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Business Markets

In UAE, 18-year olds can now launch businesses under revised Commercial Transaction Law

UAE Commercial Transaction Law revises age cap from 21 years to 18 as taps young talent



Bringing down the age cap to 18 years opens up quite a spectrum of possibilities for the UAE's young. Whether that's launching a business or joining one.
Image Credit: Shutterstock

Dubai: From now on, any UAE resident who has crossed 18 years will be eligible to launch a business or practice trade as the UAE’s revised Commercial Transaction Law comes into effect.

The age cap has been brought down from 21 years and makes the UAE law on this score in sync with most international regulations. Beyond the obvious boost it gives the younger ones considering an early move into business, the age revision will also help immensely when it comes to succession planning at family-owned businesses, say consultants.

“Apart from succession planning, the age cap drop could possibly lead to changes in the board of directors and management at a number of companies,” said Atik Munshi, Managing Director at Finexpertiza UAE.

What the change to UAE Commercial Transaction Law does is clear up succession planning and - possibly - lead to directorship and management changes at a number of family-owned companies

- Atik Munshi of Finexpertiza UAE

Not just that, “Under Article 18.2 of the new Commercial Transactions Law, a minor, whether or not subject to a guardianship, who reaches 15 years, may trade on the terms and conditions issued by the resolution of the Cabinet (and) based on the proposition of the Minister of Economy. The earlier prescribed age in such cases was 18 years and there had to be an order from the court.”

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Under the previous regime, businesses could have shareholder who were 18 (in most free zones). But their guardians had to sign the MoA. And if a shareholder’s age was below 21 years, he or she could not become a director and sign legal business contracts.”

Reducing the age of legal capacity to practice business from 21 to 18 years will bring UAE's youth at par with the top nations of the world

- Syed Asif Zaman of Ahmad Alagbari Chartered Accountants

The lowering of the age cap to 18 years reflects the emphasis being placed on the young, and offering them flexibility to take decisions on how to shape their careers. The revised Law also vests responsibilities on the country’s young, as more of them aspire to being business owners or get ‘into the trade’.

Apart from helping family businesses on succession plans, there is another side to the lowering of the age limit from 21 years. A fast expanding digital economy powered by new tech has created ‘digital natives’. According to tech industry sources, the average age of those launching such businesses has been coming down. Allowing those who have turned 18 year to consider such an option is part of that evolution.

Multiple revisions to the Law

Multiple changes are embedded in the revised Commercial Transaction Law, including on matters related to businesses/business owners with bank exposures and on e-auctioning. (The initial guidelines were published last October and have now turned into law.)

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Tapping them young

The official ‘age of majority’, according to the UAE’s Civil Transactions Law – Federal Law No. 5 of 1985 – was 21 years,

Moreover, in UAE a person needs to be 21 years old to ‘engage in trade’. This is in accordance with Article 18, clause 1 of the Commercial Transactions Law, which states that: ‘Any person who has reached the age of 21 years.

“Reducing the age of legal capacity to practice business from 21 to 18 years will bring UAE’s youth on par with the top nations of the world,” said Syed Asif Zaman, Managing Partner at Ahmad Alagbari Chartered Accountants. “In the past, a person needed to be 21 years old to ‘engage in trade’. This was in accordance with Article 18, Clause 1 of the (previous) Commercial Transactions Law.

“Whereas in the UK, since 1969, the age of contractual capacity for individuals was 18 years and known as attaining 'majority'. In almost all states in the US, the base legal age as 18 years. This is the age at which a person gains control over their own actions and affairs and becomes responsible for the decisions they make.”

Reducing the age of legal capacity to practice business from 21 to 18 years can be seen as part of UAE's strategy to become a global hub in attracting talent and investments

- Luca Angiolilli of Corporate Group
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UAE’s youth now have the same flexibility to decide on matters of launching a business.

“We have witnessed a significant growth of young entrepreneurs in the tech and entertainment industry, who are capable of generating substantial profits from a very young age,” said Luca Angiolilli, Head of Tax at Corporate Group. “Giving these young entrepreneurs the opportunity to open their own business in the UAE will attract talent, capital and will give a consistent boost to the growth of the economy as a whole.”

An 18-year-old can become a shareholder in a UAE business - the rule was changed only last week. He/she can also become sole owner and director in a LLC -.no guardian signature is required on MoA.

- Jeet Gianchandani of JCG
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