:
   Your case will first be referred to the Arbitration Department, which aims to resolve disputes within 15 days. If a mutually agreeable settlement is reached during this phase, the matter is concluded.
2. Escalation to Legal Proceedings:
   If no settlement is agreed upon, you will need to escalate the case by filing a lawsuit under RERA Dubai. A ruling on such cases typically takes around 30 days. Both parties will be notified of the date and time to present their arguments.
3. Hearing Process:
   • The initial hearing usually takes a few hours, depending on the complexity of the case.
   • Additional hearings may be scheduled if further clarification or evidence is required.
   • The overall decision-making process can span several weeks or even months, depending on the severity of the dispute and the level of legal review involved.
4. Preparation is Key:
   Whether you are filing as a landlord or tenant, thorough preparation is essential. Compile all relevant documents, evidence, and arguments to present your case effectively during hearings.
5. Patience is Essential:
   It’s important to understand that the resolution process may take time. Both parties should be prepared for the possibility of extended timelines as the RDC works to deliver a fair and just verdict.

What to Do If Your Rental Dispute Escalates

If both the Rental Disputes Centre (RDSC) and RERA Dubai are unable to resolve your rental dispute, there is an alternative path you can consider.

Legal Options Beyond the RDSC for Rental Disputes

When all efforts at the RDSC have been exhausted, your next option is to approach the Dubai Court. This step requires hiring a specialised real estate lawyer experienced in handling rental disputes. A lawyer can help you navigate the complexities of the legal system and present your case effectively in court.

However, it’s important to note that pursuing legal action at this level can be both time-consuming and costly. Filing a case at the RDSC itself involves expenses, and escalating the matter to the Dubai Court will demand additional time, money, and effort from both parties.

The Importance of Mediation and Arbitration

In many cases, mediation and arbitration are crucial as neither landlords nor tenants typically possess detailed knowledge of Dubai property law. These methods provide an opportunity for both parties to reach a mutually acceptable resolution under expert guidance, avoiding the need for prolonged legal proceedings.

Proactive Steps to Prevent Disputes

While lawyers are essential for high-level rental disputes, involving a real estate agent early in the process can help prevent issues from arising. Experienced real estate agents can assist both landlords and tenants in:

• Drafting clear, legally compliant rental agreements.
• Advising on best practices to maintain a professional relationship.
• Guiding both parties on how to avoid potential conflicts.

Proactive communication and seeking expert advice at the outset can significantly reduce the likelihood of disputes escalating to legal action.

Davidson & Co. – Your Trusted Partner in Rental Dispute Resolution

Navigating rental disputes in Dubai can be challenging, but with the right knowledge and support, both landlords and tenants can find effective solutions. Whether through amicable negotiations, assistance from the Rental Disputes Centre (RDSC), or legal intervention via RERA Dubai or the Dubai Courts, there are structured pathways to address conflicts and uphold your rights.

For expert legal guidance, trust Davidson & Co., a leading boutique law firm in Dubai specialising in landlord-tenant disputes and property law. Our team of top Dubai lawyers ensures that you are supported every step of the way, from understanding your case to achieving a fair resolution. Connect with us today!

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Leave Salary Calculation in UAE: Understanding MoHRE Guidelines

Navigating the complexities of employment law can be challenging, especially when it comes to understanding your rights and entitlements. In the UAE, annual leave and leave salary calculation are governed by the Ministry of Human Resources and Emiratisation (MoHRE), under Federal Decree Law No. 33 of 2021, also known as the ‘UAE Labour Law’. 

This comprehensive guide will shed light on these crucial aspects, ensuring you are well informed about your annual leave in UAE and how your leave salary calculation in UAE is determined.

Annual Leave Entitlement

To be eligible for annual leave in the UAE, employees must complete at least six months of continuous service with their employer. The duration of annual leave varies based on the length of service:

• One Year or More: Employees who have completed one year or more of service are entitled to a full 30 days of paid annual leave.
• Six Months to One Year: Employees who have completed six months but less than one year of service are entitled to two days of paid annual leave for each month of service.

It’s important to note that if an employee’s service terminates before they have used their full annual leave entitlement, they are still entitled to receive leave pay for the fraction of the year worked. This ensures fair compensation for all employees, regardless of their length of service.

Part-time employees are also entitled to annual leave, calculated proportionally based on their actual working hours as specified in their employment contract and following the Executive Regulations of the Labour Law.

Utilizing Annual Leave

The UAE Labour Law stipulates that employees should utilize their annual leave within the year they are entitled to it. Employers have the right to set the dates of annual leave in agreement with their employees, taking into account work requirements and operational needs. However, employers must provide employees with at least one month’s notice before the start of their leave.

In certain situations, employees may wish to carry over their annual leave to the following year. This is permissible with the consent of the employer and per the company’s internal regulations. If an employee works during their carried-over leave period, they are entitled to receive their basic salary for those working days, in addition to their leave salary.

It’s crucial to remember that employers cannot prevent employees from using their accrued annual leave for more than two years. This provision safeguards employees’ rights and ensures they receive adequate rest and time off.

When calculating the duration of annual leave, official public holidays specified by law or agreement, and any sick leave days that fall within the annual leave period are included, unless the employment contract or company regulations specify otherwise.

Leave Salary Calculation

The calculation of leave salary in the UAE is based on the employee’s basic salary. It’s important to understand that the basic salary typically excludes any additional allowances, bonuses, or other variable components of an employee’s remuneration.

