Intermediate accounting


The most basic necessity for carrying out business activity in Dubai is the possession of one of the following three licences:

  • Commercial licences; all kinds of trading activity come under its purview;
  • Professional licences; all professions, services, craftsmen and artisans are covered under the same;
  • Industrial licences for setting up industrial or manufacturing activity.

In the UAE, businesses are regulated by the emirates and the Federal government. Dubai, especially, has a congenial atmosphere for businessmen and industrialists since the government has taken effective steps to curb existing unethical and malicious practices. Hence, Dubai is considered a haven of successful business ventures for both national and foreign investors.

The laws formulated by the governing bodies in UAE's financial or economy scene specify that 55% of the investors in a company's establishment have to be UAE nationals. A few exceptions can be made in case of companies having other relations with AGCC investors or other regions needing other requirements. The least allowed amount of capital for a public shareholding company is DH 10 million, one fourth, at least, of which must be settled on subscription. All shares have equal powers, and no share can be sold at below the nominal price. The chairman, as well as the majority of the board of directors must be UAE nationals. The board of directors must comprise of at least 3 and not more than 12 individuals.

Shares Issued and Traded:

The law specifies that companies involved in banking, insurance, or financial activities should be run as public shareholding companies, which further implies that 55% of the shares have to be held by UAE nationals. Foreign banks, insurance and financial companies, however, can establish a presence in Dubai by opening a branch or representative office. The shares issued and traded for a public shareholding company are to be recorded in a share register. These shares cannot be sold beneath their nominal value or cost under any circumstances. There are 7 different categories of business types or ventures in Dubai that are:

  • General partnership
  • Partnership-en-commendams
  • Joint venture
  • Public shareholding
  • Private shareholding
  • Limited liability
  • Share partnership

All of the above have shares of their own. The liability of the shareholder varies with different types of shares. For example, the liability of someone holding public shareholding company's shares is not more than his nominal share value. (RAK ompany official website)

Shareholder's Rights

  • Different types of shares can be traded in the UAE Shares are mostly issued through the stock market. Many stock brokers have opened up in Dubai and regions nearby to help investors put their money in the right place. Share trading takes place mostly through the United Arab Emirates Index, the Dubai Financial Markets Index and the Abu Dhabi Securities Exchange Index.
  • Abu Dhabi Financial Services Company and Al Ain Centre for Securities Brokerage are some of the more reputed brokerage companies of the UAE that can help a trader or wannabe shareholder set up a personal brokerage account. From thereon, he can follow his stocks and the share market (stock market) from an internet facility.
  • Apart from the convenience with which the shareholder can follow his stocks and investments, the government has applied an upper limit, a cap to the amount of foreign investment in UAE companies. The government has kept a stipulation asking companies to have at least 55% of their investors as nationals or citizens of the UAE. This allows the people of the UAE to take advantage of the economic prosperity of the region. Nowhere in the region is a company allowed with 100% foreign ownership, whereas in certain emirates, it is also necessary for a company to be fully owned by UAE nationals. Also, the majority of the board of directors has to contain UAE nationals.
  • Another empowering feature of the UAE economy is that all shares in a public shareholding company are equal. Meaning to say, no share holder is given special privileges that are not provided to some other faction of shareholders in the same company. This allows for a well maintained and uniform equality leading to an ordered and disciplined economic background in the region. The shareholders are also well informed about the company policies and plans for the future through regular updates either through the print media or the electronic media. This is another feature of UAE work ethics that makes business and investment in the region a safe bet. In the event that a public shareholding company loses half or more of its capital, its board of directors is required to call a general meeting of shareholders to consider the persistence or dissolution of the company in distress. If the board refrains from calling such a meeting or if the meeting fails to reach a decisive conclusion on the subject, any interested party may file a lawsuit seeking the dissolution of the company. Hence the rights of shareholders are well looked after by both the company as well as the government. (Law and Tax official website)

Are the companies allowed to repurchase their own shares as treasury stocks? Are the companies allowed to retire their share?

The companies can keep their stocks in case they seem to have a little concern over the general profile of their shareholders or are apprehensive of their stock values. Stock repurchases are frequently used as an efficient method to put cash into the shareholders' pockets rather than give cash through dividends. As such the UAE companies are allowed to follow this practice. The repurchase of their own stocks mean there are lesser outstanding stocks in the market. The companies can also retire their stocks or shares though it is seen as a negative strategy by investors and experts alike.

