Representative Office
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Representative Office/Branch Office
Firstly, both types are affiliates of a parent company, carry its name and remain wholly owned by the parent company without them having their own legal entity.
Foreign companies are permitted to establish wholly owned branches and representative offices in the U.A.E.; however, these offices are limited in the activities they may conduct within the U.A.E. (Article 314 of the Commercial Companies Law). However, both types of affiliates require a service agent, who has to be a national of the UAE, but has no decision-making rights or any other rights whatsoever.
The role of the service agent is to assist in obtaining licenses, visas, labour cards, etc. The main difference between both types of affiliates is that a representative office – as opposed to a branch office – is not allowed to perform any commercial activities.
By setting up a representative office, the parent company creates its own legal and physical presence in the market. The task of a representative office is mainly providing support to the parent company. It may perform the following duties:
- Observing the market
- Preparation of project studies
- Marketing and promotion for the products and services of the parent company
- Negotiation of contracts between local customers and the parent company
- Customer advice services
- Supervision of commercial agents
- Training activities
- Observation of public sector invitations to tender
Representative offices must not perform any commercial activities, import or export goods, or sign contracts on their own behalf or set up their own accounts.
Important Note
The service agent must be strictly distinguished from the commercial agent/distributor. The UAE Companies Law provides that the service agent is responsible neither for the legal nor the financial obligations of the company; neither is he entitled to get involved in any way with the business operations of the company. In reality, the service agent is a formality. The role of the service agent is to assist in obtaining licenses, visas, labour cards, etc.
The service agent is paid an expense allowance, which is agreed in the service agency agreement to be concluded between the parent company and the agent. As opposed to the commercial agent/distributor, the service agent is not entitled to a statutory compensation payment in the event of termination of the service agency agreement
To establish a branch or representative office in Dubai, a foreign commercial company should proceed as follows:
- Apply for a license from the Ministry of Economy and Commerce, submitting an agency agreement with a UAE national or 100% UAE owned company. Before issuing the license, the Ministry will:
- forward the application to the Economic Department to obtain the approval of the Dubai government;
- forward the application to the Economic Department to obtain the approval of the Dubai government; forward the application specifying the activity that the office or branch will be authorized to undertake in the UAE, to the Federal Foreign Companies Committee for approval;
- Once this has been done, the Ministry of Economy and Commerce will issue the required Ministerial license specifying the activity to be practiced by the foreign company;
- The branch or office should be entered in the Economic Department’s Commercial Register, and the required license will be issued;
- The branch or office should also be entered in the Foreign Companies Register of the Ministry of Economy and Commerce;
- Finally, the branch or office should be registered with the Dubai Chamber of Commerce and Industry.