To calculate the leave salary, the following formula is used:

• Daily Wage: Basic Salary / 30
• Leave Salary: Daily Wage x Number of Leave Days

Example

An employee with a basic salary of AED 10,000 and taking 20 days of annual leave would have their leave salary calculated as follows:

• Daily Wage: AED 10,000 / 30 = AED 333.33
• Leave Salary: AED 333.33 x 20 = AED 6,666.60

Termination and Leave Salary

Upon termination of employment, employees are entitled to receive payment for any accrued but unused annual leave days. This payment is also calculated based on the employee’s basic salary using the formula mentioned above.

MoHRE’s Role

MoHRE plays a vital role in enforcing the UAE Labour Law and ensuring that employers comply with the regulations related to annual leave and leave salary calculations. They provide guidance and resources to both employees and employers, clarifying any doubts and addressing concerns related to leave entitlements.

Wrapping Up

Understanding your rights and entitlements regarding annual leave and leave salary calculation is essential for all employees in the UAE. This guide provides a comprehensive overview of the key aspects, empowering you to make informed decisions and ensure you receive the correct compensation.

Don’t get shortchanged on your annual leave! UAE labor law is complex, and mistakes can be costly. Davidson & Co., your trusted Dubai lawyers, can help you understand your leave rights, calculate your leave pay, and ensure you receive every dirham you deserve. Contact us today for a free consultation and let our expertise protect your interests. Your leave. Your rights. Our expertise.

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Everything You Need to Know About E-Trader Licence Activities in Dubai

Dubai has established itself as a global hub for commerce, innovation, and entrepreneurship, attracting aspiring business owners from around the world. In this dynamic environment, the e-trader licence has emerged as a pivotal solution for individuals seeking to conduct business activities online or from home. Designed primarily for freelancers, home-based entrepreneurs, and small businesses, this licence enables individuals to legally operate within Dubai’s growing digital economy.

But what exactly can you do with an e-trader licence? This article provides a comprehensive overview of the activities permitted under this licence, helping you navigate the opportunities and limitations. Whether you’re an aspiring online retailer, a budding creative, or a service provider looking to formalise your operations, understanding the scope of the e-trader licence is essential to ensuring compliance and unlocking the potential of your venture.

Is an E-Trading Licence Necessary?

The rise of online platforms for conducting business has raised questions about whether these activities constitute commercial operations within the UAE and, therefore, require licensing. Here’s an in-depth look at the legal framework and practical considerations surrounding e-trading in Dubai.

Legal Requirements for Conducting Economic Activities

Key Regulations:

• Article 6 of Law No. 13 of 2011: Governs the conduct of economic activity within the Emirate of Dubai.
• Article 328 of the Commercial Companies Law (CCL) of 2015: Prohibits foreign companies from conducting activities in the UAE without obtaining a licence.
• Article 355 of the CCL: Imposes penalties ranging from AED 100,000 to AED 500,000 on foreign companies operating without registration.

Implications:

• Any foreign entity conducting business in Dubai must hold a valid licence to comply with these laws.
• The requirement to obtain a licence includes maintaining a registered office, which some may argue is unnecessary for online businesses.
• However, authorities have broad discretion to enforce strict licensing requirements, leaving online businesses at potential risk of hefty penalties.

Do Online Businesses Require a Licence?

Some argue that online businesses, which don’t require a physical presence or employ staff locally, should not fall under Articles 328 and 355 of the CCL. However, this is not a guaranteed exemption, as the application of these laws remains subject to regulatory discretion. The safest approach is to obtain the appropriate licence to avoid penalties and ensure compliance.

Unlicenced Platforms: The Risks

While many unlicenced online platforms operate in the UAE, there is no assurance that regulators won’t identify these traders and impose penalties ranging from AED 100,000 to AED 500,000. It is advisable for online traders to formalise their operations by obtaining an e-trading licence.

E-Trading Licence: Activities and Benefits

Approved E-Commerce Activities by the Dubai Economic Department (DED):

• Jewellery and precious stones e-trading
• Garments, textiles, and gifts e-trading
• Publications and media materials e-trading
• Household, professional, and personal goods e-trading
• Vehicles and transport means e-trading
• Equipment e-trading
• Sports and recreational event tickets e-trading

Advantages of an E-Trading Licence:

• Legally sell to the public over the internet without physical interaction.
• Facilitate online payments through payment service providers offering credit card, smart card, or digital money options.
• Establish credibility and trust with customers.

General Trading and Online Activities

Currently, there is no specific “General E-Trading” activity available. However, companies with a “General Trading” licence can trade across various industries both physically and online. Typically, a licence in a specific industry also permits online operations within that sector.

E-Trading Activity in Free Zones

Free zones in the UAE operate under a distinct regulatory framework, differing significantly from the Dubai mainland, which is governed by the Commercial Companies Law (CCL). This has implications for businesses looking to engage in e-trading within and beyond free zones.

Key Differences Between Mainland and Free Zones

Mainland Regulations:

• Businesses operating in the mainland must comply with the CCL, requiring a licence from the Dubai Economic Department (DED) to legally trade within the UAE.

Free Zone Regulations:

• Free zones have their own licensing requirements and allow businesses to operate within their boundaries.
• Companies in free zones are restricted from directly conducting commercial activities outside the free zone unless additional permissions are obtained.

E-Trading in Free Zones: The Scope and Limitations

E-Commerce Activities in Free Zones:

• Some free zones offer e-commerce licences, but their scope is limited.
  • These licences allow businesses to facilitate sales through electronic platforms (e.g., acting as intermediaries).
  • Retailing or direct trading with customers in the UAE outside the free zone is not permitted under this licence.

