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Legal Forms of Companies in Abu Dhabi

You are require to determine the best business structure and then describe the steps to create a business in Abu Dhabi.

For the purpose of determination of best business structure in Abu Dhabi the selection of a least expensive and simple legal form of company has been introduced. In this regard for the purpose of this report a business which carries on its activities through a branch office has been selected. A branch office can be regarded as an extension of an international parent company which conducts business under its name and therefore it has been regarded as the best form of legal company that can be created in Abu Dhabi (Aljifri et al. 2014). In this regard it is noteworthy to mention here that an office is not allowed to import and export goods and services in its own name however other business affairs can be conducted within an established purview. In order to carry on such operations special licenses might be needed to be obtained from the Ministry of Economy (Desislava and Keith 2016). In case of establishment of a UAE- based branch office UAE national is required to be appointed as a service agent for such branch. Therefore according to the given question, in order to create a business advising company which requires physical presence and one hired staff member; the Branch of a UAE- based Company is considered to be the right choice.

Branch of a UAE- Based Company better than the other prevailing options:

The provisions of Article 5 of the Commercial Companies Law No. (8) Of 1984 categorizes the legal forms of companies as Limited Liability Company, Simple Limited Partnership, Joint Participation or Venture, Private Joint Stock Company, Partnership Company Limited with Shares, Branch of a UAE- Based Company and Public Joint Stock Company (Desislava and Keith 2016).  In this regard it can be stated that a branch of a UAE- based company can prove to be beneficial in conducting the selected commercial and professional activities, however such companies cannot import goods into Dubai. The procedure regarding import of goods shall be managed by a local trader or commercial agency in behalf of the company (French 2014). It is noteworthy to mention here that every branch of a UAE based company comprises an independent budget of its own as well as records of the financial statements including its profits and losses statements. In this regard the branch of a UAE based company has its own local service agent, who must necessarily be a UAE national or must be a company owned by one or more UAE nationals. A branch of a UAE based company is regarded as an extension of corporate entity of the parent company and will be entitled to own 100% shares of the parent company (Gomtsian 2016). Under Commercial Companies Act Number 8 of 1984 and Ministerial Decision Number 69 of 1989, a branch office of a UAE based company does possess separate entity (Hassan and Naser 2013).  A branch office basically helps in promotion of the products and services of the parent company by entering into transactions and concluding agreements by offering various services and facilities to its customers (Kerr et al. 2014). According to the given question it can therefore be stated that in case of Branch Office of a UAE based company there would never be a reason of clients to visit the office. In order to create a business advising company for the purpose of advising companies in streamlining their processes and not being a reason for clients to visit the offices; the Branch of a UAE based company can be considered to be the best option.

Benefits of a Branch Office

Other forms of company creation would not be permissible to legal entities:

The UAE since time immemorial has been attracting significant inward investments from different parts of the world. A branch office can be licensed to undertake the activities that have already been undertaken by the parent company however those activities should not be restricted by the Companies Law in UAE (Khan and Kenneth 2017). In this regard Dubai acts as the competent authority for registration and licensing of a branch office in the Department of Economic Development (DED). However in case of Abu Dhabi, the competent authority is the Department of Planning and Economy.

In recent trends with the development of various business structure the process of licensing involved in manufacturing processes is considered as a expanding market, especially in case of U.A.E.'s inclination in order to improve the condition and diversification of local manufacturing (Hassan and Naser 2013). In case of Abu Dhabi the demand for industrial licenses remains comparatively low due to the presence of finite manufacturing possibilities in the U.A.E. Foreign companies in an attempt to enter the UAE market by developing their existing operation beyond an agency often favor a branch office based in UAE (Majdalany and Henderson 2013). The formation of Branch of a UAE- Bases Company enables the foreign investors to take part in the operation and management of an entity in UAE while they are still gaining profits in participation of a local partner (Kerr et al., 2013). In this regard the local partner may contribute financially or technically to the operations of the company in an attempt to develop local connections and reputation. Branch office of a UAE based company can be compared to that of a free zone companies. Free zone companies are regulated by the provisions of the governing authority that has been operating and administering the free zone in which they are located.

Legal and government procedures along with DED in opening a business in UAE:

The UAE being an Islamic jurisdiction and where the provisions of Sharia law is considered as the main source of legislation under the principles of Article 7 of the Constitution of UAE (Nadal 2013). However the principles and doctrines of Islamic jurisprudence rely on in the understanding, development and interpretation of the provisions of the Civil Code. In this regard, under Article 75 of Federal Law No. 10 of 1973, it is necessary for the Supreme Court to apply the statutes of Sharia law and federal laws along with other rules of natural laws including the customs that are not conflicting with the subject matter of Sharia law.

