Free Zone and Offshore Legal Regimes
Free Zone Framework
Understand that free zones are designated areas with separate regulatory regimes, often with their own registration authority, courts, and company forms. Know the types of free zone entities (FZE, FZCO, branch) and their characteristics: limited liability, restrictions on doing business in the onshore market, and separate licensing.
Offshore Regimes
Study offshore company regimes: they permit holding activities and asset protection but generally prohibit conducting business within the UAE onshore market. Know the requirements for registered agents and registered offices.
Interaction with Onshore Law
Understand that free zone entities may need a local agent or a branch to operate onshore, and that employment and tax rules may differ. Know the rules on dispute resolution - free zone courts or arbitration may apply depending on the contract.
Traps
Common traps: assuming a free zone company may trade freely onshore (it generally cannot without additional arrangements); confusing FZE (single shareholder) with FZCO (multiple shareholders); and overlooking that offshore companies cannot conduct onshore business. Questions also test whether free zone entities are subject to federal labour law - this depends on the zone's rules.
Rule of thumb
For any free zone question, first identify the zone and entity type, then ask whether the activity is inside the zone, onshore, or offshore. The answer usually turns on that distinction.