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UAE Routes to Market

So you've decided to expand your business in The United Arab Emirates and researched your market. Now it's time to decide how you will register and set up the business. What is the best, most viable option for your company, your products, and yourself? Which is the path of least resistance?

Here are your typical options when expanding a business into The United Arab Emirates

Establishing a formal, permanent presence in UAE

Investors are allowed to have ownership of UAE companies on the condition that UAE nationals hold 51% of the shares. The preferred form for foreign investors is a limited liability company, where the owners are only liable to the capital invested in the business. The company needs to comprise of between two and fifty members and requires a minimum 300,000dH investment.

Using a commercial agent

Commercial agents must be UAE nationals and are used to represent foreign interests. The most common legal form is contract agency, where the agent negotiates and concludes deals on behalf of the owner in return for payment.

Establishing a Branch or Representative Office

A branch office is only permitted to engage in activities that are similar to those of the parent company and the company is not allowed to import the products of its parent company. A representative office is only permitted to promote the activities of its parent company, such as gathering information or soliciting orders. The offices are usually limited in the number of employees they can sponsor.

A UAE representative must be employed and they usually expect a contractual wage based on the turnover of the branch.

Establishing a 100% foreign business in one of the UAE Free Trade Zones

In free zones businesses are allowed to operate with improved tax and import incentives. 100% foreign ownership is permitted in free zones.

Licensing

Licensing is the permission for someone else to use your intellectual property rights in the UAE: either a patent, trademark, trade secret, or copyright. Different types of license include:

• Non-Exclusive License - A non-exclusive license implies that your intellectual property rights can be awarded to more than one licensee.

• Exclusive License - A little more complex because, although the license may not be exclusive to one licensee, it may be exclusive to a geographic location, a certain product, or limited area of use. For instance, you may grant a licensee exclusive use of the rights in France, yet grant another licensee its use in Germany.

• Patent License - The allowance of another party to use your patented product, design or process.

• Trademark License - Trademark licensing means permission is awarded to a licensee to sell a product or service. However, the licensor retains more control in order to ensure that quality is maintained. Quality control is in place to uphold the image of the brand / product / service / licensor, and therefore sustain customer confidence and satisfaction.
  
  

Franchising In the United Arab Emirates

Franchising is the licensing out of a business name, product, technique, philosophy, trademark, etc, for a percentage of the income. Instead of setting up new outlets as part of your expansion, you license your existing business blueprint out to franchisees who then set up and manage it for you.

The benefits of franchising your business in The United Arab Emirates include: more freedom, as the franchisee takes on major responsibilities; minimal expense; lower cost and higher profits; potential for fast growth; brand building.

Disadvantages of franchising a business in The United Arab Emirates: although few, rely predominantly on your franchisees. They include: poor quality franchisees; franchisees not declaring all income; poor performance.

The UAE is keen to promote franchising to catalyse the growth of small and medium size businesses. In February 2004 the government launched the UAE Franchise Association. Led by brands such as Mcdonalds, who have established a great presence across the country, franchising in The United Arab Emirates is now becoming a popular route to market.

There is no specific legislation for franchising in the UAE. General contract and commercial law apply to franchises and UAE law decrees that only UAE citizens or corporations wholly owned by UAE citizens or businesses with a UAE partner or sponsor are allowed to conduct business. Companies located in the free zones are exempt.

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