This article deals with the aspects of the UAE Federal Law No.18 of 1993 on the Issuing of Commercial Transactions (the “Commercial Transactions Law”) as well as the developments and amendments thereto.
Commercial Laws in the UAE
The UAE, through its position as a major center for global trade activities, has been eager to develop its commercial laws to be in line with international standards and to keep abreast of the rapid economic growth in the region.
Since its formation in 1971, the UAE has issued a number of laws relating to the economy, trade, and investment. These laws have been in a state of constant development for the expansion of the country’s economic infrastructure and to provide an attractive environment for investors. The Commercial Transactions Law is one of the most significant laws in this regard.
Commercial Transactions Law
Article 1 of the Commercial Transactions Law states that its provisions shall be applicable to all traders and any commercial business is undertaken by any person, whether such person is a trader or not.
Article 4 of the goes further to define the following forms of commercial businesses:
- Businesses carried out by a trader for matters related to his trade and which are commercial in nature;
- Speculative business conducted by any person for the purposes of making a profit, even if such person is not a trader;
- The business that the law classifies as a commercial business;
- Business related to or facilitating commercial business.
What is deemed to be a Commercial Business?
Article 5 of the Commercial Transactions Law goes further to define the following activities as a commercial business:
- Purchasing and selling of tangible or intangible goods and movables for the purpose of making a profit, whether the goods are sold in their current state or after processing and manufacture.
- The purchase or hire of tangible and intangible goods and movables for the purpose of leasing them out and earning profits from such leasing activity;
- The Sale or lease of goods and movables purchased or leased as mentioned previously
- Banking, money exchange and stock market transactions, investment company operations, trust funds, financial institutions, and all other financial intermediation operations;
- All commercial paper transactions
- All marine and aviation business including:
- Sale, Construction, purchase, lease and hire, chartering, repair or maintenance of ships and aircraft including sea and air consignments;
- Sale or purchase of ship or aircraft materials, equipment, tools, etc.;
- Loading and discharging business;
- Maritime and aviation loans;
- Contracts for the employment of captains, navigators and sailors on commercial ships and aircraft.
- Establishment/ setting up of companies;
- Current Account;
- Various types of Insurance, to the exclusion of cooperative insurance;
- Public Auctions;
- Hospitality industry including hotels, restaurants, cinemas, theatres or sports stadiums or other places of entertainment;
- Distribution of water, electricity and gas;
- Publication of newspapers and magazines where the purpose of such publication is the making of profit by means of the publication of advertisements, news and articles;
- Radio, television broadcasting, photographic and recording business;
- Mail, telegraph and telephone business;
- General stores business and mortgage funds deposited there.
Article 6 of the Commercial Transactions Law provides that the following activities will be considered to be a commercial business if practiced as a profession:
- Commercial Agency;
- Commission Agency;
- Commercial representation;
- Supply contracts;
- Buying and selling of property/real estate with the intention of making a profit, whether before or after the conversion or division thereof;
- Road/Land transport;
- Real estate construction contracts where the contractor undertakes to also provide the materials and workers;
- Industries extracting natural resources;
- Tourism and travel business;
- Business of export, import and customs clearance;
- Service and employment offices;
- Printing, publishing, photography, recording and advertising;
- Livestock and fisheries business;
- Leasing and renting the work of others for the purpose of leasing;
- Renting out furnished or unfurnished houses or apartments with the intention of subletting them and turning a profit from such activity.
What is not considered to be a commercial activity according to the Commercial Transactions Law?
Article 8 of the Commercial Transactions Law states that in instances where an artist creates a work of art himself or with the assistance of workers it will not be considered a commercial activity. Furthermore, Article 8 provides that the same shall apply to someone who prints and sells his/her own work.
In addition, Article 9 (1) of the Commercial Transactions Law provides that in circumstances where a farmer sells produce obtained from land owned or cultivated by him, even after the produce has been processed, it will not be deemed to be a commercial activity.
However, it must be noted that Article 9 (2) of the Commercial Transactions Law provides that in circumstances where a farmer starts a permanent store for the purposes of selling his produce, whether it’s in its processed or unprocessed form, the sale shall then be deemed to be a commercial activity.
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Conditions for doing business in the UAE
Article 23 of the Commercial Transactions Law stipulates that the practice of business in UAE is subject to the following restrictions:
- Non-UAE citizens may not engage in business activities within the UAE unless such person has one or more UAE national/s as partners according to the conditions and within the limits stipulated by the UAE Commercial Companies Law No. 2 of 2015. In this regard, the provisions of the Commercial Companies Law were amended in November 2020, one of the most significant changes being that onshore companies will no longer be required to have a UAE national as a majority shareholder.
- Professionals are prohibited from conducting business related to import and export.
Article 24 of the Commercial Transactions Law prohibits the following persons from engaging in trade within the UAE:
- Any trader who was declared insolvent during the first year of his practicing a trade unless he has been rehabilitated.
- Any person who has been convicted of bankruptcy crimes of fraud, commercial fraud, theft, fraud, breach of trust or forgery unless he has been rehabilitated.
The penalty for violating the aforementioned prohibitions will be imprisonment for a period not exceeding one year and a fine of not less than AED 5000 and not exceeding AED 100,000, or one of these two penalties. The aforementioned will, in all cases, also include a court order to close the business.