Licensing Requirements for Trading Across the UAE:

• Free zone companies wishing to sell products directly to customers outside the free zone must obtain a DED licence.
• Without this licence, the company’s activities are confined to the free zone and its authorised scope of e-commerce.

Summary of Compliance Requirements

• Free Zone E-Commerce Licence: Enables a business to act as a facilitator or intermediary for online sales.
• DED Licence: Required to trade and sell products directly to customers across the UAE.
• Without the DED licence, a free zone e-commerce licence does not allow unrestricted trade within the wider UAE.

Introduction to the DED’s E-Trader Scheme

In a bid to formalise online business operations and foster trust in e-commerce, the Dubai Economic Department (DED) introduced the innovative E-Trader Scheme. This initiative allows individuals conducting business through social media platforms like Instagram, Snapchat, WhatsApp, and Facebook to obtain a licence from the DED, ensuring their activities comply with legal and regulatory frameworks.

Key Features of the E-Trader Scheme

• Eligibility Criteria:
  • Licence holders must be UAE nationals.
  • Applicants must be at least 18 years old.
• Restrictions:
  • The licence cannot be used to establish a physical store.
  • E-trader licence holders are not permitted to issue visas.

Purpose and Vision

Omar Bushahab, Chief Executive of the DED’s Business Registration and Licensing Department, highlighted the scheme’s goal: “To promote consumer confidence when shopping for products and services on social networking sites.” By offering a regulatory framework, the DED aims to enhance transparency, build trust, and protect both businesses and consumers in Dubai’s growing digital marketplace.

Davidson & Co.: Your Trusted Partner for E-Trader Licensing Guidance

Navigating the complexities of e-trading regulations in Dubai can be challenging, but with the right guidance, your business can flourish in the competitive digital marketplace. At Davidson & Co., we specialise in providing tailored legal advice to help you understand and comply with licensing requirements, ensuring your e-commerce activities are fully aligned with UAE regulations.

Whether you are exploring the DED’s E-Trader Scheme, evaluating free zone options, or seeking to expand your online business, our experienced Dubai lawyers here to support you every step of the way. Trust Davidson & Co. to empower your business with the legal expertise and insights you need for long-term success.

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VisaNews

Your Guide to the Job-Seeker Visa UAE

The job-seeker visit visa is a unique provision by the UAE to attract global talent actively seeking employment opportunities within the country. This visa type is designed specifically for professionals who wish to explore the job market directly, without the need for sponsorship from an employer upon entry. By facilitating easier access for skilled individuals to the local job market, the UAE enhances its workforce diversity and drives economic growth through the infusion of international expertise and new perspectives.

This visa not only supports the career aspirations of individuals but also strengthens the UAE’s position as a competitive hub for global professionals.

What is a Job-Seeker Visa UAE?

A job-seeker visa in UAE is a special type of visa issued to individuals looking to explore employment opportunities in a foreign country without a prior job offer. Unlike other visas, this one allows the holder to enter, stay, and search for jobs directly within the country for a specified period. The primary aim is to facilitate the entry of skilled professionals who can contribute to the local economy but have not yet secured employment.

Key Features

• Duration: Typically issued for 60, 90, or 120 days.
• Flexibility: Allows the holder to travel throughout the country to attend interviews and engage with potential employers.
• No Sponsor Requirement: Does not require a sponsorship or host within the country for its issuance.

Eligibility Criteria for a Job-Seeker Visit Visa in the UAE

Understanding the eligibility criteria for visit a job seeker visa uae is crucial for professionals aiming to explore employment opportunities within the UAE. The following sections outline the specific requirements that applicants must meet.

Skill Level Requirements

The UAE’s Ministry of Human Resources and Emiratisation (MOHRE) categorises job roles into different skill levels, and eligibility for a job-seeker visit visa typically focuses on the top tiers of these classifications:

• Skill Level 1: Includes managerial positions and roles that require decision-making responsibilities.
• Skill Level 2: Comprises professional roles that necessitate a high degree of technical and analytical skills.
• Skill Level 3: Encompasses skilled technicians and associate professionals with specialised knowledge.

Applicants falling within these skill levels are considered highly favourable for contributing to the UAE’s dynamic economic sectors.

Education Requirements

Educational qualifications play a significant part in the eligibility criteria:

• Top 500 Universities: Graduates from universities that rank within the top 500 globally, as recognised by major educational rankings, are eligible.
• Recent Graduates: Applicants who have graduated within the last two years from these esteemed institutions are particularly encouraged to apply, ensuring that the visa attracts individuals with up-to-date knowledge and recent educational credentials.

Additional Academic Criteria

• Bachelor’s Degree or Equivalent: All applicants must hold at least a bachelor’s degree or its equivalent qualification, demonstrating a standard level of higher education, which is necessary for most professional jobs in the UAE.

Financial Guarantees

• Financial Security: Applicants must demonstrate financial solvency to cover their stay in the UAE without employment. This requirement ensures that job seekers can support themselves during their job search.
• Legislation Compliance: Details regarding the exact nature and amount of financial guarantees required are specified in the Executive Regulation of Law No. 29 of 2021 on Entry and Residence of Foreigners. Applicants must ensure compliance with these regulations to secure their visas.

Visa Validity and Types for Job-Seeker Visas UAE

For professionals eyeing the UAE as a potential place of employment, it’s crucial to grasp the various types of job-seeker visit visas available, along with their respective durations. Each visa category is designed to cater to distinct job search requirements, providing diverse benefits while also incorporating specific restrictions, including employment visa charges.

