Wednesday, 12 February 2014

How to Incorporate a Contracting / Engineering Consulting Company in Dubai

Incorporating a Contracting Company and Engineering Consultant Company

The Department of Economic Development (DED) in coordination with Dubai Municipality (DM) is the authority body that regulates and controls the licensing procedures for an entity which intends to carry out the aforesaid intended activities (Consultant and Contracting Company).
Before we inform you the regulations relating to Consultant and Contracting Company we would briefly mention the forms of legal entity in UAE. Legal Forms of Business Structures for Consultant and Contracting Company can be as a Branch of a Foreign Consultant and Contracting Company or as Limited Liability Company (LLC).

A) Background information regarding the registration of a branch office of a foreign company, in the UAE

Article (314) of the Commercial Companies Law allows a foreign company to exercise its main activity in the U.A.E. or set up their offices or branches only if a license to this effect has been issued to them by the Ministry of Economy However the Ministry of Economy does not allow registration of foreign company easily and permit it subject to the need of the UAE. The GGC members benefit of a specific status in the event the GGC company is 100% GGC national

The initial requirement for setting up a branch office of a foreign company in the U.A.E. is to appoint a Local Service Agent, who should be either a U.A.E. National or a Company owned 100% by U.A.E. Nationals .

The Commercial Companies Law provides that the said agent shall not assume responsibility for the financial obligations of the company and shall not interfere in the administration of its operations, but shall only offer necessary services such as acquiring entry and residence visas, obtaining necessary licenses from the Municipalities, Economic Department, Chamber of Commerce & Industry or various Ministries, facilitating the clearance of papers with governmental authorities and keeping the foreign company informed of all announcements related thereto, etceteras. The agent is remunerated by an annual fee for the services he renders to the foreign company, such sum shall be determined by an agreement between the agent and the company; namely, the National Service Agency Agreement.


B) Background information regarding the registration of a <Limited Liability Company (LLC) 

Limited Liability Company is one with limited liability, where the number of partners may not exceed fifty and should not be less than two. Each of the partners shall only be liable to the extent of his share in the capital. The partners’ participation should not be represented by negotiable certificates.

In addition, an LLC has the following legal and commercial characteristics:

  • The minimum share capital must be AED 300,000 divided into equal shares with a minimum face value of AED 1.000 per share. (for most of the Commercial Industrial activities except trust and holding activities AED. 3 million ) UAE nationals must hold at least 51% of the shares.
  • Public subscription for raising capital is not permitted.
  • The management or managers are appointed by Memorandum of Association, by a separate management contract or the general assembly of the partners.
  • Managers may be one or more of the partners or any other parties provided that they do not exceed a total of five persons.
  • It is possible to provide in the Memorandum of Association that the profit and losses will be shared in a ratio different to that of the share capital ratios.
  • It is necessary to appoint an auditor who must be accredited in the UAE.
Please note that for Consultant Companies all the shareholders must be qualified engineers however for Contracting Company the Shareholder’s need not be Engineers; However minimum one Engineer must be employed for Contracting License, having the experience in the specialized field, not less than three years after obtaining the university degree or having minimum 5 years experience after obtaining the diploma. The Engineer must be a member of the Engineer’s Association in the Country where he got his degree.
A LLC or Branch can be registered as Contracting Company or Engineering Company.

1) Contracting Company

Contracting Firms have been classified under Regulation (4) by the Contractors’ classification committee in the year 1980.  The Classification Conditions/Category depends on the “Technical Conditions” relating to the Permanent Technical Staff, the experience conditions i.e. contracts executed before applying for the classification and the Estimate value of the contracts participated.
Thereafter the category can be upgraded once we provide the requisite proof to Dubai Municipality (DM) of having done minimum 10 projects in the same grade/category in the last 3 years.
Initially temporary license will be issued until the Engineer appears for an exam. Thereafter upon his passing permanent license will be issued.

A Contractor who wishes to register in the Contractor Classification Registration will have to submit an application to the Committee Secretariat at DM enclosing the following documents and certificates.
1.       Certificate of Incorporation of the parent company - indicating the date of establishment thereof.
2.       Trade License of the parent company - indicating the construction grading.
3.       The Engineer’s qualification, curriculum vitae and residence visa,( if available).
4.       An introductory cover letter, on the company letterhead, specifying the information noted below.( appendix 1)
5.       Completion of six schedules( 3 of Completed Projects and 3 of Uncompleted Projects) ; indicating the information listed below.( appendix 2)
Numbers 1, 2, completion Certificate, Building permit and the manager’s educational qualification should be legalized up to the UAE embassy, including the Ministry of Foreign Affairs, in the foreign country.