Procedures to be followed by companies during the first issue and sale of shares:

Under the Commercial Companies Law or CCL, while foreign investors are allowed to hold up to 49 per cent equity ownership in UAE companies, 51 per cent of the equity must be held at all times by one or more UAE citizens. The Limited Liability Company or LLC is the most popular procedure of setting up a commercial company in the UAE, unless the business is concerned with banking, insurance and investment events carried out on the behalf of third parties wherein a Public Joint Stock Company is required. The LLC requires at least 2 and a maximum of 50 members and minimum initial cap of DH 300,000. Management of the LLC is given to up to five natural persons who may or may not be UAE nationals. The initial procedures for starting an LLC and attaining a trade licence can be obtained from the Chambers of Commerce of each emirate. The following steps are required in establishing a limited liability company in Dubai:

  • Select a name for the company and get it approved by the Licensing Department of the Economic Department;
  • Prepare and chalk out the company's Memorandum of Association (MoA) and have it authenticated by a Notary Public in the Dubai Courts;
  • Attain permission from the Economic Department and apply for record in the Commercial Register;
  • Once permission is attained, the company will be recorded in the Commercial Register and have its MoA printed in the Ministry of Economy and Commerce's Bulletin;
  • The licence will then be issued by the Economic Department;

Then the company can issue its shares through either the stock market or a national bank or any other means that it finds convenient. (Govt of UAE official website)

Dividend Payment rules

The government and banking institutions together keep a tight leash over the profits of the companies and the dividend paid by them to shareholders. Banks had earlier restricted dividend payments to only 60% of the company's profits. This was done so that the banks could retain liquidity. Also the 60% aforementioned sum included stocks. Now the government has released some pressure over dividend payments. The government and banks have come with a plan to stop restrictions on the total dividend amount, i.e., they have decided to do away with the 60% stipulation. Now, the companies can distribute all of their profits in terms of dividends, provided the cash distributed is not more than 50% of the total. Hence, though the dividend payment policies are moving towards a little more liberalisation, the banks still are keen on keeping an upper cap on the amount of cash flowing out into the open.

Rules of regulation regarding a strong Corporate Governance

Corporate Governance is a very key tool that ensures to protect and preserve the rights of the stakeholders of the company, and is thus crucial in improving the overall corporate performance and in advancing a strong focus towards and the development of democracies that are oriented specifically towards the market. If practiced properly and in a just manner, corporate governance helps in keeping up the integrity of any transactions of the company and thereby strengthening democratic governing and the rules of law. It is a strong antidote to any kind of corruption, and prevents the abuse of both private and public interests, and it clarifies them both.

The following rules roughly summarize the set of rules required to achieve strong Corporate Governance for the company:

  • Rules that specify the composition of the board of directors. It is required to have in the board, members who are independent and also non-executive directors. Even within this, it be required to have at least one third of the total number of members to be independent directors and within them, they must have a majority of members who are also non-executive.
  • It is mandatory to have audit, remunerations and nomination committees, all of these committees having a minimum of 3 directors who are non-executive, out of which, 2 being independent directors.
  • External auditors that are appointed in the audit committee shall not be permitted to take on works in technical, consultative or administrative fields that may potentially influence their independence and also their decisions.
  • It is required that the investors get a complete and precisely accurate disclosure, and it is the duty of the board of directors to ensure that this happens.
  • It is of key importance to develop a policy for Corporate Social Responsibility. (Clydeco)

Stakeholder's Issues

The way business is conducted has a number of kinds on impact on the people. It is important to provide for meaningful employment and working conditions that are constructive, lending support for charity work, or improving the type and standards of goods and also the kind of services that are made available to the customers. Such impacts, positive or negative, are often described in criteria of stakeholders' issues of a company. Thus, a stakeholder is loosely also defined as any individual or a group of individuals that is directly affected by the actions of the company.

For some investors, it is important the value that a particular company gives and the focus it has on these issues relating to the various stakeholders of the company. It is seen as an important indicator to the company's long-term sustainability as is it an indicator to the various issues relating to the environment.

