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Frequently Asked Questions

    Failure of businesses is a common phenomenon in UAE and winding up the business becomes a viable option to mitigate further losses. In UAE, the Federal Law No. (9) of 2016 (UAE Bankruptcy Law) governs the process of liquidation or bankruptcy within the country. Article 67 of the Law provides that if you are not able to pay the debts of your creditors, you can apply for bankruptcy. Though there is a provision to restructure the debt and revive the company, you can opt for bankruptcy wherein the liquidation would take place at a fair value. During the process, the assets of the companies will be sold out to cover the liabilities of the debtor.

    Alternatively, you can approach the court under Article 68 of the Law which provides that if the debtor fails to make the payment for more than 30 days from the due date on account of poor financial condition, he can apply to the court for commencement of bankruptcy proceedings. If the court approves your application, all the execution proceedings against your company shall be suspended a trustee shall be appointed to administer the proceedings. The trustee so appointed needs to prepare a report in accordance with Article 96 of UAE Bankruptcy Law.

    If you are a sole proprietor, you can file for individual insolvency as per the provisions of Federal Decree-Law No. (19) of 2019.

    The essence of the arbitration is the issuance of a binding arbitral award by the Tribunal. However, there are some grounds on which you can challenge an arbitral award in the country. Article 53(1) of Federal Law No. (06) of 2018 (UAE Arbitration Law) lists the grounds on which you can challenge the award, which is as follows-

    • When no valid arbitration agreement exists between the parties or the agreement has become void in accordance with the law chosen by the parties;
    • The parties to the arbitration agreement are not legally compatible to enter into such an agreement;
    • When an individual does not have the legal capacity to dispose of the disputed right under the law governing his or her capacity;
    • The award was not premised on the law chosen by the parties;
    • The appointment of the arbitrator or the constitution of the Tribunal was not in accordance with the UAE Arbitration law;
    • The award was affected by severe procedural irregularities;
    • The award was not issued within a specified time frame;
    • The Arbitrator rendered such an award which goes against the scope of the arbitration agreement.

    In addition to the aforesaid, Article 53(2) provides that the court can set aside an award when it is against the public policy of the country. It is very important to note that the award cannot be challenged on merits as per UAE Arbitration Law.

    Recently, in a ground-breaking move, the UAE government announced a corporate tax in the country from the financial year 2023. This new law applies to all businesses and commercial activities. Further, it applies to the individuals carrying out professional activities in the country. Thus, an important question arises about whether the freelancers would be subject to this new corporate tax?

    The corporate tax will be levied on a taxable income above AED 375,000 which means if your annual earning is less than the said amount, you are not required to pay the corporate tax. So, it can be inferred that if a freelancer is earning a taxable income (above AED 375,000) he will be subject to this new law and required to pay the tax. The rate of taxation shall be 9% on the amount exceeding the threshold of AED 375000.  

    However, if you are working on a job as a freelancer and earning employment income, you will be exempted from the payment of tax.

    This global pandemic and the subsequent lockdown have introduced us to a virtual world providing a work from home (WFH) model. Since you are using a laptop from the drawing-room, it is observed that some employees are working for more than 14-15 hours per day. Now, an important question arises whether an employee can claim payment for this overtime work?

    For all the mainland companies operating in the UAE, the Federal Decree-Law No. (33) of 2021 (UAE Employment Law) and the requirements of Cabinet Resolution No. (1) of 2022 are applicable. The provision regarding overtime work is provided under Article 19(2) of the UAE employment law. As per the said Article, if an employee works for additional hours exceeding the ordinary working hours, it will be treated as overtime work, and the employee shall be paid his basic pay along with a supplement of at least 25% of that pay.

    However, the right to claim overtime payment is not absolute, and it is subject to some exceptions. For instance- if you are employed as a manager or your work involves technical specifications, you may not be entitled to receive the overtime pay, even though you work for additional hours. Further, Article 15(4) of the Cabinet Resolution No.1 of 2022 on Employment Relations provides for a list of persons, who shall be excluded from the purview of overtime payment. It includes-

    • Chairmen and members of the board of directors.
    • People who are acting in a supervisory capacity, such as field managers or nodal officers. Under this category, it is important that the excluded person must have some employees working under his direction or supervision.
    • Workers constituting the crew of naval vessels and enjoying special conditions of service
    • People engaged in such technical work which is necessary to continue through various shifts. However, the average working hours per week should not exceed 56 hours.
    • People engaged in temporary projects with a short deadline.

    A non-compete clause is a contractual provision that intends to protect an employer’s business by limiting the activities of its employees after the termination of the employment contract. The main purpose of such a clause is to refrain the company’s ex-employees from competing or working with the competitors of the company.

    Article 127 of the UAE Employment Law enables a company to impose a post-termination restriction in the form of a non-compete clause. It is important to note that this clause can only be used to protect the company’s commercial and legitimate business interests. This clause can’t be used in a wide sense, and it must be specific with regards to the time, place, and nature of restrictions placed under the clause.

    In case of breach of a non-compete clause, the remedies are limited for the aggrieved employer. In the UAE, injunctive relief is not an available remedy before the labour court. So, if an employee breaches the restrictions and starts working for its employees, the employer can’t restrict him through direct injunctive order. The main remedy that is resorted by the employers is claiming monetary damages.

