Come October, Emirati-owned SMEs won't need bank guarantees

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Come October, Emirati-owned SMEs wont need bank guarantees
The UAE's SME sector forms the backbone of economic development.

dubai - The move is likely to be welcomed by small business owners in the UAE

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Published: Sat 23 Jul 2016, 7:37 PM

Last updated: Sat 23 Jul 2016, 9:41 PM

A new decree has been set by the Ministry of Human Resources and Emiratisation to exempt small and medium-sized enterprises (SMEs) from bank guarantees by October 2016.

The new decree supports the initiation of fresh projects and classifies them within the ministry's first category, according to the stipulated conditions.

Saqr bin Ghobash Saeed Ghobash, Minister of Human Resources and Emiratisation, said: "Following our partnership with the SME Board, the ministry decided to support SMEs for playing a vital role in our national economy. The decision is considered a major step towards reaching a competitive knowledge-based economy that revolves around young Emirati talents."

Ghobash said that bank guarantees were imposed on enterprises registered with the ministry to safeguard labourers' rights. "After studying the level of commitment shown by SMEs, we issued the decree to exempt them from bank guarantees."

The minister called upon citizens wishing to enter the SME sector to form value-added projects, which contribute towards an innovative economy.

Ghobash outlined certain guidelines for SMEs to avoid bank guarantees and enjoy the first category classification: the decree applies to two companies from the same owner, the owner or all his/her partners must be UAE citizens and the company must be a member at the Youth Project Development Organisation.

The exempted company must be owned by a UAE citizen or employ an Emirati director. Moreover, the owner is allowed the exemption only if he/she runs or partners in a maximum of five companies and the owner's companies must not fall under any constraints imposed by the ministry for upholding irregularities.

Additionally, if the company seeks to enjoy the first class category, the company's first licence issuance date must not exceed three years. If the license exceeds that period, then upgrading shall not apply but a bank guarantee exemption will if the licence doesn't exceed five years.

The decree allows small enterprises to enjoy the proposed benefits by employing a maximum of 15 workers while medium ones are limited to 50 workers. However, according to the decree, if a company wishes to increase the number of workers over the proposed limitations, a degrade re-classification shall follow, yet, bank guarantee exemptions still apply unless the company grew to employ over 100 workers.

Companies classified in the first categories pay lower fees for services provided by the ministry than those classified in the second category.

According to the decree, SMEs are not exempted from bank guarantees if they fail to pay workers' wages for more than two consecutive months.

Companies shall be downgraded if found practising one of the following: using workers registered under other companies without a written permission from the ministry, providing other facilities workers without permission, and being involved in a sham working relationship between both parties. - Wam


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