Abu Dhabi: The minimum capital requirement of Dh150,000 for the establishment of a limited liability company (LLC) in the UAE was abolished on Monday by Presidential Decree.

According to the decree issued by President His Highness Shaikh Khalifa Bin Zayed Al Nahyan, the amendment is retroactive to companies established on or after June 1, 2009 and allows new businesses to determine the capital required for the establishment and sustainability of their companies.

Experts believe the amendment to the Federal Law No 8 of 1984 stipulating requirements for companies to start operations is designed to stimulate growth in the small and medium enterprise sector by cutting the cost of doing business and removing bureaucratic hurdles including the need to produce bank certificates.

LLCs make up the overwhelming majority of small and medium enterprises (SMEs) in the UAE, a segment which accounts for more than 80 per cent of the country's businesses.

Sultan Bin Saeed Al Mansouri, Minister of Economy, praised the move terming it "a positive step to attract more investments to the country".

"This decree underlines our wise leadership's vision and strategy aiming at developing the investment environment in the UAE, diversifying sectors and activities of our economy to ensure economic prosperity and welfare to the UAE community."

"It's a step forward toward streamlining and opening the environment in the UAE for investments," said Faraj Ahnish, managing partner of Hadef & Partners (H&P), a law firm providing advisory services to the UAE's federal and local governments.

"There's a lot that needs to be done, but this shows the decision-makers are aware of the importance of improving the investment environment," said Ahnish.

"The new ruling implies that aspiring entrepreneurs can now look forward to setting up new businesses in the UAE without having to arrange funds for the minimum capital requirements," said Karthik Ganesan, senior consultant at Dun & Bradstreet South Asia and Middle East, a business consultancy firm.

"This will encourage new business formation in sectors like trading and services where business models may not necessitate high capital investments," he added.

Growth continuity

The decree comes in a period where the UAE is witnessing several developments requiring the reassessment of legislation and laws in a bid to increase competitiveness of the country regionally and globally.

It also highlights the government's interest in helping the private sector to overcome challenges and issues hindering its growth and respond to these problems, thus ensuring business and investment growth continuity.