For starters, the United Arab Emirates is one of the few places on Earth where setting up a company is a simple and straight-forward task. It is becoming quicker and more comfortable than ever, in line with the vision of the Department of Economic Development (DED) in the UAE to help business owners launch and expand their operations without the need for lengthy procedures and administration.
There are mainly two jurisdictions in the Emirates for conducting your operations, i.e. the Mainland and the Free Zone. The mainland and free zone offer different advantages depending on your business type and activities.
A common way for foreign businesses to retain foreign ownership under the Commercial Company Law in the UAE is to register a branch office or representative office, which permits 100% foreign ownership by the parent company. These types of legal entities do not have a separate legal identity and are therefore treated as an extension of the international company, which remains liable for the activities.
Let us first know more about branch office formation in the UAE.
Branch and Representative Office in the UAE
A branch office in the UAE is an extension of the foreign parent company in the Emirates. The branch office must also obtain a trade license from the same activities that its parent company carries out. A branch office can be set up in the mainland as well as a free zone. For starting a branch office, there is no capital requirement.
A representative office in the UAE just like a branch office is essentially the addition of an existing business – which can be based either in the UAE or abroad. Often confused with branch offices, there are rare defining features that set the two separately. The most notable difference relates to business activity: whereas a branch office can conduct business in the UAE and turn a profit, a representative office in the UAE cannot – it must contract out all its work back to the parent company.
Here are a few things to keep in mind while registering a branch office.
- Decide on the legal structure based on the activities that a company intends to undertake in the UAE and its intended markets
- Employ a National Service Agent (NSA), which must be either a UAE national or a company fully owned by the UAE nationals
- The documents required for registration and approval will include the following –
- Certificate of Incorporation
- Memorandum of Association
- Certificate of Good Standing which can be obtained from parents company home jurisdiction
- Board of resolution authorized the opening of the branch, to appoint a general manager and to allow a power of attorney to the general manager, and to approve that the firm accepts accountability for the liabilities of the office when setting up in the Emirates
- Audited accounts of the parent firm for the last two years
- A statement setting out the company’s main activities and operations
- Certified passport copy of the manager and shareholder
- Bank reference letter for the general manager
- Remember that the documents are required to be notarized and attested in both the applicants home state and at the relevant Emirati consulate
- The notarisation procedure should be started as early as possible because it can take a significant time
- All documents must also be interpreted into Arabic by an official translator before they can be presented to the authorities in the UAE.
- The Department of Economic Development is the licensing authority, with the approval of the Ministry of Economy.
Benefits of a Branch or Representative Office in the UAE
- Foreign companies can get 100% ownership of their company
- They are not required to show more than two years of incorporation and business experience in its home country
- The business may legally conduct the approved activity in its license anywhere in the Emirates, including the Free Zones
- No restrictions on the place where the company can rent/buy office space
- The government has forever waived any paid-up capital requirements
If you have decided to start your extensive business in the UAE, then we at Commitbiz can help you with the company incorporation process. Contact us today for more information.