Visa Duration Options

The UAE offers job-seeker visit visas with three distinct validity periods, each designed to accommodate the varying needs of international job seekers:

• 60-Day Visa: Ideal for those who have potential job leads and require a shorter duration to finalize employment opportunities.
• 90-Day Visa: Suited for individuals needing more time to explore extensive job opportunities and engage with multiple potential employers.
• 120-Day Visa: Best for those who may need substantial time to network, attend interviews across different Emirates, and explore a wide range of job opportunities or for those participating in extended recruitment processes.

Application Process for a Job-Seeker Visit Visa in the UAE

Navigating the application process for a job-seeker visit visa requires a clear understanding of the steps involved. This guide provides a detailed overview to help applicants successfully secure their visas for job hunting in the UAE.

Starting the Application Process

Initiating the application process for a job-seeker visit visa involves several key steps:

1. Eligibility Check: Before beginning the application, ensure you meet the eligibility criteria regarding skill levels, educational qualifications, and financial guarantees.
2. Visa Type Selection: Decide on the visa duration that best suits your job search plans—60, 90, or 120 days.
3. Gather Required Information and Documents: Collect all necessary information and documents to support your visa application.

Required Documents

Applicants must prepare and submit the following documents as part of the application process for the UAE job-seeker visa:

• Coloured Photo: A recent passport-sized coloured photograph that meets the UAE visa photo standards.
• Passport Copy: A clear and valid copy of your passport. The passport must be valid for at least six months beyond the expected date of entry into the UAE.
• Attested Qualification Certificate: A copy of your highest educational certificate, which must be attested by the relevant authorities in your home country and possibly by the UAE embassy or consulate.

Submission of the Application

The application for a job-seeker visit visa can be submitted through various channels, depending on the applicant’s location and convenience:

• Online Platforms: Many applicants find it convenient to use the official immigration portals provided by the UAE government, such as the Federal Authority for Identity and Citizenship (ICA) or the General Directorate of Residency and Foreigners Affairs (GDRFA) of the respective emirate.
• UAE Embassies or Consulates: Applicants can also submit their visa applications directly at UAE embassies or consulates in their home country. This might be necessary for first-time visitors to the UAE or those who need to get their documents attested or verified.
• Visa Facilitation Services: Several reputable visa services can help facilitate the application process, ensuring all requirements are met and improving the chances of approval.

Legal Framework Governing Job-Seeker Visa Dubai, UAE

Understanding the legal framework surrounding the issuance of job-seeker visit visas in the UAE is essential for applicants. This section provides a summary of Law No. 29 of 2021 on Entry and Residence of Foreigners and delves into the Executive Regulation, highlighting its impact on visa applicants.

Overview of Law No. 29 of 2021

Law No. 29 of 2021 on Entry and Residence of Foreigners was enacted to modernise and streamline visa processes in the UAE, enhancing the country’s appeal as a global hub for talent and investment. Key provisions of the law that relate specifically to job-seeker visit visas include:

• Purpose: To facilitate the entry of skilled professionals into the UAE job market without the immediate need for employer sponsorship.
• Flexibility: The law introduces more flexible visa categories, including visas for job seekers, which acknowledge the varied durations and purposes of stay.
• Regulation: It sets the framework for the conditions under which visas can be granted, extended, and the rights of the visa holders during their stay.

Executive Regulation and Its Impact

The Executive Regulation of Law No. 29 of 2021 provides detailed guidance on the implementation of the law, specifying the requirements, procedures, and conditions for the issuance of job-seeker visit visas:

• Eligibility Criteria: Clarifies the qualifications and conditions applicants must meet, such as educational background, professional levels, and financial stability.
• Application Process: Outlines the official procedures for submitting a visa application, including the documentation required, the administrative steps to follow, and the fees applicable.
• Rights and Responsibilities: Details the rights of the visa holders, such as freedom to travel across the UAE and engage in job search activities, as well as their responsibilities, like adhering to local laws and regulations.

Impact on Applicants

The Executive Regulation impacts applicants in several significant ways:

• Clear Pathway: Provides a clear and structured pathway for skilled professionals to enter the UAE job market.
• Transparency: Enhances transparency in the visa application process, helping applicants understand what is expected and how to comply.
• Supportive Environment: Aims to create a supportive environment for foreign talents, which is critical in attracting high-quality professionals and graduates.

How Davidson & Co. Supports Your Journey

At Davidson & Co., we specialise in labour affairs and employment law in Dubai, providing essential support to job-seeker visa applicants. Our expertise is particularly crucial for international professionals navigating the complexities of the UAE job market.

Why Choose Davidson & Co.?

• Specialised Knowledge: Our deep understanding of UAE employment law ensures that you navigate the legal landscape with confidence.
• Customised Assistance: We tailor our services to meet your specific needs, whether you’re applying for a visa or negotiating an employment contract.

How We Can Help

• Visa Application Compliance: We ensure your documentation is flawless and meets all legal standards, providing a smooth pathway for your visa application.
• Employment Law Navigation: Our experts keep you informed on the latest in employment law and regulatory changes, guiding you through the legal intricacies of working in the UAE.
• Contract Negotiation Support: Once you secure a job offer, we help review and negotiate your employment contract to ensure the terms are fair and compliant with local laws.

Securing Your Future in the UAE with Davidson & Co.

If you are a qualified professional considering a new career chapter in the UAE, the job-seeker visit visa could be your gateway to exciting new opportunities. Do not let the complexities of the application process deter you. Instead, allow Davidson & Co. to guide you through with the best lawyers in Dubai.

Contact Davidson & Co. today to find out how we can assist you in turning your professional aspirations in the UAE into reality. Embark on your journey with confidence, backed by the best in legal expertise.

