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Setting up a business in a free zone such as the Dubai Internet City (DIC) or Dubai International
Financial Centre (DIFC) is an incredible opportunity. However, doing so comes with its own set of
unique challenges. There are many advantages to starting your business in a free zone, as they allow
100% foreign ownership, provide some tax advantages, and have a generally encouraging business
environment. Starting the business in terms of the right steps and in mitigating shared risks can be
difficult to navigate.
We will outline the required steps to alleviate risks while also building a good base for your business
in either of these wonderful free zones.
Ignoring compliance is one of the biggest risks facing start-ups. DIFC and DIC each have their own
legal frameworks, which are very different from that of the mainland UAE.
Know the Jurisdiction: The DIFC has a common-law framework with its own laws and courts, while
DIC is under the regulations of the DDA Before starting the business, you will need to know the levels
of compliance for the formation of the company, corporate governance, and employment law of
your free zone.
Choose the Right Activity: You need to confirm that your business activity indicates the activity
permitted for your free zone and that your business activity is actually what you do, as you could be
fined or your license cancelled for a discrepancy.
Seek Professional Expertise: Work with a reputable corporate service provider like CDA that is
knowledgeable about DIFC or DIC regulations. They will help you navigate the intricacies of licensing,
memorandums of association, and shareholder agreements to make sure you are legally compliant
from day one.
One of the main reasons businesses fail is due to underestimating costs and mismanagement of
finances.
Detailed Cost Estimates: There are a lot of other costs to your business than the license fee. For
example, you need to account for the costs of visa applications, office space, professional fees,
insurance, and initial marketing. Keep in mind that you should be preparing a financial model for at
least 6-12 months of operating expenses.
Consider the capital requirements: Both free zones have minimum capital requirements. Make sure
you have sufficient capital for more than just the initial option for setup; be certain you have funds
to sustain yourself until the business is profitable.
Opening a Corporate Bank Account: Opening a bank account in the UAE can be a somewhat tricky
process. Have as many of the required documents ready as possible when you apply for a corporate
bank account. Pick a bank with experience and knowledge about the specifics of free zone
companies. Time delays in opening a bank account can restrict your ability to operate.
Having a great business alone is not sufficient; you must ensure that your idea is viable in the local
market before committing to it to minimize risk.
Conduct thorough market research about your target audience, competitors, and the market
landscape. What is the market for your product/service in DIFC or DIC? What is the
competitive landscape? and so on.
There are thousands of businesses in DIFC and DIC. Consider establishing a unique business
proposition and market niche to effectively identify yourself. This process is essential for
winning clients in a competitive market.
With us living in a digital-first world, protecting your business from cyber threats is an absolute must.
DIFC Data Protection Law (DIFC Law No. 5 of 2020): If you are in DIFC, you will need to
comply with this comprehensive data protection law, which is based on the EU GDPR. This
includes obtaining explicit consent for data collection, appropriate data security obligations,
and appointing a Data Protection Office.
Cybersecurity Procedures: From day one, you will want to put certain cybersecurity
measures in place. These include the use of secure networks, regular security checks, and
your staff knowing how to report unusual happenings and handle sensitive business
information while spotting a phishing event.
Familiarize Yourself with the Visa Process: Learn what is involved in visa employment.
Obtaining employee visas in a free zone has its own set of hurdles. It is smart to understand
visa quotas, medical checks, residency stamps, etc., prior to planning on boarding your team,
to avoid delays.
Create Compliant Contracts: Create compliant employment contracts with unequivocal
terms aligned with the free zone labor laws. This helps protect the company and employee
and lessens the chance for a legal dispute.
Recruit the Right People: Dubai talent pool is diverse. Think about hiring people who fit
your company culturally and have a working awareness of the local business region and
community, in addition to having the right skills.
Starting a company in a high-end free zone like DIFC or Dubai Internet City can be exciting, but it
requires significant planning. While the lure of 100% foreign ownership and financial benefits are
alluring, the real test comes down to handling the territory legal, finance, and operational unique
issues. If you think about legal issues to stay compliant, map out your financial runway, do your
market research, build the right team, and set the guardrails to protect your customers data from
cyberthreats, you will be well placed to manage risk and build a resilient business.
CDA’s experts have been analyzing the risk environment of the businesses and have been devising
strategies to tackle identified risks beforehand for a long time. The professionals of the CDA can
assist the entrepreneurs willing to set up the businesses in DIFC and DIC to devise the stringent
framework for the business to avoid and detect multiple risks in advance. The CDA’s business setup
service providers are well aware of the legal and regulatory risks and also the other intricacies that
are involved in setting up a business; hence, our team will help you when you require it. To know
more about the risks that you may face, connect with the experts now at CDA!
