This article discusses about the procedure for becoming an Exclusive Distributor in the UAE of a foreign company, signing an Exclusive Distribution Agreement with the foreign company and the precautions to be taken so that you can setup a successful distributorship of a foreign company in UAE.
The U.A.E. Commercial Agencies Law regulates and governs the appointment of commercial agents, sales representatives, and distributors in the U.A.E. This law allows foreign investors or companies to appoint a commercial agent to represent their interests in the U.A.E. instead of establishing a permanent presence.
This law defines a commercial agency as any arrangement whereby a foreign company is represented by an agent to “distribute, sell, offer, or provide goods or services within the UAE for commission or profit”.
Exclusive Distribution Agreement
You should enter into a non-exclusive distribution agreement with a Foreign Company whereby you can restrict them from appointing any other agents for the same products. Further, you can also add royalty clause and clauses that allow appointing sub-agents.
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Primary requirements and characteristics of commercial agencies
i. Commercial agents must be UAE nationals or companies incorporated in the UAE. and owned entirely by U.A.E. nationals. You can setup a business in Dubai to start an agency venture.
ii. Commercial agents must be registered with the U.A.E. Ministry of Economy and Commerce to engage in commercial agency activities;
iii. The agency agreement must be registered in order for the agent to avail himself of the protections afforded under the law and to have the agency relationship recognized under U.A.E. law;
iv. Commercial agents are entitled to have an exclusive territory encompassing at least one Emirate for the specified products;
v. Unless otherwise agreed, commercial agents are entitled to receive commissions on sales of the products in their designated territory irrespective of whether such sales are made by or through the agent;
vi. Commercial agents are entitled to prevent products subject to their agency from being imported into the U.A.E., if the agent is not the consignee;
vii. Commercial agents are entitled to receive compensation from the principle if the agency is terminated without substantial justification or if the agency is not renewed by the foreign principle and the agent may be able to preclude the foreign party from appointing a replacement agent in such circumstance.
FAQ about Exclusive Distributor of A Foreign Company in the UAE
1- What is a distribution agreement in the UAE?
The UAE Federal Law #18 of 1993, the Commercial Transactions Law, governs UAE Distribution Agreements. These understandings might be implicit or explicit (in writing), exclusive or non-exclusive, or general in character according to the best lawyer in Dubai
2- How can I become a distributor in UAE?
The following must be taken into account for the Agency Law to be applicable:
- A UAE national or a business with a majority UAE national ownership must be the agent.
- The connection must be solely romantic.
- The UAE Ministry of Economy must be notified of the agent and principal’s connection.
3- What does distributor exclusive mean?
An exclusive distribution in UAE agreement is one in which a distributor and a supplier agree that the distributor has the only authority to distribute the products of the providers. In other words, during the duration of the contract, the supplier now agrees to allow a different distributor to sell its products.
4- How do you distribute a product in UAE?
Many businesses decide to appoint local agents or distributors (companies, groups, or individuals) who have the capacity and resources to sell and distribute their goods in the UAE rather than opening an office or a subsidiary.
5- What is the benefit of an exclusive distributor?
“The primary advantage of the Exclusive Distribution Model for distributors is higher profit margins,” says Star. “When distributors do not have to worry about their business being price-cut, the distributor maintains needed profit margins and is motivated to sell more product.