By Andy Sambidge
Abu Dhabi sees big rise in new registrations after abolition of start-up rule.
The number of new company registrations in Abu Dhabi has doubled since the abolition of a rule requiring a start-up capital of AED150,000, new figures show.
Since the announcement in August of the scrapping of the minimum capital requirement, more than twice the number of new businesses have been registered in the UAE capital compared to the same period last year, according to data from the Abu Dhabi Chamber of Commerce and Industry.
A total of 2,063 new firms have opened, compared to the 974 that started in the same period in 2008, UAE daily The National reported on Monday.
Previously, entrepreneurs would only be granted business licences if they had a bank balance of at least AED150,000.
Back in August, Sultan bin Saeed Al Mansouri, UAE Minister of Economy, called it "a positive step to attract more investments to the country".
He added: "This decree underlines our wise leadership's vision and strategy aiming at developing the investment environment in the UAE, diversifying sectors and activities of our economy to ensure economic prosperity and welfare to the UAE community."
He said the move reflected the federal government's stance to boost the investment environment.
The issuing of the decree also aimed to limit bureaucratic procedures as the investor won't need any bank certificates prior to setting up the business.
Mohammed al Hameli, the director general of the Abu Dhabi Chamber of Commerce, told the paper: “The decision to change the law has made it easier for small companies to start.”
He added: “Before, the system of registering a company was slow. Now it is much easier.”
I doubt that this increase in registrations is caused by the share capital abolition only. Frankly, I hope this is not the case. I guess it has - in comparison to last year - much more to do with the attractiveness and stability of Abu Dhabi, going along with first settlements of hubs like a free zone and a high industrial potential. The number of registrations should not be the essential fact - BUT the potential and sustainability of new start-ups. Was or is it really a bottleneck for start-ups to show up a minimum deposit of 150,000 AED - which can be withdrawn immediately after the license has been issued? This in an ecomony with no improved rules for debt regulation, insolvency etc.? Or was/is it more or less a small kind of entry level, caring for stabile actors in a market. In the lifecycle of a company the registration is only the birth breath. Much longer halts the day to day operation and interaction with Third Parties. And there is no experience, how many additional compliance will come up all the time in the lifecycle due to unsure evaluation of counterpart's credibility when it comes to contracts, deliveries etc. Under the "old rule" one thing was clear: A counterpart has got a "fixed minimum liability" in the amount of a fixed share capital. And - last but not least - how will the amendment be implemented that the share capital should be defined accoring to the individual business requirement??? Who will define what is needed?
i fully agree with Martin KLP
Very often the demise of a bigger company that might see 100 people lose their jobs will see 5 of them start up on their own. Recessions and job losses often result in company registration spikes. The 150k rule undoubtedly makes it easier but the job losses across the UAE would quite likely increase registrations too in other parts of the UAE that have not reduced the cash requirements. It would be interesting to compare the two to see the affect it has. One must also consider what measures could be taken to reduce the costs for existing businesses. It makes no sense to have new small start ups at the same time established businesses are folding due to high costs.
Without a doubt the prices of an office space! 140K a year for a 3 person office in Dubai Internet City??? Come on!! If they want to have success, make the freezone cheaper to start up in, and cut the cost of having an office, then you will see a boom....
This is only implemented in Abu Dhabi - although at the time of declaration, the media had claimed it is for all the Emirates.