    Having a property in Dubai is not less than a dream. It is one of the prime locations across the globe which is widely sought by the investors owing to the competitive property prices, high rental yields, etc. The foreign nationals can purchase property in UAE on a freehold basis. However, they can buy the property only in certain designated areas.

    UAE has designated specific areas for foreign ownership as freehold. It is pertinent to note that all the foreigners and expatriates can acquire freehold property. The buyer will have complete access to the property without any restriction or leasehold right for a period of 99 years. You must possess valid identity proof, such as a passport for buying a property.

    Article 3 of Regulation No. (3) of 2006 demarcates the freehold area wherein the foreigners can buy a property. The Land Department is vested with the responsibility of issuing the title deeds. Interestingly, there is no maximum age limit for buying a property in the country. It is important that all the developers need to register the off-plan property in the interim register, which is maintained by the Land Department.

    The term damages refer to the compensation paid to the aggrieved party to make good the losses arising out of the breach of contract. There is a significant difference between the term damage and damages as the former is related to any injury suffered by a party whereas the latter is about the compensation. In UAE civil and commercial law, the following types of damages are awarded:

    • Direct damages;
    • Consequential damages;
    • Loss of income;
    • Loss of opportunity;
    • Moral damage

    In all civil and contractual matters, the courts generally award direct damages. However, when the amount of compensation is not clear, it shall be assessed by the court in accordance with Article 389 of the UAE Civil Code. Apart from direct damages, the court also grants consequential damages where huge losses have been incurred to the aggrieved party. The courts are also competent to award loss of profit. The concept of moral damages is provided under Article 293 of the UAE Civil Code which is provided when the liberty, dignity, and reputation of the person are affected. Many times, the contract between the parties also stipulates the amount of damage, which is also enforceable in the UAE. 

    The term harassment refers to conduct or the commission of such an act that aims to disturb, threaten or put a fear in the mind of a person. There can be various types of harassment, such as physical harassment, psychological harassment, sexual harassment, etc. Out of all such forms of harassment, sexual harassment is the most prominent one, which is elaborately dealt with in the Federal Law No (3) of 1987 (UAE Penal Code).

    Article 358 of the Penal code provides that if a person commits an indecent and disgraceful act, he shall be punished with an imprisonment of 6 months. Moreover, if such an act was directed toward a boy or girl below the age of 15 years, the punishment shall be for a period of 1 year. Article 359 states that if a person attempts to disgrace a woman in public, he shall be punished with a fine of AED 10000 and an imprisonment of 1 year.

    As per Article 361, if a person seduces a person publicly, the punishment shall be an imprisonment term of 6 months and a fine of AED 5000. Against such incidents of sexual harassment, the victim can lodge a complaint at the nearest police station. The scope of Article 359 is quite wide and a man can also institute a complaint against sexual harassment. 

    The power of attorney is a legal document that empowers a designated person to take a decision on behalf of the principal. It is mainly used with respect to the properties and other such dealings. The misuse of power of attorney is a crime as per Article 404 of the Federal Law No 3 of 1987 (UAE Penal Code). This Article states that whoever uses any immovable property with an objective to prejudice the interest of the rightful owner, shall be punished with detention and a fine.

    The language of the Article clearly states that if the partner of a joint property receives something for his personal benefits while prejudicing the rights of other partners, it shall be punishable with a fine and detention. However, it is important to note that the criminal intent of the accused cannot be limited to his conduct and it requires other corroborative evidence in this regard. 

    If some grave misuse hasn’t happened till now, you are requested to cancel this power of attorney before the notary public in the presence of 2 witnesses. Further, you need to write ‘revoke’ in large bold letters on the power of attorney.

    The power of attorney is a legal document that empowers a designated person to take a decision on behalf of the principal. It is mainly used with respect to the properties and other such dealings. The misuse of power of attorney is a crime as per Article 404 of the Federal Law No 3 of 1987 (UAE Penal Code). This Article states that whoever uses any immovable property with an objective to prejudice the interest of the rightful owner, shall be punished with detention and a fine.

    The language of the Article clearly states that if the partner of a joint property receives something for his personal benefits while prejudicing the rights of other partners, it shall be punishable with a fine and detention. However, it is important to note that the criminal intent of the accused cannot be limited to his conduct and it requires other corroborative evidence in this regard. 

    If some grave misuse hasn’t happened till now, you are requested to cancel this power of attorney before the notary public in the presence of 2 witnesses. Further, you need to write ‘revoke’ in large bold letters on the power of attorney.

    Sending a legal notice is one of the first steps before initiating proceedings against a person. It acts as an ultimatum that is served to notify the other party that if he goes against the demand in the notice, suitable legal actions will initiate against him.

    Sending a legal notice is not mandatory in each and every case. However, before initiating a civil case, the Code requires that the other party is served with a legal notice before knocking on the doors of the court. The notice depicts the intention of the sender that the legal proceedings are on the verge to get started. Further, the reply to the notice also highlights the intention of the other party. 

    In the following circumstances, sending a legal notice is mandatory:

    • Violation of employment contract;
    • Case of sexual harassment at the workplace;
    • Violation of HR policies of UAE companies;
    • Disputes concerning unpaid salary or early termination of the contract;
    • Case of cheque bounce;
    • Disputes relating to real estate properties;
    • Personal issues, such as inheritance, child custody, divorce, etc.

    In criminal cases, the requirement of sending a notice to the accused is not required.

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