Foreign companies are permitted to establish wholly owned branches and representative offices in the U.A.E.; however, these offices are limited in the activities they may conduct within the U.A.E.
Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents. Local agents (sometimes referred to as sponsors) are not involved in the operational side of the company, but merely assist in obtaining visas, labor cards etc, and are paid a lump sum and/or a percentage of the profit or turnover.
The main difference between a representative office and a branch office is that a representative office theoretically is limited to gathering information and soliciting orders and projects to be performed by the company’s head office. In this regard, representative offices are also limited in the number of employees they may sponsor (typically three or four). A representative office serves as an administrative and marketing center for the foreign company. By contrast, a branch office is a full-fledged business, permitted to perform contracts or conduct other activities as Specified in its license
To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows:
• Apply for a license from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company. Before issuing the license, the Ministry will:
• forward the application to the Economic Department to obtain the approval of the Dubai government;
• forward the application specifying the activity that the office or branch will be authorized to undertake in the UAE, to the Federal Foreign Companies Committee for approval;
• Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial license specifying the activity to be practiced by the foreign company;
• The branch or office should be entered in the Economic Department’s Commercial Register, and the required license will be issued;
• The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce;
• Finally the branch or office should be registered with the Dubai Chamber of Commerce and Industry.
If the applicant is a representative office or branch of foreign company, the following documents are required:
1. An official certificate from the competent authority in the country where the foreign company is registered which shows that the company is established and registered in that country according to the provisions of applicable laws with a statement of the legal form of the company and its capital.
2. The Board resolution authorizing the opening of a branch or an office to practice the activity in the UAE. In addition to the resolution to authorize the representative of the company with the power to establish a branch in Dubai, provided that the documents be authenticated and legalized by the concerned government authorities.
3. An identical copy of the company’s memorandum and articles of association duly attested by the competent government authorities.
4. Last two years’ balance sheets coupled with the auditor’s report duly attested by the competent government authorities or a duly document attested by the chartered accountant of the company or any other document showing that the financial position of the company is sound.
5. The agency between the foreign company and the local service agent and an identical copy of it.
6. The passport of the local service agent and photocopy of it or his identity card and a photocopy of it if the agent is a natural person. In case the agent is a juridical person (company), a photocopy of the memorandum and articles of association should be attached and attested by the concerned authority as well as a photocopy of its trade license and the certificate of its inscription in the commercial register coupled with photocopies of all these documents.
Establishing a branch office for foreign firms
The company which chooses to open a branch in the UAE may freely carry out the activities indicated in the trade license it obtains. However, licensing is governed by legal rules and regulations.
According to the Law, there are certain activities, which can only be carried out by UAE nationals such as banks, finance, insurance and commercial agencies. There are also other licensing procedures and conditions governing the work of the Department of Economic Development, which issues from time to time certain regulations and administrative decrees. A foreign company, which opens a representative office in UAE, may launch promotional campaigns for its products and services. The office may also facilitate contracts between the company and its local clients. However, the office is not licensed to conduct business operation of whatsoever kind such as obtaining credit facilities, making offers, etc.
a) Appointing a “Service Agent”.
It is conditional for offices and branches of foreign companies to appoint a local service agent. Such an agent, as already explained in the chapter on commercial agencies, is not an agent in the proper sense of the word. Article 314 of the Commercial Companies Law, defines the legal status of the legal service agent. According to this article, such an agent shall have no responsibility towards the company’s financial dealings and shall not interfere in its management.
b) Responsibilities of “Service Agents”
The role of a service agent is confined to providing services such as obtaining visas and residence permits for the staff, licensing procedure with the Department of Economic Development and formalities for obtaining the certificates of the Chamber of Commerce. Also the agent may undertake other services related to government departments such as submission to tender documents, keeping the foreign company informed about tender notices, follow up the company’s affairs and activities and notifying it with the outcome.
c) The remuneration of “Service Agents”
In consideration of his services, the agent is usually paid an agreed lump sum amount from the foreign company. If the agent is body corporate, it should be a private proprietorship or company wholly owned by UAE nationals.
d) Procedures to obtain a license
It is not permitted for foreign companies licensed to operate in the UAE to start their activities before obtaining the Trade License from the Department of Economic Development. Setting up a branch of a foreign company shall be according to the following steps:
1. The application shall be submitted to the Department of Commercial Affairs of the office of the Ministry of Economy & Commerce in Dubai. The application should include the following data:
» Name, type of company and address of its main office in the original country.
» Type of activity, specialization or type of operations required to be practiced in Dubai.
» Main operations carried out by the company and its previous expertise in the field of activity, which is required to be practiced in Dubai.
» Name of the local service agent in Dubai and his address if he is a juridical person [company, then the legal form, capital, names of the shareholders (or partners if it is a firm)], their nationalities and addresses should be stated provided that all of them are UAE nationals.
» The Department of Commercial Affairs at the Ministry of Economy & Commerce after registering the application giving it a number and making sure that the required documents are complete, shall refer it to the Department of Economic Development.
2. If the application is rejected, it shall be returned to the Department of Commercial Affairs to be kept there and the concerned parties shall be notified of the rejection.
3. If accepted, the application shall be referred to the Committee of Foreign Companies in the Ministry for approving the content of the application and to determine activity. This committee shall prepare its recommendations and refer them to the Minister of Economy & Commerce for issuing his decree. The Department of Commercial Affairs at the Ministry shall then issue the documents of the license.
4. Completion of inscription procedures in the commercial register at the Department of Economic Development according to the usual procedure for licensing.
5. Registration of the company’s branch with the Dubai Chamber of Commerce & Industry in accordance with the accepted procedure.