Under UAE Commercial Law, there are two options by which a foreign company can have a presence in the United Arab Emirates. One is by setting up a Branch Office, and the other is by having a Representative Office. The difference between a Branch Office and a Representative Office is that a Representative Office is not allowed to turn a profit. In other words, it must outsource all its work back to the parent company. A Representative Office is also not allowed to enter into business contracts in the UAE.
If the business model of a Representative Office is not in sync with what you have in mind, you can look at opening a Branch Office. A Branch Office can be 100% owned by its parent company. However, the problem is that it may not always be possible for a Branch Office to have the same name as its parent company located outside the United Arab Emirates. This situation may occur because another business entity in the United Arab Emirates has already registered the name of your company. In such a scenario, you would be left with no option but to zero in on another name for your Branch Office.
Why Choose a Company Formation Expert for Establishing Your Branch Office?
It is recommended that you enlist the help of a business setup consultant, who has prior experience when it comes to setting up the branch office of foreign company in the United Arab Emirates. He/She can run a search to see if the same name (as that of your company) or similar trade names have already been registered. If yes, you could look at alternate options, such as appending the term ‘Middle East’ to the name of your company for the proposed trade name of your Branch Office in the United Arab Emirates. Certain names, like those which include the name of a country, are not permitted in the United Arab Emirates. A good business setup consultant can advise you on all these.
When establishing your Branch Office in the United Arab Emirates, you are required to have a Local Service Agent who will legally represent your Branch Office before the Government authorities. It is the Local Service agent who applies for approvals from various Government agencies, and also for visas for the staff of your Branch Office in the United Arab Emirates. The Local Service Agent must be an Emirati* who has attained the age of 21, or a company that is incorporated in the United Arab Emirates and 100% owned by Emiratis. The Local Service Agent does not own any shareholding in your Branch Office and is not responsible for the business decisions taken by it. 100% foreign ownership in UAE is possible by opening a Branch Office of your existing company.
*This is term used to refer to an UAE national, someone who is a citizen of the United Arab Emirates.
Your Branch Office is allowed to engage in all the business activities that are currently undertaken by your company, which is formally termed the parent company when opening a Branch Office in the United Arab Emirates. However, if it wishes to engage in an allied activity, such as when an architectural firm plans to offer real estate development services in the United Arab Emirates, this may or may not be possible. Certain business activities like construction cannot be legally carried out in the United Arab Emirates without a Local Sponsor. You may be required to set up a company in which 51% of the shares will be held by the Local Sponsor, who is also referred to as the Local Partner.
The Local Sponsor does not take home 51% of the profits. The Local Sponsor is the majority shareholder and legally represents your company before the Government authorities, including the courts of law in the United Arab Emirates, but he/she can sign over a Power of Attorney document entrusting the administration of the company to you. This way, you will have full control over your company, including when it comes to financial matters.
A good business setup consultant experienced in matters of foreign company registration in Dubai can help you determine if you need a Local Sponsor for your proposed business activity in the United Arab Emirates. If yes, he/she can put you in touch with the right Local Sponsor. For instance, if you were planning to foray into construction in the United Arab Emirates, wouldn’t it be great if the Local Partner was an experienced civil engineer with knowledge of local building laws and regulations?
Why Choose A&A Associate LLC for Opening Your Branch Office in Dubai, UAE?
At A&A Associate, what we really do is put you in touch with the right Local Sponsor. In case you don’t need a Local Sponsor, we can be counted on to connect you with the right Local Service Agent for your Branch Office in the United Arab Emirates. The right Local Service Agent will always be sympathetic to your business concerns, and go out of his/her way to assist you with everything you need, in whichever way possible. Such a local resource can be an immense advantage to have when doing business in the Middle East.