Dubai: Can full-time employees invest in and operate a business?

Question: If I have a full-time job, can I invest in and operate a business in Dubai? What are the things I must keep in mind?

Answer: Pursuant to your queries, it is assumed that you are employed by an employer based in mainland Dubai. Therefore, the provisions of Federal Decree Law No. 33 of 2021 on the Regulation of Employment Relations and the provisions of Cabinet Resolution No. 1 of 2022 on the Implementation of Federal Decree Law No. 33 of 2021 Regarding the Regulation of Employment Relations are applicable.

In the UAE, an employee may establish an entity or be a partner or shareholder in an existing one, provided an employer issues a no objection certificate (NOC).

Furthermore, an employee may be a partner or shareholder in a new or an existing entity which may not be a competitor to his or her current employer if an employee’s existing employment contract with a current employer includes a non-competition clause. If the activities of an employee’s proposed entity where he or she will be a partner or shareholder are similar to the activities carried out by a current employer, then an employer may consider its employee’s proposed entity where he or she will own shares or be a partner as a competitor to the entity of an employer.

Article 10(1) of the Employment Law states related to a non-competition clause in an employment contract. It read as, "Where the employee performs a work which gives him access to employer's customers or business secrets, the employer may make a provision in the employment contract that the employee shall not compete with or be engaged in any business which competes with him in the same sector after the expiry of the contract. Such clause shall specify the place, time, and type of work to the extent necessary to protect the legitimate business interests, and the non-competition period shall not exceed two years after the expiration of the contract.”

However, a non-competition clause may not apply to an employee if he or she agrees with an employer in writing that the non-competition clause in an employment contract does not apply to the termination of an employment contract. This is in accordance with Article 12 (4) of Cabinet Resolution No. 1 of 2022, which states, “It may be agreed in writing not to apply the non-competition clause after the termination of the employment contract.”

Moreover, the provisions of non-competition may be exempted as mentioned in Article 12 (5) of Cabinet Resolution No. 1 of 2022 which states, “An employee shall be exempted from the non-compete clause provided for in Article (10) of the Employment Law under the following conditions:

a. If the employee or the new employer pays compensation not exceeding three months of the employee's wage agreed upon in the last contract to the former employer, and the former employer's written consent thereto is required.

b. If the contract is terminated during the probationary period.

c. Any professional categories according to the needs of the employment market in the UAE, as determined by the decision of the Ministry under the employment classification approved by the Cabinet.”

Based on the aforementioned provisions of law you should obtain an NOC from your current employer before you invest in a new entity or an existing entity.

However, if you intend to manage the entity in which you are investing, then you may consider resigning from your current employment by serving the stipulated notice period. Thereafter, upon completion of your notice period and cancellation of your work permit/UAE residency visa, you may invest in an entity in UAE and manage its day-to-day activities. This is to avoid any further legal consequences which you may have with your current employer.

In addition, managing day-to-day activities in your proposed new entity or in an entity which already exists may be considered as employment. Therefore, you may not be employed in another entity while you have already been employed with your current employer without the written approval of the current employer and the MOHRE. This is in accordance with Article 16(9) of the Employment Law, which states, "The employee shall not work for others in violation of the provisions of this Decree-Law and other relevant legislation in force."

However, it is at the discretion of your current employer to grant you NOC to establish an entity or be a partner or shareholder in an existing one in the emirate of Dubai.

Ashish Mehta is the founder and Managing Partner of Ashish Mehta & Associates. He is qualified to practise law in Dubai, the United Kingdom and India. Full details of his firm on: www.amalawyers.com. Readers may e-mail their questions to: news@khaleejtimes.com or send them to Legal View, Khaleej Times, PO Box 11243, Dubai.

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