Dual License Initiative in Abu Dhabi
In September 2018, the Abu Dhabi Department of Economic Development (ADED) had announced its first phase of the Dual Licenses Initiative. This enables the companies to carry out their commercial activities both onshore in Abu Dhabi, Al Dhafra and Al Ain, as well as operate in the Emirate’s free zones. In essence, the aim of this new scheme was to encourage investment and also to drive economic development across the Emirate of Abu Dhabi.
This move was in alignment with economic initiatives of His Highness Sheikh Mohamed bin Zayed al Nahyan, the Crown Prince of Abu Dhabi and Deputy Supreme Commander of the United Arab Emirates (the UAE) Armed Forces, and also the Chairman of the Executive Board of the Emirate of Abu Dhabi. This included an array of initiatives that would improve the ease of carrying on business in Abu Dhabi, and to support entrepreneurs, Small and Medium-sized Enterprises (SMEs) and the private sector. His Excellency Saif Al Hajeri, Chairman of the Department of Economic Development of Abu Dhabi, affirmed the purpose of this initiative as above, to widen the horizons of business transactions in the Emirate.
INCEPTION OF DUAL LICENSE INITIATIVE
With the aim to attract foreign investment and drive forward the economy, the Dual License Initiative forms a vital part of the 50 billion dirhams stimulus package. This package was announced in June 2018, and it was welcomed by many in the Emirate of Abu Dhabi, as it was benefitting numerous sectors in the industry to include services, financial and trading consultancies.
The Dual License will be open to the companies that are headquartered in Abu Dhabi and its various Free Zones, which include Abu Dhabi Global Markets (ADGM), Khalifa Industrial Zone (KIZAD), the Abu Dhabi Airport Free Zone, Twofour54, MASDAR also called Abu Dhabi Future Energy Company, etc.
Such creation of the new freelance licenses that are exempt from requiring to rent workspace or office space for two years in the Emirate, and allowing them to officially work from home for the first time, will be done by an instant licensing system for most of the commercial licenses and the governmental services.
CONDITIONS OF ELIGIBILITY
To be eligible, there are several documents that the free zone companies must present, as the requisites for the application, that would enable them to obtain an onshore license.
Limited Liability Companies registered in one of the Free Zones of Abu Dhabi will have the option of obtaining a Dual License. Dual License Initiative will apply to such entities which are registered as a foreign branch in such Free Zones. Additionally, Special Purpose Companies (SPCs) or Special Purpose Vehicle (SPVs) will not be able to open a branch onshore.
Following are some of the documents that need to be presented, and they include, but are not limited to:
1. A No Objection Certificate from the respective Free Zone Authority
2. An undertaking mentioning that the company does have a branch in the Emirate which is outside the Free Zone.
3. A copy of the Free Zone license of the parent company.
PROCEDURE FOR OBTAINING DUAL LICENSE
Once the documents are in place, the application may be submitted, which requires an initial approval. After the initial approval is received, the license then goes for printing post the payment of the applicable fees. Ultimately, the dual license is then issued.
Standard fees apply to dual licenses, as they do for other licenses, and the same is in accordance with the statement of the Abu Dhabi Department of Economic Development. But it is pertinent to note that, the fees may vary between different companies, and the same depends on several factors, of which one is what type of a company is applying for such license, and what are the activities carried out by such company.
The signboard and physical address are not included in the dual licenses. For this reason, the costs incurred by the company is reduced by approximately 80% according to the Abu Dhabi Department of Economic Development.
TIMELINE FOR RECEIVING THE LICENSE
The timeline for the issuance of the dual license also differs according to the type of activities that are carried out by the company applying for this license. It was advised by the Abu Dhabi Department of Economic Development that about 90% of the list of activities follow a relatively quick path for the issuance of the license, and the same is almost immediate. The activities which are more technical in nature, that require additional approval from different relevant governmental authorities, may take approximately two to three business days for the issuance of the dual license.
IMPACT OF DUAL LICENSE INITIATIVE ON THE ECONOMY AND LOCAL BUSINESS
The Dual License Initiative is indubitably a positive step that encourages businessmen and investors to be motivated for the expansion of their investments in Abu Dhabi, as a result of which, the advancement of economic development, prosperity and growth in Abu Dhabi is boosted.
