Dubai: If you are an aspiring young entrepreneur or the parent of a child eager to start a business, you might want to know how old a person must be to legally start a business in the UAE.
If you have been unable to find a clear answer, it may be because there are different factors to consider when determining the legal age at which an individual may be able to raise funds from investors and set up a business.
Gulf News spoke with legal experts in the UAE to get the legal requirements that you need to keep in mind if you want to start your business early.
What is ‘age of majority’?
The official ‘age of majority’, according to the UAE’s Civil Transactions Law – Federal Law No. 5 of 1985 – is 21 years, as per the lunar calendar.
Once a person is 21 years old, as per the lunar calendar, and is of a stable mind, he or she has the full capacity to exercise his or her rights as per the Civil Transactions Law, which covers various aspects of civil life in the UAE, like marriage, divorce, and civil contracts.
2. A person shall be of the age of majority upon reaching the age of 21 lunar years.
What is the minimum age to legally set up a business in the UAE?
The laws related to setting up and running a business in the UAE, on the other hand, are governed under the Commercial Transactions Law - Federal Law No. 18 of 1993 - and its amendments. According to legal experts who spoke with Gulf News, an individual must be 21 years old as per the Gregorian calendar to set up a business in the UAE.
“There is no specific law which states that being 21 years old is a requirement to set up a business. Rather, this conclusion is inferred from various laws and practices in the UAE,” Ludmila Yamalova, who is the founder and managing partner of HPL Yamalova and Plewka DMCC, said.
Yamalova explained that once an individual turns 21, they can conduct various activities that are part of running a business in the UAE. This includes the ability to:
There is no specific law which states that being 21 years old is a requirement to set up a business. Rather, this conclusion is inferred from various laws and practices in the UAE.
1. Issue a Power of Attorney (POA)
The UAE notary will only allow individuals who are 21 years old and above to issue a Power of Attorney, according to Yamalova.
“A Power of Attorney is often used in businesses to authorise third parties to represent business owners. Similarly, any share transfer or amendments, which would require a sign off from the notary, would be subject to the same requirement,” she said.
2. Sign contracts
Additionally, you must also meet the legal age when it comes to signing contracts.
“The legal age for signing contracts is important because a company is a form of ‘contract’. This is set out in Article 654 of the Federal Law No. 5 of 1985 On the Civil Transactions Law,” Yamalova said.
3. Engage in trade
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 by the Gregorian reckoning and to whom no legal impediment applies may engage in trade.”
4. Open a company bank account
Another aspect that must be considered is the legal age to open a corporate bank account. While minors can open personal bank accounts, the requirement is different for opening a corporate account.
"Also, historically, banks would not open accounts for anyone below the age of 21. This has now changed with regards to individual accounts. But the same requirement remains for corporate bank accounts," Yamalova, said.
What are the options for entrepreneurs who are still minors?
Yamalova stated that a minor cannot start a business on their own in the UAE. They can only set it up with their legal guardian’s consent and supervision, where the guardian would handle the minor’s affairs, as per the UAE’s Personal Status Law.
She also added that the consent must be from the official guardian of the minor, which is either set out by the UAE Personal Status Law or determined by the Court.
18 years of age, can start a business with court approval
However, you do not always need a guardian’s approval if you are under 21 years old. Yamalova explained that a minor who is 18 years old can conduct trade activities if they have the Court’s approval. This is according to Article 18 of the UAE’s Federal Law No. 18 of 1993 regarding Commercial Transactions, as amended.
Can I start crowdfunding my business idea as a minor?
If you are seriously considering setting up your own business as soon as you reach the age of majority, you will need cash flow to hit the ground running. But what are the options for a young entrepreneur to start raising funds?
With crowdfunding platforms being introduced in the UAE, to help boost small and medium enterprises (SMEs), you can start testing your business idea, and fine tuning it, by pitching it to potential investors.
However, some crowdfunding platforms do have certain age limits regarding fundraising.
“It is important to note that most crowdfunding operators specify in their terms and conditions the minimum legal age required for individuals to engage in transactions and contracts pertinent to crowdfunding,” Lien Haroun, a legal associate at Mahmood Hussain Advocates and Legal Consultancy, said.
Haroun cited the example of Dubai Next, a crowdfunding platform introduced by the Dubai government, that offers children as young as 12 years old the opportunity to pitch a business idea and raise funds. But the platform clearly states that children need their parent’s or guardian’s approval to be a part of Dubai Next.
It is worth noting that most crowdfunding operators specify in their terms and conditions the minimum legal age required for individuals to engage in transactions and contracts pertinent to crowdfunding.
What if no minimum age is specified in terms and conditions?
If a crowdfunding platform does not clearly define the age requirement, then children, teenagers and their parents must look at the licensing authority for the website, as the minimum age requirements may differ accordingly, according to Haroun.
She added that the laws and regulations governing the crowdfunding practice in the financial free zones are different from those applied in UAE mainland.
“Therefore, a person wishing to participate in a crowdfunding project must refer to the relevant laws in each jurisdiction in order to determine the legal age required for participating in crowdfunding projects,” Haroun added.
• Securities and Commodities Authority (SCA)
• Dubai Financial Services Authority (DFSA) of Dubai International Financial Center (DIFC)
• Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM)
You should be able to find the licensing authority for a crowdfunding platform clearly mentioned on the crowdfunding platform’s website. Unlicensed crowdfunding platforms are prohibited from operating in the UAE.
Here are the minimum age requirements for crowdfunding as per each regulatory body, according to Haroun:
Crowdfunding operators licensed By Central Bank of UAE:
21 years old, unless the courts allow a minor - who is under guardianship or custody and has attained 18 years of age - to engage in commercial transactions.
Crowdfunding operators licensed in free zones:
Dubai – DFSA: 18 years old, as per DIFC Law No. 6 of 2004 on Contract Law.
Abu Dhabi – FSRA: 18 years old, as per ADGM regulations.
So, even if you can’t yet legally start a business, you can still fine-tune your business proposal, pitch it to investors, and start raising funds, to get a head start start on your big business idea.