Hugh Fraser
Posted: 26 January 2005
Hugh Fraser International has published a new guide on the legal structures available for North Sea companies expanding into the United Arab Emirates.
The Dubai-based commercial law firm says there are significant opportunities for companies seeking to expand into the region but warned they should “look before they leap”.
HFI’s 2005 edition of Choosing a Legal Structure in the UAE highlights key areas which cause most headaches for companies setting up in the Gulf territories for the first time.
Top of the danger list, say HFI, is the process of selecting a suitable agent to work with in UAE.
Managing partner, Hugh Fraser, said: “When using an agent it is absolutely imperative that companies do their due diligence and select wisely and carefully.
“Too often companies fail to do their homework prior to selecting agents and neglect to use agency agreements which properly protect them.
“UAE agent laws give automatic exclusivity to the products and services covered by the agency and the right to compensation if the principal supplier terminates or fails to renew the agency. A fall out with the agent can effectively lock a company out of the territory and will prove expensive and time consuming to resolve.”
Other key areas which cause concern are the advantages and disadvantages of using free zones. HFI believe there is a failure to appreciate that free zones are ideal for import/export businesses trading regionally, but may not be suitable for companies seeking to concentrate on the UAE itself and an agent may still be necessary to comply with the law.
Many foreign companies shy away from using limited liability companies that must have a minimum 51 per cent of the share capital owned by an UAE national. The rules will soon be changed so that foreign ownership can be increased from 49% to 70% and the local shareholding can be held in trust on behalf of the foreign company if properly drafted documentation is put into place.
Mr Fraser stressed that these pitfalls and other problems can be avoided through proper legal and commercial consultation with qualified professional advisers.
He said: “There is a growing demand for North Sea skills and technologies due to pressures to increase production levels and to maximize output from depleting reservoirs.
“Our guide should make it easier and less problematic in setting up a business in the UAE and if companies ‘look before they leap’ they can avoid the downside of initial poor decisions when it comes to choosing the most appropriate legal structure.”
The 2005 Guide to Choosing a Legal Structure in the UAE can be downloaded free at www.fraserlegal.com
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