Incorporating a business can be complicated at the best of times. Add to that the additional complexities of starting a business in a foreign country and the task can feel like a bit of a minefield. However, this doesn’t appear to be putting off international business person when it comes to owning a company in the United Arab Emirates. And nor should it. Right, getting a business up and running anywhere takes work, but provided you go in with the right knowledge and expertise, there is no reason why any challenges cannot be overcome.
One of the challenges of setting up a business in the UAE is the formalities and procedures. For example – if you want to set up a company in Dubai Mainland, then you need to have a local sponsor for your business. The local sponsor will own the majority i.e. 51% of shares in the company, while the owner will have 49% of shares in the business. Naturally, the thought of handing over half of your business is overwhelming, but this is by no means the full story. And in some cases, you may not want a local sponsor at all.
That’s why any entrepreneur looking to set up in the Emirates must know precisely where they stand when it comes to holding their business: do you need a local sponsor – and if so, what exactly does that entail?
All You Must Know About Local Sponsorship in Dubai
The involvement of local sponsors in Dubai is paramount to the incorporation of Mainland businesses in Dubai, as stated by the UAE Commercial Companies Law and the UAE Civil Law. Local sponsors or Nominee shareholders are either nationals of the UAE or a company whose shareholders are 100% UAE nationals, UAE local sponsors can also act as a local service agent who will be paid an annual fee for the services they render.
The appointed Dubai local sponsor takes no role in the day-to-day running of the company’s business. They are responsible for liaising with the necessary government department on behalf of their organisation in the obtaining of immigration, visas, and other business licenses.
Types of Local Sponsorship in the UAE
Let us take a look at the kinds of local sponsor available in the UAE. The type of local sponsor required depends on the business activities you wish to undertake.
- Individual Sponsorship – Under this, an individual Emirati sponsors your business and holds a 51% stake of your company. Individual sponsors must be the UAE citizens over the age of 21 and can be male or a female. Individual sponsors do not have to have an understanding of running a company. In exchange for a set of annual fees, the local partner can hand over the full power of attorney of the business and its day-to-day activities to the foreign investor.
- Corporate Sponsorship – This is similar to individual sponsorship, except here, the sponsor is the UAE national company. Again, the local sponsor would take on a 51% stake in the company. In both cases, the foreign stockholder will run the company with the local sponsor receiving a set fee or profit share agreement.
- Local Service Agent – These agents are required when a professional like engineer, doctor, or accountant sets up a company trading in their area of knowledge. In this case, foreign businesspersons can apply for a professional services license and maintain 100% ownership of their business. They must, however, hire a local service agent who will perform as their representative in all managerial dealings with government sectors. The local service agent does not hold a stake in the company and is instead paid an annual fee for their facility.
How to Choose a Right Local Sponsor in Dubai?
- Choose an excellent local sponsor that you trust by a personal relationship
- If you don’t know any of the UAE locals, you can use an experienced business setup consultant to do this task on your behalf
- Don’t go for a very cheap sponsorship, some of them are not serious about doing actual business
- Transparent fees, sometimes there will be a hidden fee paid to the sponsor to sign any official document
- Always have the right documentation, contacts, POAs, side agreements to protect your business assets
Are you looking for a Local Sponsor in Dubai?
Let us now come to the most critical question, do you need a local sponsor? We at Business Setup Worldwide will help you to make the most of your business opportunities in the UAE. We will stand in as your local sponsor or service agent via our corporate service agent and sponsorship vehicles. Our Sponsorship and service agent services are fully compliant and provide a hassle-free business. Contact us today to know more.
1. What are the types of local sponsors in Dubai?
Local Service Agents
2. How to change a local sponsor?
1. Consult with Your Current Local Sponsor
2. Submit the Documents
3. Present the Documents before the Court and Your Current Sponsor
3. Who is a local sponsor?
A local sponsor is an Emirati or a UAE resident who works for your company in the UAE as a service agent. This person frequently serves as the company's "sleeper partner."
4. Is it mandatory to have a local sponsor in Dubai?