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Business

SETTING UP BUSINESS
General introduction
Incorporating a Limited Liability Company
Establishing a Branch or Representative Office
Commercial Agency
Public Sector Procurement
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Establishing a Branch or Representative Office

Under Articles 313 to 316 (inclusive) of the CCL, foreign companies are permitted to establish wholly owned branch and representative offices in the UAE. This business structure reduces the need for national participation.

A branch office, legally regarded as part of its parent company, is a full-fledged business, permitted to perform contracts or conduct other activities as specified in its licence. A branch office may only be engaged in activities similar to those of its parent company and it is not permitted to carry on the business of importing the products of its parent company, a function reserved for local trade agents.

A representative office, on the other hand, is limited to promoting its parent company’s activities, i.e. to gathering information and soliciting orders and projects to be performed by the company’s head office. Representative offices are also limited in the number of employees that they may sponsor (usually three or four).

A UAE national must be appointed as a ‘service agent’ for the branch or representative office. A service agent is not the same as a commercial agent. The former is not permitted to own equity in or participate in the substantive management of the representative or branch office. In practice, a foreign entity typically contracts with the service agent to provide specific services such as assisting in communications with government departments or undertaking other administrative matters. The fees paid to the service agent are a contractual matter between the service agent and the foreign company, frequently quantified by the turnover of the branch or representative office.

The procedures for establishing a branch or representative office are relatively simple and are available from the relevant Chambers of Commerce.

Limited Liability Companies - Branch and Representative Offices
Foreign entities wishing to establish a more formal commercial presence in the UAE usually do so by:

o Incorporating a Limited Liability Company (LLC)
o Establishing a Branch office or Representative office
o Establishing a wholly owned entity in one of the UAE Free Trade Zones
By establishing a presence under one of these methods, a foreign entity is permitted to engage in all activities as licensed in the UAE.

Note, however that there is a unique distinction in the UAE between companies established under the Commercial Companies Law and civil companies regulated by the Civil Code. The latter are not companies in the strict legal sense of the word, but civil entities formed as a partnership by UAE nationals or between UAE nationals and non-nationals in order to practice non-commercial activities that involve the investment of intellectual faculties, acquired information or the use of skills such as carpentry.

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