Appendix 1: 

Required contents of the introductory cover letter of the Parent Company

The following information should be specified therein with regard to the parent company and it’s branches,  :-
1.         The qualifying grade of the construction company - focus on the             unlimited / top category
2.         The activities of the company.
3.         The number of technical and administrative staff and the relevant             profession.
4.         The type, quantity and value of equipment owned by the company.
5.         The number of buildings and projects completed by the company.
6.         The current construction projects under process.
7.         Name any foreign branches of the company
8.         Name the local service agent and the office manager, indicating his             qualifications.
9.         List the number of labourers in the company.

Appendix 2:
Information required in the two  Schedules i.e. Completed Projects and Uncompleted Projects
Please note that in the event the license is required to be obtained on the basis of a qualified and experienced Engineer/s instead of the Company (as the applicant/shareholder) then the Engineer must submit as far as possible the original relevant documents mentioned below and in the event it’s a photocopy (for example Building permit or completion certificate) then he must obtain an original reference letter from the Employer/constructing company for each project (duly stamped and sign – notarized, legalized and attested) stating in detail the task handled by the Engineer and the specific contribution made by the Engineer. The more number of qualified and experienced Engineers the better.

Completed Projects arranged as per activity type i.e.
Activity no 1

Part  1 : Projects  

1.         Client name
2.         Name of project
3.         Country where project is undertaken
4.         Value of project
5.         Height of building
6.         Grade/Category of project
7.         Date of commencing the project and completing the project
8.         Completion certificate – notarized legalized and attested
9.         Actual picture

Part 2: Technical and Administrative Staff arranged as per activity type

1.         Name
2.         Profession
3.         Date of joining the Co.
4.         Graduation date
5.         No of years experience
6.         Note if such employee will work in Dubai or not
7.         Copy of the passport
8.         Copy of the degree in English language

Part 3 : Equipment / Machinery - including vehicles arranged as per activity type

1.         Type
2.         Number
3.         Date of expiry of registration
4.         Place of registration
5.         Value
6.        Attested by the registration authority.

Followed by activity no 2 in the aforesaid format.

B) UNCompleted Projects arranged as per activity type
Activity no 1

Part 1 : Projects  

1.         Client name
2.         Name of project
3.         Country where project is undertaken
4.         Value of project
5.         Height of building
6.         Grade/Category of project
7.         Date of commencing the project
8.         Expected date for completion of the project
9.         Building permit notarized legalized and attested

Part 2: Technical and Administrative Staff arranged as per activity type

1.         Name
2.         Profession
3.         Date of joining the Co.
4.         Graduation date
5.         No of years experience
6.         Note if such employee will work in Dubai or not
Part 3 : Equipment / Machinery - including vehicles arranged as per activity type
1.         Type
2.         Number
3.         Date of expiry of registration
4.         Place of registration
5.         Value
6.         Attested by the registration authority.
* An interview shall be held with one construction engineer at least, to be approved for working in the office.
Followed by activity no 2 in the aforesaid format.

2) Engineering Consultancy Company

A- Relevant Authorities

The Dubai Municipality which is the authority responsible of regulating, administering inspecting and developing the Profession, have established a Committee for registering and licensing the practice of the Profession and a Register recording the information of authorized practitioners of the Profession ie : Engineers . No natural person shall be allowed to practice the Profession unless his name is entered in such register.
Therefore the Municipality subject to their compliance with all the requirements shall register all applicable Engineers to practice in Dubai. Furthermore the firms license shall be issued personally to the applicant for the same and may not be assigned to others except particular conditions.
Once the Municipality has granted approval for the registration of an Engineering firm the Dubai Economic Department (DED) is the responsible authority for granting the license.
Both authorities are complementary since you the DED will not issue the license without prior approval and authorization of the Municipality for this type of activities, in the other hand even with the approval of the Municipality you are not permitted to practice before the DED issue the relevant license.

B- Requirements for the Practice of the Profession

B-1 An Engineer whose name is to be entered in the Register shall comply with the following requirements :
1.       be fully competent
2.       be of good conduct and reputation
3.       not have previously conducted a crime or misdemeanor relating to the honor or honesty unless the competent authority already granted a pardon to him or he had been rehabilitated .
4.       Not be an owner or partner in more than one engineering firm or use more than one engineering firm as a location for practicing the profession in Dubai except in the case of an associate engineering firm .
B-2 In addition to the above the foreign engineers shall further comply with the following requirements:
1.       Be a holder of BSc Degree in engineering from a recognized university in one of the engineering filed relevant to the licenses activity.
2.       Have minimum of five years experience in the concerned engineering field subsequent to receiving the university degree.
3.       Be a member of the Engineers Association in the UAE
4.       Be personally resident in the UAE for a minimum period of nine months per year
B- 3 However Local engineers shall comply with the following additional requirements:
  • Be a holder of BSc Degree in engineering from a recognized university in one of the engineering filed relevant to the licenses activity.
  • Have minimum of three years experience in the concerned engineering field subsequent to receiving the university degree.
  • Be a member of the Engineers Association in the UAE
C-Form of Engineering Firms

