License to trade
The GCC region continues to grow in importance as an economic and trading hub, making it an increasingly important trading partner as well as investor for international markets. With one of the fastest-growing populations in the world, predicted to increase by one-third to 53 million people in 2020, rising affluence and abundant natural resources, the GCC region will continue to enjoy strong market demand, which in turn helps to make the GCC countries attractive prospects for foreign investors.
For foreign investors who have got the GCC in their business development sights, the UAE and Qatar are among the hottest growth destinations. According to the International Monetary Fund (IMF), the UAE’s GDP is expected to increase 2% to reach USD 394 billion in 2013. In 2017, the UAE’s GDP is expected to increase 14% to reach USD 448 billion.
With the third-largest proven reserves of gas in the world and as the world’s largest producer of liquefied natural gas, Qatar, is expected to witness dramatic growth in all sectors, especially with the country gearing up to host the 2022 FIFA World Cup. According to the Economic Intelligence Unit (EIU), Qatar’s GDP is expected to increase 2.4% to reach USD 206.7 billion in 2013.
In order to capitalise on these market opportunities you need to make sure you have set up your business the right way.
IDENTIFY THE RIGHT LEGAL PRESENCE OF YOUR NEEDS
First and foremost, foreign investors need to decide what type of legal presence best suits their business requirements. Currently, in the UAE foreign investors are required to establish a legal presence through any of the following means: incorporating a local entity under the Commercial Companies Law, registering a branch or representative of a foreign company, establishing a free zone entity, entering into a commercial agency relationship.
In Qatar, the richest country in the world in terms of per capita GDP, foreign companies can choose from the following options: incorporating a local entity under the Commercial Companies Law; obtaining a license for a branch office or trade representative office; entering into a commercial agency relationship; incorporating or registering with the Qatar Financial Centre; and setting up a Free Zone entity within the Qatar Science and Technology Park.
SPEAK TO THE EXPERTS
However, not all these entities will have free reign to trade wherever and with whomever they like. It is also important to understand ownership requirements for any legal presence.
For instance, if you are looking to establish a legal presence in the UAE to have full access to the UAE market and work on an unlimited number of projects, then you would be best to incorporate a Limited Liability Company (a type of entity under the Commercial Companies Law). This means appointing a local Emirati partner who holds a minimum 51% of the company’s shares.
There is no doubt that finding the right local partner, either an individual or a company, is absolutely essential to the success of the business. Investors looking to establish a local entity under the Commercial Companies Law will also need to consider which type of entity best suits their current and future needs.
Expanding into new markets is always challenging and it is natural for business owners to want to keep their overheads as low as possible. However, investing in the right company license and structure from the outset can save money and frustration over the long term.
Get advice from a trusted and experienced company formation specialist. Share your business plan with them so they can recommend the most appropriate way for you to incorporate a commercial presence.
START THE LEGAL PROCESS
After choosing the right company structure and license for your business, you will need to appoint a lawyer to prepare the necessary legal documentation in order to incorporate your business and become commercially registered. The type of documentation required will again vary according to the company structure and license which you are seeking.
All documentation should follow the formatting guidelines provided by the compliance bodies in the UAE or Qatar. Each document must also be notarised and attested at the foreign party’s Ministry of Foreign Affairs and Embassy in their country of origin.
Registration of the company will differ depending on the jurisdiction.
GETTING REGISTERED IN THE UAE
Once the legal documentation is completed, the next step is to obtain initial approval from the ministerial bodies in the UAE for the name of the company and the activity of the company. In the UAE, foreign investors need to reserve a company’s name and submit the company registration application to the Department of Economic Development (DED).
If the Licensing Section at the DED approves the business activities, trade name and the partners, then the company’s Memorandum of Association need to be signed at the notary public. A common practice is for the investor’s lawyer to get a preliminary approval from the notary beforehand so that the client can arrive at a specified time and have the documents notarised immediately.
