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Investing in the UAE - Legal Mistakes

Investing in the UAE: Five Typical, Legal Mistakes You Want to Avoid

The number of people intending to invest in the UAE is increasing yearly as the UAE has become the world destination for many business opportunities. Favorable conditions for capital investment are the main reason investors from the CIS and several other countries are active in the market.

‍The main directions of investment are stocks, bonds, ETFs, REITs, real estate investments, operating companies, and projects, which will be discussed further below.

‍1. Buying an existing company in the UAE

A legal form of company you might deal with is likely a Limited Liability company. LLC has specific regulations and rules, which, if you are not aware from the beginning, can cause big-time consuming problems.

‍Why should you be careful? Only the company holds responsibility for any claims or debt in LLC companies. Managers and shareholders are not personally responsible for any obligation or claims. Only the company’s assets can be frozen. If you wish to transfer the ownership of the company under your name you must check the following:

‍How long a company has been running

  • A number of employees
  • Receipt of salaries by employees
  • A company has any block in Human Resources and Emiratization, the Ministry of Economy (depends on the kind of company)
  • A company has cases that are under process of Dubai Courts
  • Turnover of a company
  • Capital of a company

‍2. Investment in Different Kinds of Projects

Again, you might mostly be dealing with a legal form of organization such as an LLC. If you invest money without checking this company later, if something goes wrong, it will be complicated to refund the investment. If you have a dispute against an LLC, only you can chase a company’s assets. You must refrain from pursuing shareholders, managers, and their assets. If the company has nothing later, collecting something will be challenging. So before doing something, you need to evaluate the company entirely.

Case example – № 2873

A European company signed a contract with a local company registered in the DMCC Free Zone. The deal was for the sale and purchase of gold worth AED 8,200,000. After the customer paid 50% of the total price, the local company stopped contacting the customer. Consequently, the customer lost AED 4,200,000. The case is in Dubai court and is being processed now.


  1. The client did not check the company
  2. The company has no assets, only a bank account and a business license.
  3. Only one shareholder and he is outside the country
  4. There are no employees
  5. The agreement had an arbitration clause in the London Court of International Arbitration. This court is too expensive.

‍This case once again confirms that Due Diligence is critically important. Losses could have been avoided by consulting a licensed lawyer who could have conducted quality due diligence on the company before concluding the contract.

Law Bridge experienced lawyers provide investment counseling that identifies risks and gives clients more control over their investments. If you have any questions or need advice – please book a legal consultation with one of our experts.

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