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One Entity – Two Premises?

Guiding Principle

Insufficient office space is a problem that many companies face when business increases. Once a company is well established and growing it usually requires more space in order to satisfy its clients’ demands. Obviously, in such a case instead of moving, the company prefers to stay in the same location and rent additional office or workshop space. Moving offices involves time consuming procedures with the authorities, additionally, moving is rather costly, and finally – and probably most important – the clients and customers are familiar with the existing location. Accordingly, companies in Dubai ask for options which allow them to grow their businesses without giving up their existing location.

A. May a company operate in two locations under the same trade license?

Generally a company established under the laws of the Emirate of Dubai is only allowed to operate at one location. This rule applies to all business forms, may it be a branch of a foreign company or a LLC. However, the Ministry of Economy (MoE) and the Dubai Economic Department (DED) allow to rent additional units at the same location, e.g. in the same building. The determining factor is that the premise is registered under the same premise number at the Real Estate Regulatory Agency (RERA). Renting additional room in a different location will not be approved under one trade license.

B. May the company in Dubai establish a subsidiary?

In order to lease additional premises, the company needs an additional trade license. It is worth considering that a subsidiary is formed by the company already existing. Meaning a branch would have to be established. This idea is however only feasible for a legal entity as a LLC. When it comes to a branch, UAE laws do not allow the establishment of a subsidiary (“sub-branch”). Thus and different from an LLC, a branch cannot establish another branch.

C. May the mother company of a Dubai branch establish a second branch?

The foundation of another branch is an alternative to obtain additional premises in Dubai. The DED and the MoE do not have any objection for a mother company to establish several branches in Dubai. As the name of a branch is determined by the mother company’s name, all branches will operate under the same name. The second branch’s trade license will be registered under the new location. However, it should be observed, that laws regarding the commercial licenses for branches of foreign companies have changed within the last years. Therefore, it is possible that the new license will not be granted for the same activities as the existing branch conducts. The most important change in company regulations is that the DED does not approve any trading activities anymore. It is worth mentioning that the application for a new branch will not have an impact on the existing license.

D. Requirements and Procedure

The procedure for the establishment of a second branch is similar to the establishment of the first branch. The DED and the MoE require only few additional documents. Firstly, the mother company must provide a resolution stating that a second branch should be opened. Secondly, a General Manager must be appointed. In case the General Manager will be the same person as the General Manager of the existing branch, the mother company has to issue a non-objection certificate for his appointment in the name of the first branch. At last, the new lease agreement must be submitted.

The national agent, who has to be appointed for each branch, does not necessarily have to be identical. However, if the additional branch should cooperate with a national agent different from the existing one, a non-objection certificate from the presently registered national agent must be submitted

July, 2011 Lena Brand
Meyer-Reumann & Partners – Dubai
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