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Opening up the Market in the United Arab Emirates – Other ways of doing business in the UAE

8th October, 2018

This is the third in a series of  6 articles with regards to establishing a business in the United Arab Emirates.

Other ways of doing business in the UAE

If you do not wish to proceed by trading out of a free zone, it is possible to trade directly into the UAE with commercial and professional activities through:

Some options are as follows:-

Branches

A branch, which must be registered at the commercial registry, allows certain commercial and professional activities to occur within the jurisdiction. Generally speaking a branch cannot import goods.

The trading in goods is usually undertaken by a commercial local agent and it is essential that a branch operating within UAE engages with a local service agent.

Any agent must either be a UAE national or a company owned by a UAE national.

Some companies commence the process of trading into the UAE by the use of a representative office.  These structures are not really of a commercial nature but are used to undertake promotional and marketing activities.

Any representative office also requires a local service agent.

LLC

The most common corporate vehicle for foreign companies entering into the market is a limited liability company (LLC).

This has a maximum available shareholding to foreign companies of 49 per cent with a majority holding held by UAE nationals (also knows as sponsors).

It is usual for the sponsors to charge a fee in relation to their holding of shares but they do not tend to take an active part in the company. There are usually provisions which restrict the amount of dividend that they receive from the company.

Partnerships/LLPs

The setting up of a partnership within the UAE is not an attractive option to foreign companies as only UAE nationals are allowed to be partners in a general partnership.

A limited liability partnership (LLP) is formed by two or more general partners who will be liable for the business as a whole. Again, only UAE nationals are permitted to be partners within LLPs.

Joint Ventures

Joint ventures within the UAE are set up by entering into an official agreement which needs to be registered.

The terms and conditions of the agreements are fairly standard within the UAE and are issued by the Department of Economic Development, with an application process whereby the proposed joint venture partners need to provide detailed information – a process we can help you with.

Like with LLCs, any joint venture needs to be owned 51 per cent by a UAE national.

In addition to the formal corporate documentation. the participants in a joint venture will enter into a Shareholders’ Agreement which sets out the arrangement between the parties. This document must be in accordance with UAE law and the registered memorandum of the company.

As members of IAG Global, Aarons International is able to provide assistance and advice on legal matters across numerous jurisdictions.

Article 1 – Legal System and General Business Vehicles
Article 2 – Free Zone Companies

Stuart-Haynes
Stuart Haynes

Corporate & Commercial Partner
IAG Global Board Member
Email: [email protected]
Tel: 01743 453687

 

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