Tuesday 11 August 2020 - 4:37:17 pm

U.A.E. President issues federal Law No. 2 of 2014 on Small and Medium Enterprises - 1st add

ABU DHABI, April 13th 2014 (WAM) -- XXXXX the country.

The Minister of Economy commended the efforts of all those who support the small and medium enterprises sector and entrepreneurs, specifically the Khalifa Fund for Enterprise Development, Dubai SME, and other leading national institutions across the U.A.E.

He expressed confidence that the new law would draw the attention of citizens towards SMEs, and offer a legislative framework that supports and encourages them towards entrepreneurship and initiating new business start-ups.

The minister also stressed that SMEs have a prominent role to play in the U.A.E.'s overall economic structure and noted that the new law regulates the provisions related to these enterprises. Furthermore, the new law will contribute to the role of the Emirates Development Bank in augmenting the national economy by supporting SMEs, securing the financial resources they require, and enhancing the cooperation and coordination between the various entities involved in supporting them.

Article (1) of Law (25) defines some of the terms and terminology prescribed by the law as follows: - 'Enterprises and Establishments' refers to any company or individual enterprise engaged in small economic activity (including micro and medium) - 'The Council' refers to the Small and Medium Enterprises Council - 'The Program' refers to the National Program for Small and Medium Enterprises Article (2) explains the objectives of the law that seeks to achieve the following: - Nurturing of SMEs as a major contributor to the economic development of the country - Dissemination of information about the law and encouragement of research - Innovation, creativity, and fostering a culture that stimulates entrepreneurship - Coordinating the efforts of various entities involved in the development of SMEs - Boosting the competitiveness of SMEs to provide employment opportunities - Creating programs and initiatives aimed at the development of SMEs - Stimulating and supporting citizens to enter the SME's labor market to contribute to the country's GDP - Strengthening the country's position as an entrepreneurial hub Articles (3 and 4) classify and define micro, small and medium enterprises. Article (3) stipulates that the Council will classify SMEs based on two or more of the following criteria: - Employment size - Size of annual returns - Capital investment Based on the recommendations of the SME Council, the U.A.E. Cabinet may add any other criterion to those listed in item (1) of this article, given the nature and type of the economic activities of the enterprise.

Titled 'Unified definition of SMEs', Article (4) indicates that the U.A.E. Cabinet must issue a decree on the unified definition of SMEs, based on the recommendations of the SME Council, in consultation with competent local authorities.

Titled 'SME Council', Article (5) states that the U.A.E. Cabinet must issue a decree to establish the governing body of the SME Council under the Ministry of Economy, chaired by the U.A.E. Minister of Economy and with the membership of representatives from relevant public and private sector authorities, which will determine the Council's work regulations and decision-making mechanisms.

Titled 'Competences of the Council', Article (6) stipulates the creation of policies and strategic plans towards the development of SMEs based on the following: - Developing the rules and regulations to coordinate between the National Program for SMEs and other stakeholders - Monitoring the performance indicators of the program and approving its annual report on SMEs - Periodic review of the effectiveness of the SMEs, classifying criteria to propose the appropriate amendments and submitting them to the U.A.E. Cabinet - Setting conditions and criteria for the program's membership - Any other relevant tasks assigned by the U.A.E. Cabinet Titled 'The National Program for SMEs', Article (7) states that the U.A.E. Cabinet must issue a decree to establish the National Program for SMEs within the Ministry of Economy.

Article (8) covers the program's responsibilities, stating that the National Program for SMEs is responsible for coordinating with concerned authorities in drawing up the general guidelines related to the provision of expertise, technical, administrative, and training assistance in various fields to support and develop SMEs, including: - Preparing a periodic evaluation report and submitting it to the Council highlighting the challenges faced and suggesting the appropriate solutions - Coordinating with federal and local government entities and the private sector to market SME products inside and outside the country - Coordinating with the concerned authorities to provide benefits and incentives for SMEs - Coordinating with the relevant regional and international organisations to support the development of SMEs - The development of awareness programs to encourage the creation of SMEs and promoting the investment opportunities available - Explaining the risks involved and supporting the participation of SMEs in local and international exhibitions - Creating and categorizing a database of registered SMEs - Encouraging self-employment, joint cooperation and integration between SMEs - Approving requests for granting concessions to members of the program through funds, institutions, projects and local entities - Any other related tasks determined by the SME Council Under the title, 'SME Program Registration', Article (9) provides that the National Program for SMEs, in cooperation with the concerned authorities, is responsible for registering SMEs wishing to join the program after fulfilling the conditions and criteria determined by the SME Council, and to update the Council with the registration data periodically.

