This option is apt for a company who wants to tap into the local market and is bound to hold back share-holding. A few insights into the formation of a foreign company:-
Under Commercial Companies Act Number 8 of 1984 and Ministerial Decision Number 69 of 1989, a branch office of a foreign company does not have a separate entity. It merely represents the parent company and carries on business under its name. Usually, a branch office may promote and market the products of the parent company, enter into transactions and conclude agreements in the name of the parent company, and offer services to its customers.
With the exception of foreign companies licensed to operate from the free zone in the UAE, a foreign company may carry on its main activity or business in the UAE or establish an office or branch after a license is issued by the Ministry of Economy and Commerce. The license specifies the object or objects which the company is permitted to carry on. For the license to be granted the company must appoint a UAE national or a corporate body, the partners or shareholders of which are all UAE nationals, as agent of the company (a term which, under the Commercial Companies Act, does not include commercial agency). The duties of such agent to the company and third parties are limited to rendering the service necessary to the company without undertaking financial liability in respect of the business or activity of the company in the UAE or abroad; the agent is not entitled to claim any rights or authority in the business of the company. His rights in consideration of his services are determined by agreement.
The applications to set up a branch in the UAE must contain the trade name, legal form, address of headquarters of the foreign company and the country where it carries its activities, nature of activity intended to be exercised in the UAE, name of national agent (if the agent is a legal entity, then its legal form), capital, names of partners, their nationality, and addresses and various other related documents of the Parent company.
The Companies Law, in Article (313) allows a foreign company to exercise its main activity in the UAE by opening a branch or a representative office. The difference between the two is that the foreign company which opens a branch in the UAE may freely exercise the activities for which it is licenced, whereas a representative office may practice only promotional business for the products and services provided by the parent company. Unlike a foreign branch a representative office cannot conduct a business operation or market its product. In order to engage a foreign branch to conduct its operation in Abu Dhabi it should obtain a licence from the Ministry of Economy (‘the Ministry’) prior to obtaining a licence from the Department of Economic Development. Foreign companies licenced to operate in Abu Dhabi may not start their activities before being inscribed in the Ministry’s Register of Foreign companies. The main stipulation for opening a representative office or a branch of a foreign company in the UAE is to appoint a Service Agent who should be a UAE national. A Service Agent is not an empowered agent who can bind his principal as explained in the definition of the term ‘agent’ in the Commercial Companies Law. A Service Agent is not required to undertake any financial obligations concerning the activities of the company’s branch or representative office within the UAE or abroad. They should not interfere in the matters relating to the company’s management or activities. Their duties towards the company and others are confined to providing such services as required by the principal. These services usually include obtaining entry/residence permits, acquiring the necessary licences or facilitating the processing of its transactions with government authorities. The Service Agent is remunerated via a lump sum for the services rendered to the foreign company, subject to the agreement between them and the company. Foreign company branches or representative offices are required to submit a bank guarantee of AED 50,000 in favor of the Ministry as part of the licence application documentation. The licence of the foreign company’s branch/ representative office will be cancelled if it is not renewed within two years of the expiry date, and the fee due to the Ministry.
Look after the entire process of establishing your branch or representative offices. We give strategic inputs, help select local sponsors, assist to select locations, on your business plan, and also paperwork and documentation formalities.
With HLB Hamt, you get the combination of our deep local knowledge and extensive experience, which gives us the ability to precisely understand the unique needs of your business. We are thus able to recommend the best possible options and ensure that your business is up and running with minimal hassles and effort.
We undertake the entire task on your behalf , so you’re free to concentrate on the bigger picture – your business.