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NewsVisa

The Investor’s Guide to Residency Visas in Dubai

As the world’s economies gradually recover from the novel Coronavirus, Dubai’s real estate sector has shown remarkable resilience. In the early months of 2021, from January 1 to March 7, sales transactions registered with the Dubai Land Department totalled AED 16.10 billion (approximately US$4.4 billion).

Global investors, keen to diversify their portfolios, have increasingly recognised Dubai as a prime investment destination during the pandemic. In 2019, the Dubai Land Department (DLD) enhanced the appeal of this vibrant city by introducing two categories of residency visas for property owners and their dependents. This initiative has not only made investing in Dubai more attractive but has also opened the door to a new and exciting lifestyle for international investors.

What is a UAE Residency Visa?

The Property Investment Residency Visa caters to high-net-worth expatriates seeking residency in Dubai through property acquisition. Currently, investors can apply for either a three-year or five-year property residency visa, as facilitated by the Dubai Land Department (DLD).

Property owners are eligible to apply for a residency visa for themselves and their immediate dependants—including their spouses and children. This visa can be renewed indefinitely, provided the property ownership is maintained under the prevailing regulations.

What level of investment is required for a Residency Visa?

An investor can qualify for a three-year Residency Visa with a minimum property investment of AED 1 million (approximately US$250,000). For a longer, five-year Residency Visa, the required investment increases to AED 5 million (approximately US$1.4 million).

Regarding government fees, the cost for a three-year Residency Visa is currently around AED 14,000 (approximately US$4,000), while for a five-year Residency Visa, the fees are approximately AED 4,000 (around US$1,000).

Residency Visa Requirements in Dubai

Based on our discussions with the Dubai Land Department (DLD), the general eligibility criteria for obtaining a Residency Visa are as follows:

Individual Ownership

• The property must be owned directly by the individual applying for the visa. Ownership through a corporate entity does not qualify for a Residency Visa application.

Title Deed Requirement

• The property ownership must be complete, evidenced by a title deed issued by the DLD in the owner’s name. Consequently, buyers of off-plan properties are ineligible to apply for a Residency Visa until the property is completed and the title deed issued.

Financial Criteria for Visa Duration

• For a five-year Residency Visa:
  • The property must be fully paid for and free from any financing. Only properties free of mortgages or other encumbrances are considered.
• For a three-year Residency Visa:
  • The applicant can still be eligible if they have paid off at least 50% of their mortgage, or a minimum of AED 1 million has been settled with the mortgagee bank or seller.

Personal Presence and Legal Formalities

• Applicants must be physically present in Dubai to apply for the visa. The use of a power of attorney for these purposes is not permitted.

Health Insurance Requirement

• Applicants must have valid medical insurance that provides coverage within the UAE.

Multiple Property Ownership

• For those owning multiple properties, the combined value (as stated in the title deeds) must meet the minimum investment criteria to qualify for the Residency Visa.

These stipulations ensure that the process is transparent and that the rights and responsibilities of all parties are clearly defined, paving the way for a more structured and secure investment environment in Dubai.

Post-Issuance Conditions for the Residency Visa

After a Residency Visa has been granted, there are specific regulations and compliance practices that come into play to maintain the validity of the visa.

Property Restrictions

• The Dubai Land Department (DLD) will place a restriction on the property linked to the Residency Visa. This notation indicates that the property purchase was instrumental in acquiring the Residency Visa.
• The primary purpose of this restriction is to prevent the investor from selling the property during the visa’s validity period, thus ensuring the maintenance of the minimum investment threshold required for the visa.

Conditions for Property Sale

• If the investor wishes to sell the property during the visa term, the DLD will revoke the Residency Visa unless the investor procures a substitute property that meets the necessary investment criteria.

Residency Maintenance Requirements

• The property owner is required to visit Dubai at least once every six months to keep the visa active. This is a common requirement for all UAE Residency Visas and is intended to ensure that the visa holder maintains a genuine connection with the UAE.

Dubai as a Premier Investment Destination

As we look towards the future, Dubai continues to strengthen its position as a prime destination for affluent investors seeking property investment visas. The emirate offers a straightforward application process, devoid of stringent requirements such as language proficiency tests.

Advantages of Investing in Dubai

• Minimal Entry Requirements: The criteria to qualify for a property investment visa remain relatively minimal, making it accessible for many investors.
• Tax Benefits: With some nations considering increased taxation on the wealthy, Dubai’s Residency Visa options present a significant opportunity for potential tax savings.
• Luxurious Lifestyle: Investors can enjoy a high standard of living, complemented by abundant sunshine, beautiful seas, and a host of luxury amenities.

Pathway to Emirati Citizenship

In 2021, the Dubai Government introduced the possibility of Emirati citizenship for property investors and their dependants among other categories. This opens up new avenues for investors seeking not just residency but also citizenship.

• Separate Legal Requirements: It is important to note that the criteria for citizenship are distinct from those for the investor visa. Detailed information on this will be covered in an upcoming Law Update article.

Secure Dubai Investor Visa with Expert Guidance

As Dubai continues to offer appealing incentives for property investors, understanding the nuances of investment visas and potential pathways to citizenship is crucial. Navigating these opportunities effectively requires expert legal assistance to ensure compliance and optimise benefits.

Davidson & Co. Law Firm in Dubai is your ideal partner in this journey. With a deep understanding of local laws and regulations, our top law firm is perfectly positioned to guide you through every step of the investment and visa application process. Whether you’re aiming for residency or considering citizenship, we’re here to help you make informed decisions that align with your financial and lifestyle goals.

