UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance

Archive for January 27, 2010

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I Want to Open a Branch Company in Abu Dhabi

 

A branch company can be 100% owned by a foreign national, however, the branch company must hire a service agent and pay them on an annual contractual basis a sum to be decided between the two parties, which is not regulated by law.   The role of the service agent is purely administrative and limited to inter alia immigration, labor, liaising with government departments, and other administrative matters.  The agent is not permitted to own equity in or participate in the substantive management of the branch office. 

The mother company must have been in existence for more than 2 years in the country in which it is registered.  A branch office, legally regarded as part of its’ parent company, is a full-fledged business, permitted to perform contracts and conduct the activities specified in its’ trade license.  However, the branch office must engage in activities which are the same or similar to the activities listed on the mother company’s trade license.  

Through registration of a branch office, a foreign entity can establish a direct business presence in the UAE with significantly less UAE participation than is possible by establishing an LLC, which requires 51% local ownership.  However, as a branch company, again you are restricted to engaging in the activities which are the same or similar to the mother company’s activities.  If you are looking to branch into new areas of activities, than an LLC would be a preferable vehicle. 

Operating as an LLC is riskier than as a branch company as all Partners in an LLC are liable up to the amount of paid up share capital.  For branch companies, since there is no legal distinction between the branch company and the mother company, the mother company is fully responsible for the branch office.  However, often times, mother companies register branch offices as branch offices of their subsidiaries to limit the mother company’s legal risk and exposure in the UAE. 

 

The minimum capital requirement for a Branch of Foreign Company in Abu Dhabi is 250,000.00 AED.

Opening a Branch of Foreign Company in Abu Dhabi:

  1. Adopting the same mother company’s name for the branch in Abu Dhabi (Chamber Approval).
  2. Getting the company activity approved by the Licensing Department of the Department of Planning and Economy and the Ministry of Economy.
  3. Detailed statement on the activity to be practiced by the branch.  Getting it approved by respective competent authority, and the branch activity must correspond to the activity practiced by the mother foreign company.
  4. Contract agreement with a services agent holding the UAE nationality duly authenticated by Notary Public.   (The company must have a UAE services agent.  In case the agent is a company, the company and all its’ partners must hold UAE citizenship.)  The obligations of a services agent shall be confined to rendering required services for the company without any liability or financial obligations relating to the business or activity of the company branch in or outside of the UAE.
  5. Submission of a duly attested ‘Undertaking’ issued by the mother company pledging to bear any financial liabilities on behalf of its branches in the UAE.
  6. Duly attested decision taken by the mother company confirming willingness to open a branch in Abu Dhabi.  This decision will be taken by the mother company’s Board of Director’s in the form of a Board Resolution and must be duly attested by the UAE embassy based in the country in which the mother company is registered and located.
  7. Duly attested official certificate issued by competent authority in country where the mother company is registered stating that the company is registered and describing the company’s legal status, capital, names, capacities and powers of its representatives. 
  8. Duly attested mother company’s certificate of incorporation and articles of association, notarized, translated, and with UAE Ministry of Foreign Affairs attestation in Abu Dhabi.
  9. The last few balance sheets accredited by the mother company and duly attested along with the auditor’s report, profit/loss account, and other balance sheets and related explanations.
  10. Statement showing main operations and activities practiced by the foreign company outside the UAE  and accounting for its previously accumulated experiences.
  11. Duly attested power of attorney in favor of the company’s representative in Abu Dhabi authorizing the representative to sign the sponsorship agreement along with his or her passport copy and personal photograph.
  12. Passport copy and personal photograph of the national service agent if he or she is a natural person.  In the case that the service agent is a legal entity, an official certificate confirming that all partners are UAE nationality holders should be attached along with copies of issued licenses.
  13. Statement showing the number of employees expected to be recruited in the company branch in Abu Dhabi.
  14. A bank guarantee of 50,000.00 AED to guarantee payment for the Ministry of Economy.
  15. Submit license fee.
  16. The branch capital amount must not be less than 250,000.00 AED.
  17. All documents should be translated into Arabic by an authorized legal translator and duly attested by the UAE Ministry of Justice.
  18. The license will be issued by the Department of Planning and Economy.

The license will be revoked if the mother company abroad is proved to be insolvent and/or closed and liquidated.