Article (10) of the new law focuses on the private and public sector facilities and the incentives offered to owners of enterprises that are members of the National Program for Small and Medium Enterprises, including: - Finance, marketing and promotion from the private sector, provided associating with these facilities does not conflict with any financial or legal obligations - Commitment of Federal Government entities to contract with local small and medium enterprises by not less than 10 percent of the total contracts of these entities towards meeting their purchasing, servicing and consulting needs.

- Commitment of companies in which the Federal Government owns more than 25 percent of the total capital, to contract with local small and medium enterprises by at least 5 percent of the total contracts of these companies.

- Simplify the procedures related to these facilities, in addition to reducing licensing costs, and enabling them to benefit from land granted to them for industrial or agricultural purposes, in accordance with relevant legislations and in coordination with the concerned authorities.

- The allocation of adequate space in the exhibitions that the U.A.E. participates in abroad, to showcase products made by national small and medium enterprises, and providing necessary information to them about international markets in accordance with the regulations prescribed by this law.

- Organising local, specialized exhibitions for small and medium enterprises or facilitating their participation in domestic exhibitions to promote and market their products.

- Permissibility of exempting small and medium enterprises, for production purposes, from customs tax for equipment, raw materials and intermediate goods, through a Cabinet resolution issued by relevant U.A.E. authorities and Union members, each in his/her own capacity, based on the recommendations of the Minister of the Economy.

- Exempting small and medium enterprises from bank guarantees that companies must pay per new worker. The Small and Medium Enterprises Council will coordinate with the Ministry of Labor to implement the regulations and conditions required in this regard.

Article (11) tackles implementing the strictures ( 4, 7 and 8) of the preceding article, over three years of getting the membership of the National Program for Small and Medium Enterprises, and the extension of the benefit period over one year, renewable for additional term/s.

Article (12) of the law specifies additional facilities provided, which include: Taking into account copyright regulation laws, executive regulations of the law identify the additional facilities granted to small and medium enterprises that have special departments for R&D and innovations, and have achieved economic success, as well as to inventors and patent owners in the country.

With regards to combining facilities and incentives, Article (13) states: Small and medium enterprises owned by U.A.E. Nationals may combine facilities and incentives provided by both federal and local entities and the private sector.

Article (14) deals with the conditions related to facilities and incentives, and states: In order to benefit from facilities and incentives, small and medium enterprises and establishments should be fully and privately owned by U.A.E. nationals, and be participating members of the program.

According to Article (15), small and medium enterprises and establishments are committed to the following: Using facilities and incentives solely for their specified purpose, without changing the enterprise or establishment or transferring its ownership to other parties without the approval of the concerned entity, in addition to being transparent and disclosing all information to the concerned parties.

According to article (16) titled 'Insuring Establishments', owners of small and medium enterprises and establishments who wish to receive facilities and incentives need to insure their establishments at a licensed and registered insurance company within the U.A.E. , depending on the type of insurance specified by the executive regulations of this law.

Article (17) addresses the methods of facilitating credit and funding services for activities undertaken by small and medium enterprises and establishments, and states the following: The Emirates Development Bank cooperates with the Small and Medium Enterprises Council in setting procedures for credit and funding facilitation for enterprises and establishments that have joined the program. The Bank is obligated to contribute no less than 10% of its total annual financing facilities to small and medium enterprises that are part of the program.

With regard to the procedural and technical criteria for receiving loans, Article (18) of the law stipulates that the U.A.E. Central Bank is to establish procedural and technical standards for providing commercial loans to owners of small and medium enterprises.

Furthermore, Article (19), titled 'Annual Evaluation of the small and medium enterprises sector' states that concerned parties are required to carry out an annual evaluation that seeks to ensure a supportive and enabling environment for small and medium enterprises and establishments, through developing fast and effective services and facilitating procedures that enhance the U.A.E. 's competitiveness on a global scale. A report of evaluation results is to be submitted to the Council.

Article (20) of the law clarifies that the Ministry of Economy, in cooperation with concerned parties, is the lead representative of enterprises and establishments in other countries and global and regional organisations.

Article (21) on fee exemption states that the Cabinet will be responsible for exemptions of federal fees for small and medium enterprises, in addition to stipulating the duration of these exemptions.

Article (22) titled 'Penalties' states the following: Without prejudice to any other penalty stated by other laws, any owner of a small and medium enterprise who breaches any ruling of Article (15) is to be fined no less than five thousand dirhams (AED5,000), and no more than five-hundred thousand dirhams (AED500,000).

According to Article (23), the Cabinet issues the executive regulations of this law for three months of its operation, and in accordance to Article (24), all rulings that contradict this law will be annulled.

Article (25) states all SME regulations are to be published in the official gazette, and will be effective after three months from the date of publication. MMYS