The UAE Commercial Law provides foreign investors two options in relation to their expansion into the UAE. Each of these legal forms gives the company varying amounts of access to function in the local market.
The Foreign Branch Office and Representative Office legal forms, allow foreign companies to establish a presence in the UAE while retaining 100% ownership. The offices function as extensions of the parent company and have no separate legal identity. The parent company remains liable for all activities conducted under the branch / representative license.
WHAT IS THE DIFFERENCE BETWEEN BRANCH OFFICE AND REPRESENTATIVE OFFICE?
Branch Office: A branch office permits the investor to set up a full-fledged business that is permitted to perform all activities similar to its parent company (depending on activities) as specified in the license at time of incorporation.
Representative Office: A representative office is strictly restricted to advertising and marketing of services and products that the parent company deals in. The office is not permitted to earn and engage in profit making activities.
WHAT ARE THE REQUIREMENTS FOR SETTING UP A BRANCH / REPRESENTATIVE OFFICE IN DUBAI?
- Appointing a Local Service Agent
- Application process for branch / representative offices begins with identifying a Local Service Agent (LSA). Both business forms are required to appoint an LSA, a UAE National or a company wholly owned by a UAE National.
- The LSA has no responsibilities towards management, operations or ownership of the company. He is solely involved in PRO/ administrative functions of obtaining and renewing licenses, permits, visa and so on.
- Trade Name & Initial Approval – Once the LSA is appointed, the trade name must be reserved and a proposal of the branch office must be submitted to the Department of Economic Development (DED).
- Application & Submission of Relevant Documents at Ministry of Economy (MOE)
- Following the approval from DED, all company documents relating to details to:
- Ownership & Legal Structure of Foreign Company
- Nature of business that parent company engages in.
- Proposed business activity
- Proposed General Manager
- A form highlighting the below will be submitted along with the accompanying documents:
- Trade Name Reservation & Initial Approval Certificate
- Parent Company Documents:
- Certificate of Incorporation
- Memorandum & Articles of Associations (MOA & AOA)
- Certificate of Good Standing
- Board Resolution authorizing:
- Opening of Branch / Representative Office
- Confirmation that liabilities of office will be the responsibility of the parent company.
- Appointment of General Manager and Power Attorney
- Audited Accounts of Parent Company
- Statement specifying intended activities in the UAE. Licenses in the UAE are issued on the basis of the service or business activity that the company wishes to engage in.
- Notarised Agreement with LSA
- Once the documents are submitted, approval will be received from MOE. Although, the company is legally formed, the company cannot begin work till all procedures are completed.
- Obtaining License from DED
- An official approval will be issued by MOE to DED. The documents submitted in step 3 will be resubmitted at DED along with:
- Lease Copy of Proposed Office
- Undertaking from Foreign Company
- Letter from UAE Auditor summarizing financial statement of the parent company (past 2 years).
- DED then issues a commercial license for the branch / representative office. The license is usually valid for a year and annually renewable.
- Completion of Administrative Tasks
- The next step involves the signing of lease for office, opening bank account, and applications for hiring new employees.
- The duties are usually carried out by a Public Relationship Officer (PRO) in the UAE. These PROs handle all government related requirements of the company. As these processes are often foreign to new establishments, outsourcing of PRO is highly advised.
- Register as member at Chamber of Commerce & Industry
- The branch or representative office will finally be registered as a member at the Chamber of Commerce by completing a similar application as the at the DED.
The procedure is straightforward but incredibly detailed and the assistance of an expert in Business.
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