Legal and Government Procedures of Starting a Business in Abu Dhabi

The legal and government procedures of starting a business in Abu Dhabi can be emphasized in this context. Therefore for the purpose of creation of a business advising company the following steps can be considered.

Identification of Local Service Agent:

In order to create a branch office of an advising company the first requirement is the appointment of a local service agent. The local service agent can be either a national of UAE or can be a company which is owned by the nationals of UAE. The local service agent is appointed through a written agreement which must be duly signed by the parties to the contract before the notary officer (Molk 2016). However there exists no prescribed form in such agreement and therefore there is no scope for negotiation.

Reservation of trade name along with initial approval:

In order to start a business in Abu Dhabi it is required to obtain a trade name and prior approval is needed from the Department of Economic Development (DED) (Nadal 2013).

Application to the Ministry of Economy:

An application in this regard must be presented to the Ministry of Economy (MOE) under Article 314 of the UAE Commercial Companies Law. After the approval it is necessary to access the Licensing Committee presented at the Emirate Municipalities of Abu Dhabi which will inspect the applications and all the required documents which includes the details of the partners and the capital shares (Shayah and Qifeng 2014). The Licensing Committee after verification of the documents shall provide information whether the application requires approval of a competent authority.

Obtaining License from the DED:

The Ministry of Economy shall provide the issuance of a formal approval to either the Abu Dhabi Department of Economic Development (DED). Thereafter the applicant is required to proceed further in order to present application to the DED (Molk 2016). The DED will issue a commercial license addressing to the branch of the parent office which is valid for one year and has to be renewed annually.

Register as a member of the Chamber of Commerce and Industry:

After the confirmation from the qualified authority, the application shall be assigned to the Abu Dhabi Chamber of Commerce and Industry (ADCCI) in order to gain sanction and emanation of a Chamber Membership Certificate which is compulsory in order to obtain a commercial license (Kerr et al., 2013). After the issuance of the Chamber Membership Certificate visit shall be made to the location of the company in order to assure that all terms and conditions as well as the requirements are consistent.

Conclusion

Conclusion:

In the conclusion it can be stated that in order to set up a business advising company in Abu Dhabi which involves one hired staff and requires a physical presence; the Branch of a UAE based company has been considered. In this regard it can be mentioned that in case of a branch office of a parent company it will involve visiting the premises of the companies in order to advice the owners on streamlining their processes and in such cases it will not be necessary for clients to visit the branch office. Lastly it can be stated that in order to commence a business in Abu Dhabi it is important that the legal and government requirements should be taken into account in order to reduce the risks involved in the process.

References:

Aljifri, K., Alzarouni, A., Ng, C. and Tahir, M.I., 2014. The association between firm characteristics and corporate financial disclosures: evidence from UAE companies.

Desislava D. & Keith B., (2016) “International Establishment Mode Choice: Past, Present and Future”, Management International Review (MIR), Vol. 56 Issue 4, p489-530.

French, R., 2014. A Public Law Perspective on Intellectual Property. The Journal of World Intellectual Property, 17(3-4), pp.61-80.

Gomtsian, S., 2016. Private Ordering of Exit in Limited Liability Companies: Theory and Evidence from Business Organization Contracts. American Business Law Journal, 53(4), pp.677-744.

Hassan, Y. and Naser, K., 2013. Determinants of audit fees: Evidence from an emerging economy.

Kerr, M., Ryburn, D., McLaren, B. and Dentons, Z., 2013. Construction and projects in United Arab Emirates: overview. Multi-Jurisdictional Guide, 14, pp.1-12.

Khan, Y. and Kenneth, E.S., 2017. Corporate governance and the legal environment: some theoretical insights and related UAE evidence. Ushus-Journal of Business Management, 13(3), pp.1-25.

Majdalany, G. and Henderson, J., 2013. Voluntary Disclosure of Intellectual Assets and Intellectual Liabilities: Impact on Financial Performance in Publicly Listed Firms in the United Arab Emirates. Electronic Journal of Knowledge Management, 11(4).

Molk, P., 2016. How Do LLC Owners Contract Around Default Statutory Protections?.

Nadal, n.i.c.k., 2013. Corporate governance post ‘Arab spring’in the Middle East and North Africa. Law in Transition, 6, pp.52-61.

Naser, k.a.m.a.l., nuseibeh, r.a.n.a. And Al-Hadeya, a.h.m.e.d., 2013. Factors influencing Corporate working capital management: Evidence from an Emerging Economy. Journal of Contemporary Issues in Business Research, 2(1), pp.11-30.

Shayah, M.H. and Qifeng, Y., 2014, October. Development of free zones in United Arab Emirates. In First Middle East Conference on Global Business, Economics, Finance and Banking, Dubai.

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