The treatment and the kind of connection with the stakeholders encompass various kinds of issues such as:

  • Complaints regarding advertisement by the company.
  • Maintaining health and safety, and providing appropriate working and living conditions.
  • The various supply chains.
  • The various trade unions existing.
  • The focus that the company gives to training and developments. (charitysri)

Long-term Bonds

Yes, long term bonds are in fact issued and also traded in UAE. The Dubai or government has issued a $20 billion in the interest of long-term bonds, and the very first fraction or instalment of $10 billion has already been sanctioned entirely by the UAE's central bank.

The reason this was sanctioned was to provide Dubai with the kind of necessary liquidity, and to substitute for that liquidity which has already dried up in the global market after the recession. Therefore, Dubai gets a chance to face all the upcoming financial obligations. The bond is unsecured, is at a fixed-rate paper, with a yield of 4% per year and a maturity of a five year term.

Bonds are let out by authorities in the public sector, institutions lending out credit, companies and institutions in the primary market that are supranational. The procedure used most commonly when bonds are issued is through underwriting. In this process of underwriting, when a bond is being issued, one or more firms or banks dealing in securities form a collection or a syndicate, and then buy the entire issue or series of these bonds from the issuer, and then later these are re-sold to the investors. The risk is taken on the part of the syndicate or the collection of security banks, because they may be unable to trade the issues off to the end investors. Government bonds are however, auctioned typically. As a matter of fact, during the financial crisis, the desire and the true risk taking ability, along with the willingness of the syndicates was tested when they actually performed the underwriting. Book-runners are those responsible for arranging primary issue arrange the bond issues and who also have direct contacts with the end investors and also help in the advisory work to the issuers of the bonds, in relation to the price of the bond issued and also its timing. It is also important to estimate the willingness of the book-runners to underwrite before opening any books on a bond issue, because it may lead to a case of the book-runners having very low appetite to underwrite.

Rules for long-term Financing

There a few fundamental rules that one must use as a guide to ensure healthy income from long-term financing:

  • Investing only in quality assets. For stakeholders, it is important to research and rather as much data as possible about a company before investing. Some principles must be followed and the investors must go through the history of the company and also the growth over a large period of time. Also, for people investing in properties, the location and other factors become important guiding factors for choosing a property.
  • It is a good strategy to diversify investments. This reduces the risk involved, and also gives an opportunity have a good mix of fixed interests, liquid cash, and property investments along with shares that can be purchased.
  • Compounding interests can produce high yields. The interest earned on an investment will compound or multiply if the returns are re-invested instead of spent. It simply means earning interest on interest. And over time, the returns can be many times more than what is invested.
  • Changes in the financial world must be closely monitored. Economics always works in cycles. Management changes, as well as scientific or political changes and events can have a great impact on the economy and the stable functioning of a company. One must follow the market trends. It is better to take greater risks during financial booms. It may sometimes be better to have a net profit which is not of a grand scale buy selling early, than holding on to stocks for too long, which may result in a loss. (Family Finances)

Other Issues or Regulations for Stakeholder

Issue related to the stakeholders has a wide area to cover. Some other issues other than the discussed above are: Relations with customers as well as suppliers

Customers and Suppliers are two of the major stakeholders of a company. Relation with customers and suppliers should be maintained and monitored by the company. Company must be engaged intensively with these stakeholders to improve the quality of their products and services. This issue also requires a better monitoring system for the best implementation of the practices and betterment of the relation.

Involvement and relations with the community

Organisations must be aware of their corporate social responsibilities. A company must be involved in the communal events and activities. The efforts made by a company for the development of society and the community should be encouraged. These efforts can be done via economical and other helps but it has to be in for a positive motive not just for the sake of complying with government laws or regulations.

Giving equal opportunities at all levels

Equal opportunity in the work environment is a global issue in the corporate world. Company's policies for establishing equality in the system at different levels differ all around the globe. In the UAE its nationalization policy becomes a hurdle in developing an equal environment for expatriate and national workers. (charitysri)


  1. RAK Company official website (n.d.) retrieved 9th March 2010 from
  2. Law and Tax official website (n.d.) retrieved 9th March 2010 from
  3. Government of UAE official website (n.d.) retrieved 9th March 2010 from
  4. Clydeco official website (n.d.) retrieved 9th March 2010 from
  5. Charity Sri official website (n.d.) retrieved 9th March 2010 from
  6. Family Finances official website (n.d.) retrieved 9th March 2010 from

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