Local Sponsor Services in UAE for your Company Formation
Important Factsheet about Local Sponsors in the UAE
One of the requirements for establishing and operating a business in the UAE is the need for local sponsorship, wherein a UAE national will hold 51 percent of the business. This criteria is applicable when business entities intend to work out of mainland Dubai. This will not apply to other business entities where full foreign ownership is permitted. However, for certain businesses that demand the establishment of an entity in the mainland, and to meet the specific demands of businesses, it may be necessary to opt for a business model that requires a local sponsor. UAE nationals are only individuals who can assume the mantle of a local sponsor. Here is important information that will help you to set up business in the mainland.
Different types of sponsorship
At first glance it may appear that all requirements can be easily met by a local sponsor. UAE laws of business, however, clearly list out three different types of sponsorship – corporate sponsorship, individual sponsorship, and local service agent. As the names imply, each type of sponsorship is suitable for specific use cases. Here is a look at the three different types and use cases.
A business that intends to establish a Limited Liability Company, or a trading entity or a company that is involved in some kind of manufacturing activity, will have to choose corporate sponsorship. The responsibilities of the corporate sponsor include the actions of the company, and are not limited to the profits alone.
A company that is owned by UAE nationals can become a corporate sponsor by holding 51% shares in a company that is owned by individuals of foreign nationality or partners of foreign nationality.
This is more of a flexible arrangement in the perspective of foreign entities. In this definition of a local sponsor, UAE nationals who assume the mantle of an individual sponsor will exercise control over 51% of the shares in his/her personal capacity. The individual need not possess expertise or established knowledge of the domain of the proposed business entity. The entity will exercise control over the profits and the liabilities of the company to the extent of 51%. This is more suitable when the proposed entity is either a LLC or a trading firm.
This model is regarded as flexible as the UAE national is at liberty to sign a power of attorney, delegating responsibility to the foreign company. In return for this power of attorney, the partner firm will pay the UAE national a fixed remuneration annually.
Local Service Agent
This is more in the area of individual professional services or for the purpose of maintaining a field office/representative office in the destination. In this definition of a local sponsor, UAE nationals will be considered as a local service agent for an individual or entity offering professional services. The nature of services that will be rendered will be liaison with government departments. This is for the purpose of smoothing out routine actions and regulatory compliances that may be required periodically. The role will typically be representative in nature.