Today we are talking about external approvals you might need as a future business owner. The important questions we will cover today are as follows: what is an external approval? What types of external approvals exist in the UAE? Why it is important to know if you need external approval prior to company formation and what license types and business activities need external approvals and why.
First of all let’s clarify what is an external approval. External approval is a confirmation or approval from a 3rd party governmental establishment allowing you to do some sort of activity or action. The most common types of external approvals that exist in the UAE are NOCs – No objection certificates or NOC letters. In our next video we will cover the topic of No Objection certificates and No Objection letters in detail and explain what is the main difference between them. But in this video, we will focus more on the situations and business activities that might require an external approval for you as a business owner or you as a person who only growing a great new idea that will come to life soon or before you register a company and at the time of company registration.
All right. When you might need to get an external approval? It is important to keep in mind that certain businesses require external approvals which in most cases should be obtained PRIOR to the final issuance of business license irrelevant of emirate. For offshore companies, you will not need to get any external approval in the UAE, it might be required if you are planning to start your business in a free zone or mainland (LLC or Sole Establishment). Therefore, it is highly recommended to do preliminary research prior to any start of business registration process or at least to consult with Registrar or business consulting company in case you don’t have time to do the research on your own.
You might need to get an external approval whenever your business is somewhat dealing with or serving the following industries: oil and gas, banking, insurance, some financial activities, legal consulting, some construction and engineering activities, road transport activities, telecommunications, fire-arms and defense, governmental or semi-governmental activities like mass cultural events, health and veterinary, mass media, publishing and some other. Sometimes there might be a difference between the requirements in obtaining an approval be it ministry, police, municipality, or other governmental body in different emirates – but all in all - the previously mentioned areas will definitely require additional approval everywhere in the UAE.
So, depending on the activity of your future business, you might need to approach the respective authority that is in charge of the area of your interest. As a rule, the requirements might differ: from very tiny and easy like in some cases you will need to proof your experience, education, knowledge and expertise in the business area you are about to start, and up to very serious like doing expertise on your products or providing guarantees in the form of making a bank deposit.
Ok, so at what point of time such approval should be taken you might ask. Again, we strongly recommend to clarify if your intended business activity requires external approvals PRIOR to the start company of registration as it might lead to huge additional expenses which in some business areas are quite impressive, like in tourism or banking sectors for example, where you are paying a bank gurantee deposit - that is refundable - but that makes you liable for the full amount of money you deposited into the account and this is a safe measure against cheating in the market and keeping strong and professional business environment in the Emirates.
Why does it matter so much you might ask? Imagine a situation: you didn’t do any preliminary research and just started the process of company registration. What will happen next? Firstly, after your preliminary approval of name and registration form, the Registrar at some point of time asks you to provide additional external approval to proceed with your license issuance, of course it will affect the process and you might immediately need to recalculate your budget-plan dedicated to your company formation, Secondly, the time span devoted for company formation might increase many-fold as you will not be prepared to present the required data and documents to the authority IMMEDIATELY at the same time, so you will need extra time for preparation and if your deadlines with current buyer or supplier are tough, you might start losing money.
So, dear fellow entrepreneurs and business owners, be prepared: Forewarned is forearmed. Start preparation to external approval far before the actual time of documents submission. Again, don’t be afraid to visit the relevant authority, approach the reception or give a phone call or at least an explanatory email and describe your situation. You will definitely find someone who would help you understand the process and the requirements. Be prepared that you might be asked to provide several approvals from different organizations, and that it would require even more time as you are just a new-business owner without contacts and general understanding of the market and it’s functionality, you will need some time to find the correct connections and get used to the processes.
The last aspect I want to cover here is the pricing of such external approvals. Hardly it reaches the level of more than 500 dirhams but in some rare cases it might be higher. As we mentioned earlier, extra security deposit might be required of up to 10 Mln dirhams or more for some potentially risky for customers industries like insurance or construction as the government takes measures to protect end-users.
That’s all for now, as promised in our next video we will cover the topic of NOC’s that will give you even deeper understanding of the external approvals concept which will be applicable not only for the sphere of business but also daily life in the UAE.
If you want to know more about Dubai freezone company formation, feel free to get in touch with our professional consultant team and we would be delighted to assist you and help you to compare Dubai freezone company setup costs and help you to find that free zone, which would suit your business needs the most.
Disclaimer: Business Boutique UAE-Consultants.com is not affiliated with any particular government or legal entity. Business Boutique does not give professional legal advice nor any other professional advice subject to a public office in the government. This article merely sets out a simple and basic idea as to the reasons of Dubai freezone company setup and Dubai free zone company formation cost. Business Boutique in no way holds nor imposes any official governmental or legal authority and the article herein is only to be taken as a guide. All further governmental or legal issues should be addressed to the corresponding authorities.
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