I. Operation through third party distributors or agents
II. Limited Liability Company LLC
III. Branch license / representative
I. Offshore Limited Company
II. Onshore Free Zone Company
- This form of operation entails that the multinational company will sell / supply its services and products through one or more agents or distributors operating and licensed in the UAE
- Historically the difference between agents and distributors in the UAE have been the nature of the agreement entered between the multinational company and the agent/ distributor.
- An agency agreement usually results in the UAE agent registering such agreement on exclusive basis with the Ministry of Economy or the relative authorities. Distributors on the other hand would have an arm length commercial arrangement.
Aspects to consider when setting up an LLC:
- No minimum share capital requirement.
- Activities varies depending on the multinational business requirements.
- Subject to the nature of the business to be developed, the multinational company may fall under the new Foreign Direct Investment law (Federal Law No. 19 of 2018).
- The need of a UAE national sponsor. This is not the same as a UAE national partner, as explained above for an LLC. A sponsor will not own any shares in the company branch but will act as a service provider for local requirements.
- A branch license permits the headquarter of the multinational company to conduct trade and provide service activities.
- The branch license would not have an independent legal capacity. Any liability assumed by the branch license will need to be borne by the multinational company headquarter.
There are various designated free zones in the UAE, each one of the free zones regulates certain activities in the UAE. For example, the DIFC and the ADGM were setup regulate the financial sector; the Jebel Ali Free Zone and Dubai Airport Free Zone were setup for the trading sector; and TwoFour54 and Dubai Knowledge village were setup for the education sector.
II. Onshore Limited Liability Company or Free Zone Establishment
The offshore is a special service vehicle usually setup for purposes of owning an asset, holding shares or related to a specific transaction. This structure is similar to that of limited companies incorporated in the BVI (British Virgin Island) and other jurisdictions.
Aspects to consider when setting up Free zone offshore:
- This entity cannot be conducting services or trade in the UAE. This entity however, can hold shares or assets in the UAE.
- This type of company does not have operational offices and premises and as such cannot employ / sponsor personnel.
These are entities setup as 100% owned by the multinational company without the need for a UAE partner or UAE sponsor. These entities are usually setup to develop the multinational company in the region and to assist their operations in the UAE.
Aspects to consider when setting up Free zone onshore:
- An onshore free zone company must operate from the free zone it is incorporated in.
- Any trading from within the free zone to the mainland must be conducted through a proper legal structure and will be subject to custom duties and VAT.