Afterwards, foreign investors will need to submit some original documents to the DED -Commercial Registration Department. The documents are: prescribed application form signed by the company managers or their legal representative; copy of the Memorandum of Association, a certified attested copy of the foreign companies registration, formation documents and resolution to open the new company in the UAE; a letter issued by the DED attesting to the company name approval; original letter of company approval; and passport copy of each partner.
If Commercial Registry officials deem the documentation to be in order, the company name will be entered into the Commercial Register. A Trade license fee will be generated, and once settled the License will be produced.
If registering a branch office of a foreign Company, the commercial register and accompanying documentation will need to be submitted to the Federal Ministry of Economy to arrange for registration of the foreign branch. The publication may take several weeks as all branches must deposit a large bond prior to being registered. However, this time frame is not important as the authorities will accept a copy of the Ministry’s receipt of publication fee payment allowing the business to start trading.
It is important to note that all application forms must be filed in Arabic, dual text versions are not valid. There is no doubt having a company formation specialist and a law firm for these steps will help avoid critical errors.
Once the original trade license and commercial registration certificates are obtained, foreign investors can go and apply for the “Establishment Card” at the Ministry of Labour and then register the employees of the company.
GETTING REGISTERED IN QATAR
In Qatar, once the legal documentation is completed, foreign investors will need to obtain the approval of the Commercial Companies Inspection Department. This is done to ensure the articles of association satisfy the laws and regulations in place in Qatar.
The department will also need to approve the name of the company. This is a relatively straightforward process with the application now lodged online to the Commercial Registry Department and the Trademarks Department. Investors should know, however, that there is a difference in fees according to the language of the company’s name. If your company has an Arabic name, then the fees will be less than if you only register a non Arabic name.
If the articles of association and company name are approved, the Commercial Companies Inspection Department will then issue the bank certificate for depositing the capital of the company at the bank. After that, the foreign company will need to open a bank account and deposit the mandatory minimum share capital amount. The minimum share capital requirement varies according to the company structure and license being obtained.
Once the minimum share capital is deposited, the bank will issue a letter to the Ministry of Business & Trade stating that funds have been received into the company’s bank account. This share capital can later be withdrawn for the purposes of running the company, but only once the entity has been incorporated and the commercial registration is issued.
Once the company is registered with the Ministry of Business and Trade as well as at the Qatar Chamber of Commerce, the foreign company must then obtain a Municipality License and Signage License. The latter is only secured after signing a one-year lease at an approved commercial office.
Before the trade license is granted, the municipality will inspect the commercial premises to ensure the correct signage is installed. It is important to note that all signage must be written in Arabic before any other language is added. The property must also be zoned as commercial premises. Failure to comply with both these requirements may result in your trade license being declined.
In Qatar, a company’s labour and immigration services are conducted online using its Computer Card. It is important that all the relevant people are authorised to use this card or sign for immigration services on behalf of the foreign company. The foreign company will also need to apply for the company labour quota in order to obtain the desired number of employment visas. Once the labour quota is received the company can then start applying for work permits for its staff, including that of the General Manager.
GET ON THE RIGHT PATH
The UAE and Qatar remain among some of the fastest growing economies in the world, albeit at different stages of maturity. While the roadmap may seem complicated, a trusted company formation specialist will be able to set you on the right path and help you avoid potentially costly roadblocks along the way. Foreign investors that position themselves correctly via the most suitable means of legal incorporation will be well placed to capitalise on the lucrative opportunities offered by the UAE and Qatar.
Wayne joins Links Group with a background in Sales & Marketing and in Business Development in the UK and the Middle East. Wayne joined Links Group early in 2011 as a Consultant before being appointed as Country Manager for Qatar in October 2011.
Carl Dowling joins the company with an impressive track record in retail and in the customer service sector including eight years as the manager for a large retail chain in Australia. In August 2011, Carl was appointed as Business Development Manager for Links Group and is responsible for the continued business expansion of the company across Dubai and Abu Dhabi. Carl also serves as a Committee Member for the Australian Business Council in Dubai.