Setting up a business in a foreign land can be complicated at the best of times. Additionally, the further complexities of setting up a foreign country and a task can feel like a bit of a minefield.
One of such most common challenges is the issue of foreign ownership.
In the UAE, if one is forming a company in mainland jurisdiction, it is necessary to have a local sponsor.
Who is a Local Sponsor in Dubai?
A local sponsor is an Emirati or a UAE national who acts as a service agent for your business in the UAE and is usually a sleeper partner for the company. Having a local sponsor is mandatory while you are setting up your business on the mainland.
Learn more about how to start a business in Dubai mainland.
According to the law, the majority of shares, i.e., 51% of shares of a company, must be owned by a local sponsor, while the remaining 49% of claims are owned by the investor or the entrepreneur of the business.
Usually, the local service agent has no particular role or interest in the industry but is appointed to liaise with the government departments and authorities to obtain labor and immigration approvals and visas and complete other necessary paperwork for the company.
Being a mandatory requirement, it’s a natural, inevitable challenge for foreign investors to find the right local sponsor in Dubai appropriate for their line of business.
Types of Local Sponsors in Dubai
Let us look at the types of local sponsors available in Dubai. But, of course, the kind you require will depend on the business activities you wish to undertake.
1. Individual Sponsorship
Under this, an Individual Emirati National sponsors your business and holds a 51% stake in a company. Individual sponsors must be UAE citizens over 21 and can be male or female. Respective sponsors do not have to have experience running a business in your chosen field; however, they should be professionals, business owners, or government employees. Here, in exchange for annual fees, the local partner can hand over the full power of attorney and, therefore, complete control of the business and its day-to-day activities to the foreign investor.
2. Corporate Sponsorship
This is similar to individual sponsorship, except the sponsor is a UAE national company. Again, the local sponsor would take on a 51% stake in the business. Furthermore, the foreign investor will run the company with the local sponsor receiving a set fee or profit share agreement in both cases.
3. Local Service Agents
These sponsors are required when a professional starts trading in the area of expertise. Foreign entrepreneurs can apply for a professional services license and maintain 100% ownership of their businesses. Learn more about how to get a professional license in Dubai. They must appoint a local service agent who will act as their representative in all administrative dealings with the government.
Advantages of Having a Local Sponsor for Your Business
Having a local agent in Dubai for your business also come with various benefits, which are as follows:
- First, one can trade locally within the UAE market.
- LLCs formed with a local partner are 100% tax-free
- Full repatriation of profits and capital for the investor
- Open limitless branches throughout the UAE
- Pitch for a host of private and government projects that are not available to free zone or professional services companies without a local partner
- Foreign entrepreneur is given investor status in the UAE, allowing them to obtain residence visas for themselves and their dependents. Learn more about the different visa services in Dubai that we offer.
Responsibilities of a Local Sponsor in the Business
The duties of a local agent are as follows:
- Local sponsor plays a vital role in forming mainland business in Dubai. Read more about the 8 easy steps to start a company in Dubai mainland. Some of the essential duties of a local agent are as follows:
- Employee work visas are being revoked.
- Employees' employment status is revoked.
- Bank accounts are being closed.
- If there is a deal with government authorities and ministries on behalf of the firms, clear any outstanding debts and make the renewal process more accessible.
- Interpreting Arabic-language business contracts for company registration.
Ways to Change a Local Sponsor in Dubai
There can be instances where you might want to change your current local agent. So here are a few things to consider while changing your local sponsor:
1. Consult with Your Current Local Sponsor
If you disagree with your local sponsor, address it. You may change sponsors if it doesn't work. Mediation and informal conversations may assist parties in reaching an agreement. If your current sponsor refuses to consent to a sponsorship change, you may need legal help.
2. Submit Required Documents
Foreign investors must show appropriate documentation to the court for a seamless change of local sponsors. For example, one of these papers is a Memorandum of Association (MOA) between the international investor and the local sponsor.
3. Present the Documents Before the Court Along with Your Current Sponsor
You will meet in the court, where an official will check your paperwork and confirm your current sponsor's consent after you have all of your documentation and your current sponsor agrees to the change. Your firm will then get updated documentation to demonstrate your new sponsor, including a revised MOA and trade license.
How to Get a Local Sponsor in Dubai?
So are you looking to open a business in Dubai Mainland?
Business Setup Worldwide is here to help you get a local sponsor for your business. Our advisors are well versed with the laws in Dubai and can provide you with a secure partnership with local sponsors according to your business requirements.
We can make this process simple and hassle-free for you. Contact us today- we’d be glad to help you out.