- Setting Up a Branch or Representative Office of a Foreign Company in the UAE
- February 28, 2012
- Law Firm: Norton Rose Canada LLP - Montreal Office
A popular way for foreign companies to retain 100 per cent foreign ownership in the United Arab Emirates (UAE) is to open a branch or representative office. These offices do not have a separate legal identity but are treated as an extension of the foreign company, which remains liable for their activities.
A branch office can engage in commercial activity in the UAE and can earn profits. It is licensed for the purposes set out in its commercial licence but may only engage in activities similar to those carried on by the foreign company in its home jurisdiction.
A representative office is not permitted to earn profits within the UAE and the activities it may undertake in the UAE are limited to marketing and/or promoting its foreign parent company products and services.
Branch and representative offices share many similar features, as both operate under the authority of a commercial registration and licence in the name of the foreign company - and both are required to appoint a local services agent, who must be a UAE national. The process for establishing either a branch or representative office is therefore largely the same1. That process is dealt with below.
In a recent significant move, HH Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai has issued a new licensing law that aims to, amongst other things, organise the conducting of economic activities in the Emirate of Dubai and streamline the licensing process by facilitating coordination between the various government entities in Dubai.
Step 1: identify local services agent
One of the key features of a branch office and a representative office is that both are required to appoint a local services agent (LSA). The LSA must be either a UAE national or a company wholly owned by UAE nationals.
The LSA is not responsible for the branch or representative office, nor does it take part in any operations, management or ownership of the office. Technically, the role of the LSA is restricted to administrative functions such as the obtaining of licences, permits, visas etc, in return for a fee.
The appointment of the LSA is effected through a written agreement, which must be signed by the parties before a notary public in the relevant Emirate. There is no prescribed form of agreement and it will therefore be a matter for negotiation.
Step 2: trade name reservation and initial approval
Application must first be made to the relevant Emirate’s Department of Economic Development for a trade name reservation and initial approval of the proposed branch or representative office registration.
Step 3: apply to the Ministry of Economy
Following initial approval pursuant to step 2, an application must be made to the Ministry of Economy (MOE) (the UAE Commercial Companies Law, article 314).
The application form requires full details of the foreign company (including share capital, head office, overseas activities, home jurisdiction); the nature of the proposed activities (these must be consistent with activities in the home jurisdiction); and the name of the proposed general manager in the UAE. The form must be accompanied by the prescribed documents, which will include2:
- trade name reservation certificate and initial approval
- corporate documents including a certificate of incorporation (or equivalent), memorandum and articles of association, a certificate of good standing (where one can be obtained in the home jurisdiction)
- a board resolution authorising the opening of the branch or representative office, appointing the general manager and resolving to grant a power of attorney in the general manager’s favour; and confirming that the company accepts responsibility for the liabilities of the office once established in the UAE
- a power of attorney in favour of the general manager (authorised by the board resolution) and a copy of the general manager’s passport
- audited accounts of the parent for the last two years
- a statement setting out the company’s main operations and activities - supporting its intended activities in the UAE
- the notarised agreement with the LSA, and a copy of the LSA’s identification documents (or corporate documents if it is a corporate entity).
The MOE will then issue their own initial approval, at which point the following additional documents must be submitted in hard copy to the MOE:
- application form
- certificate of incorporation of the parent company
- initial approval of the MOE
- local bank deposit certificate.
The MOE will then approve the establishment of the branch or representative office. Business cannot commence, however, until the following further steps have been completed.
Step 4: obtain licence from the Department of Economic Development
The MOE will issue a formal approval to either the Abu Dhabi Department of Economic Development or the Dubai Department of Economic Development, as appropriate (collectively referred to as the DED here).
Once the DED has received this approval, the applicant will then need to make a further application to the DED. This requires similar items to those submitted to the MOE; in addition, the applicant will need to include the proposed office address in the UAE.
This application needs to be accompanied by:
- the MOE approval obtained under step 3, together with approvals received from any other authorities applicable to the industry
- a copy of the proposed lease in the UAE
- copies of certain of the documents submitted to the MOE under step 3
- undertaking from the foreign parent company
- a letter from a UAE auditor confirming that it acts, together with a statement by the same auditor summarising the financial statements of the company for the two years preceding the year in which the application was submitted.
The DED will then issue a commercial licence to the branch or representative office, usually valid for one year3 and renewable annually.
Step 5: completing the administrative tasks
Once the commercial licence has been issued, the foreign company may enter into the proposed lease for office space, open bank accounts and obtain visas and labour cards for its employees.
Step 6: becoming a member of the Chamber of Commerce and Industry
The final step is for the branch or representative office to register as a member with the Abu Dhabi Chamber of Commerce and Industry or the Dubai Chamber of Commerce and Industry, as appropriate. The procedure is largely the same. It will be necessary to complete an application, and provide copies of the commercial licence and office lease agreement along with passport copies of the authorised signatories of the branch or representative office.
The various fees arising during the process vary from Emirate to Emirate (although the MOE fees are the same). The fee payable for the commercial licence may also vary, depending on the activities to be undertaken in the UAE.
Notarisation and translation of documents
The foreign company will have to present the documents listed above for authentication at the foreign ministry of the country in which the company is incorporated and subsequently to the UAE consulate. Before they can be presented to the authorities in the UAE, they must also be translated into Arabic by an official translator. The notarisation process should be commenced as early as possible as it can take a significant amount of time. Where the responsible UAE embassy is not located in the country of incorporation, the process can be delayed further.
- It should be noted that: (i) the formalities and procedures are generally determined by each Emirate separately - this article has been prepared as a brief overview of the main steps and key documents common throughout the Emirates and, where possible, has highlighted some of the key differences between Abu Dhabi and Dubai (being the main Emirates where registrations take place); (ii) a company may need to meet additional requirements in order to operate within its relevant industry; and (iii) each application will be considered on its merits by the relevant government authorities and, in each case, additional requirements may be imposed or usual requirements may be waived.
- The application process is now an on-line process and the relevant form and documents must be submitted electronically through the MOE website (for Abu Dhabi applications only).
- The new Dubai licensing law provides that, upon special request, it may be possible to obtain a four year licence.