The branch offices of foreign companies registered in the UAE previously required a national service agent, often referred to as a “sponsor.” The 2020 amendment1 to the UAE Commercial Companies Law2 removed the requirement of a sponsor and the procedures for the removal of a sponsor are now in effect.
Deletion of Article 329
The 2020 amendment deleted Article 329 from the Commercial Companies Law, which was the article that required foreign companies with a branch office to appoint a UAE national or their wholly owned company as a national service agent.
A national service agent was appointed by signing a contract with the agent at the public notary, and then submitting the agreement to the Department of Economic Development (DED) that maintains the corporate registry in each Emirate.
Previously, a national service agent could be changed with the consent of the existing agent and the signing and notarizing a contract with a new agent.
By law, agents did not have authority over the operations of the branch, but in practice were in a position to interfere with visa issuance and licensing issues. The removal of the requirement for foreign branches to appoint a local service agent removes the administrative burden and reduces operating costs of the foreign companies.
Removal of National Service Agents
The procedure for removal of a National Service Agent is as follows:
1. Complete a form with the DED to remove the national service agent, along with formalities required for the trade license of the branch office.
2. Once approval is granted by the DED, a separate application is made to the Ministry of Economy, which maintains a registry of foreign companies with branch offices in the UAE.
3. The approval from the Ministry of Economy is submitted to the DED and the trade license is revised to remove the national service agent from the registered documents of the branch office.
Review of National Service Agent Agreement
By law and by practice, the national service agent is not required to agree to its removal. However, the termination or non-renewal provision of the notarized contract with the national service agent will have to be reviewed and either terminated or made to expire in accordance with the agreed terms.
A termination or non-renewal that is not carried out in accordance with a written agreement leaves 1 Federal Decree Law No. 26 of 2020 issued on 27 September 2020 2 Federal Law No. 2 of 2015 on Commercial Companies 6 July 2021 Page 2 the company open to a claim for breach of contract by the national service agent, which may result in a claim for damages or restitution of the position of the national service agent.
If you would like more information about this topic then please contact us.
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