Contact Davidson & Co. today to schedule a consultation and take the first step towards your new life in Dubai.

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News

Mandatory Health Insurance UAE Explained

In a landmark decision that marks a significant step towards universal health coverage in the United Arab Emirates, HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President, Prime Minister, and Ruler of Dubai, has recently presided over a UAE cabinet meeting that approved the implementation of a mandatory health insurance system across the remaining Emirates. 

This system, already in place in Dubai and Abu Dhabi, is now set to expand, ensuring that all residents within the UAE benefit from comprehensive health coverage.

Current Status of Health Insurance in the UAE

As it stands, mandatory medical insurance in Dubai and Abu Dhabi in enforced. In Dubai, the system is regulated by the Dubai Health Authority (DHA), while in Abu Dhabi, it is under the purview of the Department of Health (DoH). These frameworks have set a precedent for the rest of the Emirates, providing a model of successful health insurance mandates that combine public and private sector efforts to offer extensive healthcare services.

Expansion to the Northern Emirates

The recent decision extends these mandates to the other Emirates: Sharjah, Ras Al Khaimah, Umm Al Quwain, Ajman, and Fujairah. This expansion mandates that employers in these regions must secure health insurance coverage for their employees. This move not only promises to enhance the health and wellbeing of the workforce but also aims to standardize health benefits across all seven Emirates.

Implementation Strategy for Health Insurance UAE

Scheduled to take effect from January 1st, 2025, the specifics of the implementation process are still forthcoming. However, it is anticipated that the approach may mirror that of Dubai, where the introduction of mandatory health insurance was phased based on the size and type of business. This staggered approach helped ease the transition for businesses and allowed for adjustments tailored to diverse enterprise needs.

The UAE Cabinet has tasked the Ministry of Human Resources and Emiratisation (MOHRE) with leading the awareness campaigns. These initiatives are crucial for ensuring that both employers and employees understand their new obligations and the benefits of this policy.

Economic and Sectoral Impact

This policy is poised to invigorate the health insurance sector significantly. By expanding the insurance mandate to new areas, there will be fresh opportunities for growth within the sector. Insurers, including overseas reinsurers who have substantial investments in the UAE market, are expected to benefit. This expansion is not just a boost for the insurance industry but also promises to spur overall economic growth by improving the health standards of the workforce.

Opportunities and Considerations

For businesses currently operating in the UAE and those looking to expand into the Northern Emirates, now is a critical time to begin exploring licensing requirements, setup procedures, and distribution structures. Additionally, for international players in the insurance market, this development presents an opportune moment to strengthen partnerships with local entities and tailor their offerings to meet the expanded demand.

Prepare for Change with Confidence!

The extension of mandatory health insurance across all Emirates is a commendable move by the UAE government, reflecting a proactive approach to public health management and economic stability. It not only aligns with global health coverage goals but also ensures that the UAE remains a leading example of healthcare innovation and accessibility.

As the UAE broadens its health insurance mandates, ensure your business is ahead of the curve with the help team of best lawyers, UAE. Contact Davidson & Co. today to navigate the new legal landscape with expert guidance tailored to your needs. Secure your consultation with us now and stay compliant with confidence!

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News

Legal Insights: Company Liquidation in Dubai, UAE

In the UAE, the concept of company deregistration or licence cancellation is frequently employed by licensing authorities to facilitate the closure of limited liability companies. Despite debates over its definition and legal underpinnings, we will explore the practical application of deregistration, paying close attention to the significant liabilities involved. 

The first part of the discussion will address the practical steps for company liquidation in the UAE, while the second will examine the associated legal and liability issues.

Steps and Strategies for Effective Liquidation

This section explores the key requirements for deregistration and contrasts them with liquidation. 

Although deregistration isn’t specifically codified under UAE regulations, it is a practical approach adopted by certain licensing authorities across the Emirates. Its primary goal is to cancel a licence and shut down a company swiftly, with fewer formalities compared to liquidation. 

Liquidation, by contrast, is the standard and legally recognised method for closing companies at most licensing authorities. Therefore, understanding the distinct requirements and implications of each process is crucial.

Legal Considerations in Company Deregistration

The deregistration process in the UAE is primarily governed by the internal rules and guidelines issued by the relevant licensing authorities. While specific requirements may vary between Emirates, the general steps include the following:

Key Requirements

1. Company Resolution
   • A formal resolution must be issued by the company, approving the cancellation of its licence and closure.
2. Clearances from Relevant Authorities
   • The company must obtain clearances from various entities, such as:
     • Telecommunication providers (e.g., Etisalat or Du)
     • SEWA (Sharjah Electricity and Water Authority) or other utility providers
     • Emirates Post or other relevant service providers
3. Cancellation of the Memorandum of Association (MoA)
   • The company’s MoA must be officially cancelled as part of the deregistration process.

Final Steps

• Once the completed application, along with the required documents and deregistration fees, is submitted, the licensing authority will process the request.
• Upon approval, a final certificate will be issued, confirming the company’s deregistration and the cancellation of its licence.

This streamlined procedure ensures the proper closure of a company while fulfilling all legal and administrative obligations.

The Liquidation Process in the UAE

The liquidation of companies in the UAE is thoroughly governed by the Federal Law No. 2 of 2015 on Commercial Companies. Here’s a streamlined guide to understanding both voluntary and compulsory liquidation processes under this framework:

Legal Framework

• Default Provisions: Liquidation should align with the 2015 Law unless the company’s constitutional documents specify otherwise.

