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). Only UAE nationals or companies 100% owned by UAE nationals may be appointed as local agents. Local agents (sometimes referred to as sponsors) are not involved in the operational side of the company, but merely assist in obtaining visas, labor cards etc, and are paid a lump sum and/or a percentage of the profit or turnover.
The main difference between a representative office and a branch office is that a representative office theoretically is limited to gathering information and soliciting orders and projects to be performed by the company's head office. In this regard, representative offices are also limited in the number of employees they may sponsor (typically three or four). A representative office serves as an administrative and marketing center for the foreign company. By contrast, a branch office is a full-fledged business, permitted to perform contracts or conduct other activities as Specified in its license.
The company which chooses to open a branch in the UAE may freely carry out the activities indicated in the trade license it obtains. However, licensing is governed by legal rules and regulations. According to the Law, there are certain activities, which can only be carried out by UAE nationals such as banks, finance, insurance and commercial agencies. There are also other licensing procedures and conditions governing the work of the Department of Economic Development, which issues from time to time certain regulations and administrative decrees. A foreign company, which opens a representative office in UAE, may launch promotional campaigns for its products and services. The office may also facilitate contracts between the company and its local clients. However, the office is not licensed to conduct business operation of whatsoever kind such as obtaining credit facilities, making offers, etc.
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