Non-profit organisations: how to set them up

Education Sector

Non-profit organisations:
How to set them up

Omer Khan
Partner,
Corporate Structuring

Nazanin Maghsoudlou
Senior Associate,
Corporate Structuring

Omar Sharief
Trainee Solicitor,
Digital and Data

Providing a legal basis
for the Year of GivingIn 2017, the Year of Giving, the UAE developed a legislative framework for the operation of non-governmental organisations (NGOs).Dubai Law No. 12 of 2017 Regulating Civil Society Organizations (‘Non Profit Law”) was implemented. It is highly relevant to the education sector, as many investments in “not for profit” schools in the UAE are attributable to foreign embassies and governments in order to meet the needs of their nationals.The Dubai Community Development Authority (“CDA”), responsible for setting up and developing a framework for social development, supervises and regulates NGO’s or non-profit entities. The general aims of the Non Profit Law are:

To achieve social development in the Emirate of Dubai through promoting the role of civil society;

To regulate the licensing of Civil Society Organisations and vest them with legal personality;

To enable Civil Society Organisations to provide their services in all areas of interest to the community; and

To encourage individuals and entities to engage in volunteer work and foster community engagement.

Two types of NGOsThere are two types of Civil Society Organisations – or non-profit entities - that can be established in Dubai: Civil Society Association; and a Civil Society Establishment.A Civil Society Association is a non-profit entity comprising a group of natural and / or legal persons organized for an indefinite term, and conducting any of the activities that are stated in Article 5 of the Non Profit Law.On the other hand, a Civil Society Establishment can be defined as a non-profit entity established by one or more founders: it is based on the allocation of property to any of the activities that are stated in Article 5 of the Non Profit Law.Regulatory requirements - generalNon Profit Law defines the regulatory requirements that must be met by the Articles of Association of a Civil Society Organisation. Such regulatory requirements include the numbers of directors on the board, nationality requirements and quorum. This is especially relevant where the entity has been established prior to the release of the Non Profit Law (i.e. before 2017). Regulatory requirements – some specifics A founder member must:

Have full legal capacity and not be less than twenty-one (21) years of age at the time of submitting the incorporation application;

Be of good character and repute and not have been convicted of any felony or other crime affecting honour or trustworthiness, unless he / she has been rehabilitated;

Be a resident of the UAE, if he/she is a national of any of the Gulf Cooperation Council states; and

For non-UAE nationals, hold a valid UAE residence permit and have resided in the UAE for at least three (3) years.

Securing fundingThere are a number of ways in which a Civil Society Organisation can secure finance for its activities.Funding may include subsidies from the UAE government. The founder is also permitted to inject personal funds. Some Civil Society Organisations may accept donations (though at all times subject to the approval of the relevant licensing authorities). Moreover, Civil Society Organisations usually provide certain goods or services and can secure funds in this way.Impact of Non Profit Law on “not for profit” schools in DubaiStrictly, all schools operating as “not for profit” schools that wish to continue to publicly hold themselves out as such, must submit to CDA’s jurisdiction by reorganising themselves as either a Civil Society Association or a Civil Society Establishment and comply with requirements set out in the Non Profit Law for this purpose.Potential consequences of non-compliance with the Non Profit Law include:

A fine of not less than five hundred Dirhams (AED 500) and not exceeding one hundred thousand Dirhams (AED 100,000);

The fine being doubled in the event of a repeat of the violation within a year from the date of the previous violation. The fine must not exceed two hundred thousand Dirhams (AED 200,000);

Suspension of the activities of the violating Civil Society Organisation for a period not exceeding three months;

Dissolution of the Board and;

Closure, revocation of the Licence, and dissolution, of the Civil Society Organisation in question.

For further information, please contact Nazanin Maghsoudlou or Omer Khan,

^{Published in August 2022}

^{Illustration of Isaac Newton}