Small and mid-sized businesses of foreign origin wanting a piece of the action in the UAE — or at least an operating address — are spoilt for choice.
Should they opt for a base within the city now that the UAE is amending its Companies Law to allow foreign businesses more than the 49 per cent stake they are allowed now? (But this change could come with a caveat in that only businesses in select industries are allowed to do so. The industries have not been named so far.)
But beyond the actual equity stake, foreign businesses setting up shop in the UAE could also get to decide for themselves whether they needed to appoint a “service agent” for this market.
The businesses “may have the option of whether or not to appoint,” said John Martin St Valery, CEO of The Links Group, a business advisory firm. “This was tested in the past, but it quickly became apparent that some form of local assistance — generally through a simple services agreement — is required for labour and immigration services.
It is highly unlikely that this situation will change.”
If they are still undecided about an “onshore” option, does it make better commercial sense for overseas SMEs to come in through a free zone and thus retain full control of their operations?
The answer to each situation would depend on the overriding priorities of the individual business.
“It is a costly mistake to make to be enticed by free zone benefits — such as ownership structure — if that is not the correct locale for the business,” said St Valery.
At the same time, “In the case of businesses that do comply with the free zone model this can be a very attractive proposition.
“Costs aside, an incoming company needs to ascertain whether the audience for their product or service is based ‘onshore’, regionally or internationally.