Freezones have always been the topic of discussion in the U.A.E., especially when considering options for setting up a business within the country. Which is why, many investors are attracted to establishing a company within the UAE freezones, as unique packages united with advantages offer the perfect hub for businesses to grow. Amongst the various benefits, 100% foreign ownership is one of the advantages which is enjoyed the most by investors in these freezone companies. However, as any economic zone, freezone companies also have their own restrictions in doing business, such as conducting business outside the freezone in the mainland.
In 2011, His Highness Sheikh Mohammad Bin Rashid Al Maktoum, Vice-President and Prime Minister of the UAE and Ruler of Dubai introduced Law No. 13 of 2011 which permits the freezone companies to open branches in Dubai mainland. However, it must be noted that individuals are not allowed to conduct economic activities in Dubai, outside the free zones, but only through a corporate entity licensed by the DED and According to Law no. 13 of 2011 the Department of Economic Development (DED) is the only responsible authority for issuing such licenses outside the free zones.
Apart from DED, the branch of freezone company will also need to register itself with the Ministry of Economy. Although the Law No. 13 of 2011 does not stipulate anything regarding the activities that are permitted to be conducted by a branch in Dubai, the Ministry of Economy has certain restrictions regarding the activities that can be conducted by a branch of a free zone company in mainland. Those restricted activities are:
- Commercial Agencies
- Labor Supply Services or
TRADE NAME & NATIONAL SERVICE AGENT:
The law concerning the Trade Name of the branch of the freezone company is similar to the other branch companies. As the branch of the freezone company in Dubai mainland will be wholly owned by the free zone entity, it will have the same trade name as of its parent company and a UAE Local Service Agent (Wakeel e Khidmat) will need to be appointed who will sponsor employees for the branch company at the Ministry of Labour. The local service agent will have no rights of voting or decision-making in the company. However, the branch company will be exempted by the Ministry of Economy from appointing a Local Service Agent if the free zone company is owned 51% or more by UAE nationals.
While the requirements of the DED for registering a branch seems to be less problematic. The requirements of the Ministry of Economy to register a branch from a free zone entity include the following:
- Initial approval certificate and trade name certificate as issued by the DED.
- Copy of the corporate documents of the free zone entity including duly notarized resolution calling for opening the branch and power of attorney in favour of the branch’s general manager.
- Copy of the passport for the general manager and the local service agent or copy of the license in case the local service agent is a corporate body.
- Local service agent agreement duly notarized at the notary public.
- Payment of AED 15,000 as the Ministry of Economy fees.
- Bank guarantee of AED 50,000 in favour of the Ministry of Economy.