UAE Commercial Agency Law: Extended scope allows public joint stock companies to take ‘agent’ roles
It will be allowed after UAE Cabinet approval on Ministry of Economy recommendations
Dubai: The revised UAE Commercial Agency Law widens the scope of who can take on the mantle of a commercial agent representing an international brand or business in the UAE.
Apart from UAE Nationals or businesses owned and operated by them, a public joint stock company where the UAE National shareholding is at least 51 per cent can be a commercial agent. Extending the scope to Public Joint Stock Companies can play out in two ways.
“For UAE family businesses with extensive commercial agency interests could seek a stock market listing for that particular division,” said an analyst. “Or some of the listed enterprises could expand the scope of their operations to take on commercial agency rights – provided they have 51 per cent or more UAE National shareholder base.
“The business landscape is extremely fluid, and there could be changes in the partnership arrangements between international brands and their current UAE commercial agents.”
There is also another option, where the international brand also takes on the dual role of being its own agent in the UAE. This, however, will require clearance from the UAE Federal Cabinet itself on recommendation from the Ministry of Economy.
To qualify as commercial agents, the international brands must conform to these requirements:
- There should have been no commercial agent registered for the relevant product in the UAE; and
- There has not previously been a commercial agent registered for the relevant product(s) in the UAE.
“Termination of a commercial agency contract can happen on expiry of the period stipulated - or earlier if mutually agreed between the parties,” said Atik Munshi, Managing Partner at Finexpertiza UAE.
“Earlier, only UAE Nationals or entities fully owned by UAE Nationals would be entitled to register as a commercial agent with the Ministry of Economy. The new law is more liberal. The change on listed companies will drive many UAE family-owned businesses, who currently hold agency contracts, to take an IPO route and capitalize and expand their opportunities.”
Expiry of contracts
The new Commercial Agency Law is all-encompassing on the pros and cons related to principal-agent contracts coming to a close. The Law will determine ‘instances for expiry through a set of controls and provisions for the duration of notification and exit mechanisms,” according to a statement from the Ministry. It will also create a ‘commercial agency committee by the decision of the UAE Cabinet. The committee will be specialized in resolving the dispute between registered agency parties.”
A boost for FDI
“With the amendments proposed, UAE will be able to attract far more capital from foreign companies,” said Nimish Goel, Partner at WTS Dhruva Consultants. “At the same time, allowing local Emiratis sufficient time and protection of their interests.
Widening the definition of who can be a commercial agent allows wider participation from stakeholders and the required flexibility for local groups to attract foreign capital.
* Offer guarantees and after-sale services as well as create new job opportunities.
* Create an environment favorable for investment and safeguards the rights of parties per their agreements.
- Syed Asif Zaman, Managing Partner, Ahmad Alagbari Chartered Accountants
The new Commercial Agency Law states there are no punitive penalties, imprisonment or fines. Violators will have disciplinary penalties that the UAE cabinet will issue. One of the most innovative ideas in the articles in the law is arbitration. If there are new disputes between the parties, both parties can agree to go to arbitration