Engineering consultancy is considered in Dubai as a professional activity that is regulated by the Local Orders Consequently it is the norm that a locally incorporated engineering firm is owned by one or more natural person\(s) rather than by a legal person. The exceptions are mentioned in C-2 and C-4 here below.
In the event that more than one licensee owns an engineering firm the partners are required to sign a professional business agreement in respect of a professional civil company. This Agreement shall regulate the business relations between the partners and shall require that the partners be jointly liable for such company‘s obligations toward third party as stipulated in article 18 of LO No 89.
The Engineering Firms operating in Dubai shall adopt one of the following forms

C-1 A local engineering firm

A local engineering firm might be owned either solely by a local engineer or jointly by a number of local and foreign engineers, all of whom are entered in the Register. The foreign participation in the capital of the firm shall not exceed 49%.

UAE National
(not less than)
Expatriate
(not less than)
Category I
10
15
Category II
5
10
Category III
3
3

C-2 An associate engineering firm

A local engineering firm classified under the first category only may associate with a foreign engineering firm (s) by establishing not more than one associate engineering firm to carry out some sophisticated engineering works. The foreign firm shall have previously practiced the profession for a minimum of ten years within the UAE or abroad in the field required to be licensed.

C-3 An expert  engineering firm  

An Expert Engineering Firm is the firm carrying out some of the sophisticated specialized engineering works. Its work shall be limited to provide opinion to the local engineering firms, the associate engineering firms or any of the official bodies. The applicant of the Expert Engineering Firm licence must hold a scientific degree in a sophisticated engineering specialization, have practiced the profession in his sophisticated specialization for a period of not less than 15 years and required to carry out the activity personally. It is conditional for an Expert Engineering Firm (if the licencee is an expatriate) to appoint a UAE national as Local Service Agent whose domicile is in Dubai.

C-4 A branch of foreign engineering firm

A foreign specialized engineering firm may establish a foreign engineering branch office. The license shall be limited to fields of sophisticated specialized engineering works not commonly practiced by local engineering.
Article 2 of the LO No 4 (local order No 4 of 1999) on the practice of engineering consultancy profession in Dubai exempt such firms from the original requirement of LSA as stipulated in articles 30.31.32 and 35 of the LO No 89
 
The registration with the Municipality and DED is compulsory in order to be granted with a professional license to practice engineering profession. Any type of engineering firms has to be granted with the approval of the Municipality first in order to get the professional license from DED.
All the license are issued by the DED, however some requires specific authorization for instance from the Municipality (such as engineering firms), central bank (baking representative office, brokerage) Ministries.
According to Article 12.2 of LO No 89 the licensee holder is not permitted to be an owner or partner in more than one Engineering firm or to use more than one firm as a location for practicing the profession in the Emirate. However as an exemption to the provisions of article 12.2. local engineering (of the first category only –ie ten years of experience for the nationals of the UAE or fifteen for others) may associate with foreign engineering firm in establishing not more than one Associate Engineering Firm to carry out some specialized engineering works, provided that such firms should have previously practiced the engineering profession for a period not les than ten years inside or outside the Country in the field required to be licensed.
In all case the foreign engineering firms shall be a licensed engineering firm. (Article 26 of the LO No 89).
According to article 2 of the LO No 4 amending article 30 of the LO No 89 all foreign engineering branch office and engineering, expert firms existing at the time of enforcement of this LO or those established after shall be exempted from the requirement of appointment of a local service agent.

