Local Sponsorship in Dubai – Why, What & How?

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A non-Emirati/an Expat entrepreneur deciding to establish a business in Dubai can either set up in the Free Zone and own 100% of the business or set up in the Mainland and share over 51% of the business to a local…

by | May 18, 2020 | 0 comments

A non-Emirati/an Expat entrepreneur deciding to establish a business in Dubai can either set up in the Free Zone and own 100% of the business or set up in the Mainland and share over 51% of the business to a local sponsor.

*A business operating under a Professional Services license has the option to be 100% foreign owned.

Owning a business in the Free Zones brings many benefits – such as 100% ownership, 100% repatriation of capital and profits or 0% corporate or personal income tax – but there is a slight difference to owning that same business in the Mainland.

A company established within a Free Zone can operate only within the Free Zone areas & internationally. To be able to operate within the Mainland and have direct access to the entire local UAE market and internationally – a local sponsor (individual/corporate) or local agent is required to be appointed.


WHY do I need a Local Sponsor in Dubai?

“Local sponsor” is a general term used in the UAE to refer to local service agents and nominee shareholders in Mainland companies with foreign investment.

The local sponsor/agent has to be an Emirati individual (UAE national) or a company owned by Emirati nationals and own a minimum of 51% of company shares, while the owner will hold 49% of the shares. The first though of handling over half of your business is overwhelming and in some instances you may not want a local sponsor at all.

This is why, an entrepreneur wanting to establish its business in Dubai must research and understand precisely what needs to be done from a legal perspective, if their business requires a local sponsorship or not and what other available options exist.

In most instances, the local sponsor has no role in the day to day business operations. Their responsibility is to liaise with the government bodies on behalf of the company to ease the business process from the government perspective (immigration, visas, labor, etc.)

Despite foreign equity in such a company not exceeding 49%, profits do not need to be split along these lines. In fact, in the majority of instances, the local sponsor is paid annually a set fee or minimal profit share, agreed upon when the business is set up.


WHAT type of local sponsorship do I need for my business in Dubai?
The type of local sponsorship required depends on the types of activities that the company will operate with.

1. Individual Sponsorship – An individual Emirati national will sponsor your business and will hold a 51% stake of your company. Individual sponsors must be over the age of 21 and can be male or female. In exchange for a set of annual fees, the local sponsor/partner will grant complete operational powers to the foreign partner(s) or a third party on the memorandum of association.
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2. Corporate Sponsorship – Similar to individual sponsorship, the difference is that the sponsor is a UAE national company. Same as for individual sponsorship, the corporate local sponsor will hold a 51% stake of the company and receive a set fee or profit share as mutually agreed with the foreign partner(s).
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*Both Individual and Corporate Sponsorships are applicable for LLC’s (Limited Liability Companies)
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3. Local Service Agent – This type of sponsorship is required when a professional such as a business consultant, artist or accountant establishes a company in their area of knowledge. Therefore the foreign partner can apply for a professional services license and maintain 100% ownership of their business. They must, however, appoint a local service agent who will perform as the company representative in all the government sectors. The local service agent will not hold any share of the company and will instead receive an annual fee for their services.
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*A Local Service Agent is required for a Sole establishment, Civil company and Branch of foreign company.
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HOW to choose the right Local Partner/Agent in Dubai?
In Dubai, working with a local partner/agent comes with its challenges and benefits at the same time. Finding a local partner in Dubai is not that difficult, but finding a reliable one that will fit all the requirements can be seen as a daunting task for a foreign business entrepreneur.

This is why it is crucial to seek expert advice before choosing a local sponsor for your business in the UAE.

  • Take the time to know the sponsor well, before committing to an agreement (do your own investigation, check their profile closely and if possible get the assurance from others who worked closely with the sponsor). If you can’t find a local sponsor by yourself, seek advice from an experienced business setup consultant
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  • Be transparent with what each party will benefit from and take a common decision to avoid a possible miscommunication or confusion later on
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  • Make sure all the terms and conditions are mentioned in the MOA (Memorandum of Association) in the LLC case or in the LSA (Local Service Agent Contract) in the case of a sole establishment, civil or branch of foreign company
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  • Have the right documentation in place before starting to operate: contacts, email, POA’s (Power of Attorney), side agreements, etc. to protect you and your business assets

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Advantages of appointing a corporate sponsor/agent for your business in Dubai
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1. Continuous support and access to the sponsor’s authority for all the government procedures (labor, immigration and all other UAE governmental authorities), that way minimizing the time for the sponsor to be available (in the case of individual sponsorship).
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2. Zero involvement from the sponsor
With corporate sponsorship, foreign business owners have full control over their business, even if the local sponsor is holding the majority of shares. Generally, corporate sponsors do not get involved in the day-to-day operations of the company.
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3. Available comprehensive agreements
You don’t have to worry about drafting the agreement and MOA, also searching for the right and legal wording. In most instances, corporate sponsors offer detailed agreements drafted by law firms, that way assuring full transparency and legal protection for both shareholders.

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How BIZZMOSIS can help you?

Whether or not required to appoint a local sponsor or agent in Dubai depends on the nature of your business. We at BIZZMOSIS can advice and point you in the right direction, having the right expertise in the field by registering your business, obtaining the correct license, processing visas for your partners and employees.
We also offer a reliable corporate local sponsorship service with full protection and peace of mind when it comes to your business safety.

Sign up for our in-house UAE Local Individual & Corporate Sponsorship service and let our dedicated team take care of it!
Contact us today to book an appointment.

✍️ Sign up and get a call back
☎️ +971 4 381 3934
📞 +971 52 979 8169
📧 hello@bizzmosis.com

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