Types of Liquidation

Voluntary Liquidation:

• Initiated by a shareholder resolution.
• Involves appointing a liquidator to manage the process.

Compulsory Liquidation:

• Ordered by the court in cases of disputes among shareholders or other triggers.
• The court dictates the liquidation method and appoints the liquidator.

Key Requirements for Voluntary Liquidation

• Shareholder Resolution: Formal agreement to liquidate and appoint a liquidator.
• Clearances: Necessary from utilities and service providers like SEWA and Emirates Post.
• Public Notice: Publication in two local daily newspapers, one in Arabic, for at least 45 days.
• Liquidation Report: Prepared by the liquidator and submitted to the licensing authority.

Finalisation

On successful completion of these steps and submission of the liquidation report, the licensing authority issues a liquidation certificate, marking the formal closure of the company.

Managing Legal Risks and Liabilities During Deregistration

In light of the regulatory framework, a company in the UAE can opt for deregistration without the necessity for a formal liquidation process. Here are the key points:

• No Liquidator Required: Unlike liquidation, deregistration does not necessitate appointing a liquidator.
• Creditors and Reports: There is no obligation to notify creditors or prepare a liquidation report during the deregistration process.

This streamlined approach allows for a more direct and less cumbersome closure of a company.

Initiating Dissolution and Selecting a Liquidator

The lack of a liquidator in the deregistration process brings up legal queries about the necessity for typical dissolution and liquidation steps, even after a company has been deregistered. According to Article 308 of the 2015 law, these considerations require careful legal evaluation to ensure compliance with existing regulations and to clarify whether these traditional steps remain mandatory in the absence of formal liquidation.

“The liquidation shall be conducted by one or more liquidators appointed by the partners or under a Decision by the General Assembly or any other similar body, provided that the liquidator is not an auditor of the company at the time being or has already audited its accounts within five years preceding the appointment“.

Examining Roles and Responsibilities in Liquidation

Stakeholder Involvement

• Managers and Shareholders: Their roles and liabilities become a focal point, particularly in relation to compliance and decision-making during the liquidation or deregistration processes.
• Licensing Authority: The extent of the authority’s involvement, including its approval rights in liquidation activities, is critical.

Regulatory Permissions

• Required Approvals: Certain liquidation actions, such as public announcements in newspapers, necessitate permissions from the licensing authority, indicating a significant level of regulatory oversight in these proceedings.

This structure highlights the complexity of roles and the need for regulatory compliance in the liquidation and deregistration processes.

Engaging with Creditors During Deregistration

During the liquidation process, the liquidator is required to make a publication per Article 316 of the 2015 law:

”All the debts payable by the company shall become immediately outstanding upon its dissolution. The liquidator shall notify all the creditors by registered letters with acknowledgment of receipt of the commencement of the liquidation, inviting the creditors to present their claims. The notice shall be published in two local daily newspapers; one of them is issued in Arabic. In all events, the notice of liquidation shall include a period granted to the creditors for at least 45 days from the date of the notice to present their claims”.

Deregistration does not mandate notifying creditors, which raises potential concerns about the liabilities of managers and shareholders towards the company’s creditors post-deregistration. It is crucial to navigate the deregistration process with great care to prevent situations where shareholders and managers might remain liable to creditors or third parties. This careful approach helps to mitigate risks associated with unresolved financial obligations.

Closing Your Business Legally and Efficiently with Davidson & Co.

Navigating the complexities of deregistration in the UAE without notifying creditors can expose managers and shareholders to unforeseen liabilities. 

To ensure that your legal rights are fully protected, it’s crucial to consult with the top lawyers in Dubai. Connect with Davidson & Co. today for comprehensive guidance and expert legal advice tailored to your specific needs. 

Ready to secure your financial interests? Reach out to us now and safeguard your future.

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News

Work-life balance: The role of paternity leave in the UAE

In the UAE, female employees are entitled to 60 days of maternity leave, comprising 45 fully paid days and 15 days at half pay. Expecting mothers can start their maternity leave up to 30 days before their due date.

In recent years, the UAE has made significant strides towards modernising its workplace policies, reflecting a growing understanding of the importance of work-life balance. Among these progressive steps is the introduction of paternity leave, a policy that champions the involvement of fathers in early child-rearing alongside their professional responsibilities.

Let’s explore how paternity leave is shaping work-life balance in the UAE, exploring its implications for employees and the broader socio-economic landscape.

Evolution of Paternity Leave in the UAE

The UAE has consistently led the Gulf region in progressive employment reforms, enhancing its labour laws to create supportive work environments. A key advancement came with the enactment of the federal decree-law no. 6 of 2020, which revolutionised parental leave policies, acknowledging the roles of both parents in child-rearing. This was particularly significant for the UAE’s private sector, which employs a large expatriate workforce.

Introduction of Paternity Leave in the UAE’s Private Sector

Under the guidance of President His Highness Sheikh Khalifa Bin Zayed Al Nahyan, modifications to the UAE’s labour regulations have established more inclusive parental leave practices. Historically dominated by maternity leave provisions as outlined in UAE labour law, the updated regulations introduce a transformative concept: paid paternity leave. Now, both male and female private sector employees are entitled to five working days of paid leave to care for their newborns, from the day of birth until the child is six months old.

Paternity Leave for Expatriates

This decree is groundbreaking, especially for expatriates, by fostering a more equitable sharing of childcare responsibilities traditionally seen as the mother’s domain. The introduction of paternity leave in the UAE for expats not only supports gender equality but also promotes a healthier work-life balance, crucial for both parents’ well-being and involvement in early child development.