I Want to Form an LLC in Abu Dhabi

 

 

 

 

The Steps to Incorporate the LLC in Abu Dhabi are as Follows:

1. Obtain trade name approval and eventually register it in the Commercial Register.

2. Submit definition of activity of company and get it approved by Department of Planning and Economy.

3. Submit articles of association duly authenticated by a Notary Public in Abu Dhabi.

4. If the 49% foreign ownership is by a company and not an individual, you must submit a letter from the company that states it exists outside of the UAE.

5. You must lease an office space for the intended business activity and submit a copy of the lease contract with the application.

6. Submit an application form to the Department of Planning and Economy (license), the Commercial Register (Ministry of Economy), and for Abu Dhabi Chamber Membership with corresponding fees.

7. Submit a passport copy and two passport photos of each Partner.

8. If one of your non-national partners is already resident in the UAE, a preliminary residence-related sponsorship assignment (transfer) must be obtained from the previous sponsor.

9. Submit a Bank Certificate certifying that the company has paid up capital in the amount ‘sufficient to conduct the stated activity (activities) on the trade license’  in a bank in Abu Dhabi along with a statement showing the cash shares of the Partners.

10. A duly authenticated Power of Attorney in favor of an authorized person, in case such a person is required to subrogate the principal in respect of application submission and representation before the concerned authority.

11. A copy of the receipt certifying that the company has already taken the required steps towards the promulgation of its articles of association in the special publication issued by the Ministry of Economy.

12. A copy of a valid membership certificate issued by the Abu Dhabi Chamber of Commerce and Industry.

13. Register the articles of association at the Ministry of Economy and the Abu Dhabi Chamber of Commerce.  The license will be issued from the Department of Planning and Economy, Abu Dhabi.

14. You then go to register at the Labor and Immigration Departments to organize visas and employment contracts for your employees and the Partner(s).

15. After the license is issued, you may start drawing upon the bank account set up in the Company’s name and begin operating business.

16. You must renew the license on an annual basis.

The trade name and activity must be obtained before submitting the final application for the LLC license.  This could be considered the initial application phase.

 

You Must Consider Some Requirements in Abu Dhabi for the Trade Name:

1. The name of the partnership shall be composed of the names of all partners, yet its name may merely reflect one or more names of its partners in addition to a notation indicating the presence of partnership.  Moreover, it is permitted to have a special trade name.  In the event the company’s name included the name of a person who is not a partner to the partnership, with the knowledge of that person, the latter shall be jointly liable for the partnership’s obligations.

2. The name of the LLC shall be derived from its activity or from one or more names of its partners in addition to a notation indicating its status as a LLC company together with stating its capital.  If the directors fail to observe this provision, their liability would extend to their own funds over and above the joint-liability for the company’s obligations in addition to compensations.  According to Article 3 of Law No. (5) Concerning the Issuance of Licenses in Abu Dhabi, the validity period of an entry license shall be one year.  However, it may be renewed for one, two, or three calendar years beginning from the date of issuance of the license.  In case of loss and insufficient assets to fulfill the company obligations, or if the partners were reluctant to cover such a loss, the company should be dissolved and liquefied.

 

General Terms and Conditions for Company Incorporation in Abu Dhabi:

1. 51% local ownership.

2. All partners of the Company should sign an articles of association written in Arabic and duly authenticated by the Notary Public at the Court of Law.

3. Any company incorporated in Abu Dhabi should have its articles of association and any amendment thereto duly registered in the Commercial Register and the Companies Section at the Ministry of Economy and Commerce.  LLC’s should also obtain the Abu Dhabi Chamber of Commerce and Industry Membership Certificate and the Abu Dhabi Municipality License from the Department of Planning and Economy.

4. Partners may not agree in the articles of association on depriving any of them from receiving profit or exempting any Partner from suffering loss.  If so, the articles of association will be considered null and void.

5. The articles of association should contain the following: Each partner’s name, surname, title, nationality, date of birth and domicile.  The company’s name, purpose, head office, capital, the share of each partner, lifetime, the commencement and end of fiscal year, the terms of profit/loss distribution; dispute-solving party, terms of notification, terms of share assignment and value estimation; terms of joining or leaving by a Partner(s); terms of liquidation; partners liabilities and any other information or stipulations agreed among partners who show willingness to include them in the memorandum providing that such stipulations should be in conformity with the enacted laws.

UAE Laws and Islamic Finance

Laws of the UAE and Islamic Finance