Conditions of Registration (Local Decree No. 89/94)

The following conditions shall be available for every person who applies for the registration:
  • Complete legal capacity and technical qualification
  • Well known – good reputation
  • Have not committed any criminal act related to trust or honor breach, unless a pardon has been issued in this regard.
  • Practical experience not less than 3 years after graduation date.
  • To be a member in the Engineering Association in UAE
  • To be a partner or owner of a construction company, or building material trading company.
Required Documents:

1-
New license application as per First and Second Chapter of local decree No. 89/1994:
1
To fulfill the application for consultant office license on form 3/94
2
To fulfill the application of registration entry for license owners as per form 1/94, page 4/8, as per article 5/6 of the local decree No. 89/94.
3
Copy of the valid initial approval issued from Department of Economic Development (for activity + Partners + Trade Name).
4
New statement from Department of Economic Development about the owners of the issued licenses (for license owners / partners / manager in charge / services agent) showing the number of the initial approval.
5
Copy of passport and attested university certificates (for license owners / partners / manager in charge / services agent).
6
No objection certificate from place of work to issue licenses of consultant office (for local engineers).
7
No objection letter from the previous sponsor of non local engineers, if applied as partners.
8
To attach he partnership contract as per article 20 of local decree No 89/1994.
9
Copy of engineers’ society membership (for license owners / partners / manager in charge).
10
In case of applying for a license of foreign engineering offices branches and partner engineering offices, requirements mentioned in page 6/8 of the form (3/94)  shall be presented in addition to the above mentioned requirements.
11
To obtain the booklet of local decrees and the executive regulations + the booklet of terms and specifications of building.

2-
Requirements for foreign engineering office branch,
as per article 33/34/35 of Local Decree No. 98/94
1.
To present the Articles of Associations of the principle company, if any.
2.
Copy of the resolution of the administrative board to open a branch for the company in Dubai.
3.
Letter from the principal company to support the branch.
4.
Copy of the last renewed license or registration certificate or the new registration certificate of the engineering office in the home country or the branch, if any.
5.
To submit a statement (Schedule) showing the technical staff of the principal company who have more than 15 years experience, showing (name/ profession/ date of joining/ years of experience/ copy of academic certificates).
6.
Valid letter of authorization from the principal company to the manager in charge.
7.
Services agent contract. Valid for two years (if any), and to follow the local decree No. 4 / 1999.
8.
Statement (Schedule) showing the executed projects for the principal company, showing: (project owner/ name of the project/ place/ value/ area/ number of stories/ date of commencement/ date of complication certificate). Copy of completion certificate or confirmation documents shall be attached + Projects photos.
9.
Statement (Schedule) showing the projects under execution for the principal company, showing: (project owner/ name of the project/ place/ value/ area/ number of stories/ date of commencement/ date of complication certificate). Copy of completion certificate or confirmation documents shall be attached + Projects photos.

First: Conditions of Registration (Local Decree No. 89/94)

The following conditions shall be available for every person who applies for the registration:
1.       UAE National
2.       Complete legal capacity
3.       Well known – good reputation
4.       Have not committed any criminal or delict related to trust or honor breach, unless a pardon has been issued in this regard.
5.       Practical experience not less than 3 years after graduation date.
6.       To be a member in the Engineering Association in UAE
7.       To be a partner or owner of a construction company, or building material trading company.

Second: Required Documents:

  • 2 new photos
  • Attested copy of the university degrees
  • Copy of the valid passport/ Khulasat Al Qayed
  • Copy of the membership in the Engineering Association in UAE
  • Original no Criminal Liability certificate
  • Statement issued by the Economic Department regarding the previous licenses.   

Article No. 6: exception from the articles nos. (1) & (6):

 It is permitted to the expatriates to apply for the registration, since all other conditions are available, in addition to the following two conditions:
1.       Devotion to the work in the engineering office
2.       Practical experience not less than 5 years after graduation date. Moreover, the residency period shall not be less than 9 months every year, after obtaining the license. 

Conditions applied on the licensees and technical cadre regarding the local engineering offices only as per the Article No. 18 of the Local Decree No. 89/94

Category
Permitted Projects & Works
Minimum limit of specializations
Name of licensee, minimum limit of the Technical Cadre and required experience  
1st
Unlimited floors
2
Licensee10 years for local & 15 years for expatriates
Technical Cadre: 
3 Architects with experience not less than 10 years
3 civil engineers with experience not less than 10 years
1 engineer whatsoever years of experience – any specialization
* the devoted licensee is included with the technical cadre.   
2nd
G + 12 floors
2
Licensee5 years for local & 7 years for expatriates
Technical Cadre: 
2 Architects with experience not less than 7 years
2 civil engineers with experience not less than 7 years
1 engineer whatsoever years of experience – any specialization
* The devoted licensee is included with the technical cadre.
3rd
G + 4 floors
2
Licensee3 years for local & 5 years for expatriates
Technical Cadre: 
1 Architects with experience not less than 5 years
1 civil engineers with experience not less than 5 years
1 engineer whatsoever years of experience – any specialization
* the devoted licensee is included with the technical cadre.
* An interview shall be held with one construction engineer at least, to be approved for working in the office.


Kind Regards,

Vithul V Murali
Dubai Mobile : +971 50 55 73 538
Skype : Vithul.murali


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