Duration and Impact of Paternity Leave in the UAE

Paternity leave in the UAE now spans five working days, a period designed to support the father’s involvement without compromising their professional obligations. This policy enhancement significantly contributes to the UAE’s aim to boost the attractiveness of the private sector for Emirati nationals and expats alike. It aligns private sector benefits with those of the public sector, making the private sector a more appealing employment option for capable national staff.

Strengthening Family Roles and National Employment Strategies

Moreover, the legislation bolsters the UAE’s global stature as a forward-thinking nation committed to promoting workplaces that support family integration and work commitments. This initiative benefits not just individual families but also the overall productivity and job satisfaction within the workforce, contributing substantially to the country’s economic and social stability.

Expert Legal Support from Davidson & Co.

In conclusion, the UAE’s introduction of paternity leave marks a significant advance in fostering a supportive environment for working parents, balancing professional commitments with family life. For those seeking to navigate these new regulations or address any employment and labour issues, Davidson & Co., a boutique law firm in Dubai, offers offers the best lawyers for all legal issues. With a deep understanding of local employment laws, Davidson & Co. can help you leverage these changes to benefit your family and career. Contact them today to ensure your rights and responsibilities are expertly handled.

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News

How to Check Absconding Status in the UAE

To check your absconding status in the UAE, log in to the MoHRE website using your UAE Pass or account details. Select ‘Employee Services’ or ‘Absconding Status’ from the service menu, input your passport, visa number, or Emirates ID, and submit. Your status will be displayed. For any problems, contact MoHRE or consult a legal expert.

If you’re working in the UAE, it’s crucial to know your legal status, especially concerning absconding allegations. Being marked as an absconder by your employer can seriously affect your residency and future work opportunities. 

This guide will explain how to check your absconding status in the UAE using the Ministry of Human Resources and Emiratisation (MoHRE) system, helping you manage your employment records and safeguard your professional future.

Reporting domestic worker absence in the UAE

This service provided by the Ministry of Human Resources and Emiratisation (MoHRE) allows employers to officially report a domestic worker who has been absent for more than seven days without the employer’s knowledge of the worker’s whereabouts and any contact. It’s designed to ensure both the safety of domestic workers and the regulation of employment standards within the UAE.

Terms and conditions for reporting absence of a domestic worker in the UAE

When reporting the absence of a domestic worker in the UAE, employers must adhere to specific terms and conditions set by the Ministry of Human Resources and Emiratisation. Understanding these guidelines is crucial to ensure that both the rights of the worker and the employer are protected under the law.

Minimum Absence Period

A domestic worker must be absent from their place of employment for a period exceeding seven days before the employer can initiate a formal absence report. This period allows for any unforeseen circumstances that might have prevented the worker from contacting their employer or returning to work.

The process of reporting the absence of work in the UAE

When a domestic worker in the UAE fails to report to work without prior notice, employers are required to follow a specific protocol to report their absence. This ensures that all parties are protected and legal standards are upheld. Below, we outline the steps involved in this process, from gathering the necessary documents to receiving the final confirmation from the Ministry.

Required Documents

Before initiating the reporting process, ensure you have the following:

• Passport or employment visa of the domestic worker (if available). These documents are critical as they contain essential information needed for the reporting process.

Service Procedures

• Login Credentials: Access the Ministry’s portal by logging in with your username and password, or use the UAE Pass for authentication.
• Entering Information: Enter the absent domestic worker’s details such as passport number, ID number, unified number, name, date of birth, and nationality.
• Payment of Fees: Proceed to pay the prescribed federal fees associated with the reporting process.
• Application Forwarding: The application will then be electronically forwarded to the Federal Authority for Identity, Citizenship, Customs and Ports Security for compliance verification.
• Addressing Shortfalls: If there are any deficiencies or missing information in your submission, these will be reported back to you for completion.
• Receiving Notifications: Approval or rejection of the application will be communicated to you via text message and email.
• Finalisation: Upon completion of the process, the Ministry’s seal will be placed on the application, marking the formal recognition of the report.

Charges to report absconding in the UAE

When reporting an absconding case in the UAE, employers are subject to certain fees that vary depending on the emirate in which the service is provided. Here, we detail the cost implications for initiating an absconding report through the Ministry of Human Resources and Emiratisation (MoHRE) and the General Directorate of Residency and Foreigners Affairs in Dubai.

All Emirates except Dubai

• Fee: 315 dirhams This fee applies when the report is made through MoHRE’s services available in Emirates other than Dubai.

The Emirate of Dubai

• Service Provider: The service in Dubai is managed through the systems of the General Directorate of Residency and Foreigners Affairs – Dubai.
• Business Centers Commission: A capped commission fee of 72 dirhams is charged by business centers for processing the report.
• Federal Charges: Outside of business center fees, the service through MoHRE’s website and smart app remains free of charge, except for federal charges.

Please note that the fees mentioned do not include tax and collection charges, which may be applied additionally. It is advisable to check the latest fee structure and any potential additional costs directly through MoHRE or the relevant authority in Dubai to ensure all financial requirements are understood and met correctly. This proactive approach will aid in the seamless processing of your absconding report.

Get assistance in absconding cases with Davidson & Co.

Navigating UAE employment law, particularly concerning absences and absconding, demands strict adherence to regulations and a thorough understanding of related costs. Whether you are an employer filing absence reports or an employee contending with absconding allegations, expert legal advice is essential.

For bespoke support and professional guidance from top lawyers, consider Davidson & Co., a boutique law firm specialising in UAE employment issues. Ensure your employment practices comply with the law and that your rights are robustly protected by contacting Davidson & Co. today.

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