One small step for starters, but no giant leap

Entrepreneurship in the UAE got a major shot in the arm this week with a decree that eliminates the minimum capital requirement for new enterprises.

Under the old law, which dated back to 1984, anyone setting up a limited liability company, or LLC, in the UAE had to have paid-up capital of at least Dh150,000 (US$40,838). Somewhere along the line, the emirate of Dubai doubled its own minimum to Dh300,000. Now, entrepreneurs will decide for themselves how much they need to get a new business up and running. Conceivably, one could now set up a business anywhere in the UAE with a single dirham. And by one I mean two, because an LLC still requires a minimum of two partners, at least one of whom must be an Emirati.

Imposing a minimum level of start-up capital was a sensible requirement in theory. It ensured that new LLCs would have enough cash to get going and offered suppliers and creditors a measure of confidence they could do business with unknown start-ups without worrying too much whether they would be able to pay up. Most of all, it demonstrated a level of seriousness by the partners.