UAE is a country that offers immense business opportunities to investors around the world. Dubai is the centre stage of business and trade in the Middle-east and many investors prefer Dubai as their location of business operation. Thanks to a visionary government that always stands for the development of the Emirates and the betterment and well-being of the people. An investor can set up a business in Dubai/UAE in any of the 3 business jurisdictions and they are Mainland, Free zone, and Offshore. Local sponsorship is a necessary prerequisite for a foreign investor to start a business in the Mainland jurisdiction. Now, let us delve into the concept of Local sponsorship and the different types of sponsorship in detail.
The Importance of Local Sponsorship
The rule of local sponsorship is mainly associated with the Ownership of the company. A foreign investor who plans to set up a company in Dubai mainland can own only 49% of the shares of the company. The remaining 51% (minimum equity) is owned by a UAE local sponsor. The local sponsor or local service agent must be a UAE national. The UAE Companies Law and Civil Law makes it mandatory for every foreign investor to appoint a local sponsor for his/her mainland LLC Company in Dubai. To find a local sponsor in Dubai for your business can be a daunting task. Even though the task is a bit challenging for a new investor, with the assistance from a reliable business setup professional the whole process looks so easy. Moreover, by forming a Mainland LLC the chance to trade anywhere in the UAE mainland opens up for the investor. The local sponsor assigns the responsibility and authority of conducting the daily operations of the company to the expatriate investor for a fixed fee by means of appointing a power of attorney.
The local sponsor also serves as the representative of the Mainland LLC Company. The Local sponsor is in charge of liaising with various government authorities in connection with accomplishing various official formalities.
Types of Sponsorship
Individual Sponsorship – In this case, a minimum of 51% of the company share is assigned to a local sponsor who is a UAE national. The foreign investor holds the remaining 49% of the company shares. A good number of businesses in Dubai go for Individual sponsorship. It is not mandatory for the local sponsor to engage in the daily operations of the business establishment. Usually, foreign investors opt for Individual sponsorship for setting up a commercial establishment in Dubai or UAE.
Corporate Sponsorship – In simple words, here the local sponsor is a corporate entity instead of an individual Emirati. 51% of the company shares are owned by a corporate entity and the remaining 49% goes to the foreign investors. In most cases, Limited liability business ventures that conduct manufacturing prefer corporate sponsorship.
Local Service Agent (LSA) – When it comes to a professional company or a service-oriented business initiative, the local sponsor takes up the role of a local service provider. Professionals are the ones who have expertise in an activity or trade like doctors or artisans. The equity shareholding of the local service agent is not the same as in the case of an individual sponsor or corporate sponsor. The LSA does not own 51% of the company shares but serves as a liaising representative of the professional company for fixed yearly fees.
Apart from Professional companies, representative offices and branch offices of expatriate ventures can appoint an LSA.
How To Find a Local Sponsor in Dubai
As already mentioned in the article, if you are new to Dubai or do not have sufficient business contacts it is always wise to seek advice from a reliable business setup professional.
The reliability of the local sponsor matters a lot. If the reliability of the sponsor is compromised it may seriously affect your business. Verify both the personal history and the family background of the local sponsor prior to going for an agreement. Appointing a government official as the local sponsor can be helpful in the sense that government officials have better access to government authorities. Have a precise understanding of the sponsorship agreement and double-check the same prior to signing.
To find a local sponsor in Dubai for your business, verifying his personal history and family background, etc can be time-consuming. Lack of resources and insufficient business contact can make it very challenging for a first-time investor in Dubai. Therefore, the most feasible or practical option is to contact a professional and experienced Business Setup firm. Even if you are bound to pay the necessary fees involved to the business setup agency it’s fine. You may save the most precious time and energy and utilize the same to sort out other issues relating to company formation. Kiltons Business Setup Services has a well-organised and experienced team of professionals to handle sponsorship services. We offer the dedicated ruling family sponsorship for big business concerns and have two decades of business setup experience in Dubai and UAE. To know more, please visit our website or contact our business advisors.