Previously, the Offshore companies were restricted and confined to the limitations under the Free Zone in which they were established. The only conditions under which they were able to expand their geographical scope, as well as the legal scope of their respective businesses, were when certain conditions were met; such as:
1. When the Offshore company partnered with an Onshore company or agent, which enabled them to secure a larger market. However, this expansion condition came at the cost of sharing the profits therein.
2. When the Offshore company applied for a license Onshore, which resulted in such an Offshore company incurring additional costs (like leasing an office). Additionally, with the issuance of such Onshore license, the Offshore company would then be restricted with the regulatory and compliance obligations Onshore.
Hence, practically speaking, a foreign investor who owns a Free Zone company under the Dual License Initiative can expect to commence business onshore without sharing their profits, and without the need of a local partner.
WHAT IMPLEMENTED WITH THE DUAL LICENSE?
With the abovementioned announcement of the Dual License Initiative, the following amendments were brought about:
- Additional Branch Address Elimination
Formerly, a branch in one of Abu Dhabi’s Free Zone was required to have its distinct address that leads to a separate office. This consequently called for an additional agreement (lease).
With the introduction of the Dual License Initiative, the is no particular requirement for an address or nameplate that needs to be submitted with the branch application in the Department of Economic Development. Hence, with a Dual License, the branch will not need a distinct address that needs to be registered with the Department of Economic Development, and the branch may operate from the same office as its parent company.
It is still possible for the Dual License Branch to have an address of its own, however, this new approach provides a far more cost saving and flexible by not setting this as a prerequisite for setting up business in this manner.
- Elimination of Local Sponsor for Registration of Dual License
The Parent Company acts as the sponsor for the registration of the Dual License. This is another attractive feature of the initiative that encourages foreign investment in Abu Dhabi, and it is unlike any other Emirate where the local sponsor is required for such registration.
With the elimination of the need for partnering with a local agent, the companies which are interested in obtaining the Dual License are able to avoid additional costs. They are saved from comprehensive paperwork associated with the need of a local sponsor, where additional documentation is needed on the domestic agent’s behalf. As a result, the process is expedited, since the need to find a suitable domestic agent is eliminated.
- Mandatory Appointment of the Branch Manager
The Dual License Branch is not issued with its establishment card, or a Ministry of Labour file since the same is the responsibility of the parent company. Therefore, the hiring of the employees in the Dual License Branch is far more feasible and is sponsored by the parent company of such branch. It is compulsory for a Branch Manager to be appointed for the Dual License Branch. Favourably, the Branch Manager so appointed should also hold a Power of Attorney to have the authority of the established Dual License Branch. This is to enable that the Branch Manager has adequate authority to act on behalf of its Dual License Branch.
It is believed that boosting the key engines of the economy such as entrepreneurs, the private sector and SMEs was vital for the overall development and expansion of businesses in Emirate of Abu Dhabi. Abu Dhabi Department of Economic Development’s Chairman, HE Saif Al Hajeri in his words reiterated that ‘in the first phase of the Dual License Initiative, companies will be offered more opportunities to carry out their businesses, and to expand by giving them the chance to partner and work with different government entities.’
At present, it is unclear whether the Dual Licenses will qualify for some regulatory approvals onshore, such as Health Authority, Training, Education, Oil & Gas, and other similar requirements.
In the coming years, Abu Dhabi’s economic growth will be accelerated with the approval of the 50 billion dirhams stimulus package. As announced, the Dual License Initiative seems to form part of a much larger economic plan. It has required the already existing companies, as well as new investors to consider their existing business ventures and structures, as well as the evolving economic dynamics from a legal perspective, both, at an external and an internal level.
To embark at the end of this article, under this initiative, the companies that are based in the capital of the UAE’s Free Zones will be able to carry out their business in mainland as well, which reduces the cost of carrying out such business, improve the competitiveness in the Emirate of Abu Dhabi, and encourage foreign investors to invest in the Emirate.