Local sponsorship is required by law if you wish to set up a business in the United Arab Emirates outside of the free zone. Who is a local sponsor, what is their role, and how can you find or change one? These are just a few of the many questions that new entrepreneurs will have.
I decided to write the definitive guide on this matter because you had so many questions. This guide aims to provide you with all the answers to your questions. Let us begin with the fundamental query.
What is a local sponsor in the UAE?
A local sponsor in Dubai is a resident of the United Arab Emirates. A company or an individual may be this sponsor. A local sponsor is, therefore, a UAE Nnationalor company that offers guidance and support to a foreign investment regarding an effective business setup.
Suppose you establish a limited liability company in the mainland. In that case, you must comply with the UAE Companies Law and Civil Law by giving a local sponsor 51% of the company’s shares. You control 49% of the LLC’s ownership as a foreign national. While the law specifies the share allocation, the foreign investor and the local sponsor will jointly agree on the profit distribution.
A local sponsor may still be employed as a Local Service Agent, or LSA, in several professional and civil companies where a foreigner holds 100% ownership of the mainland company.
Categories of UAE local sponsors
In the United Arab Emirates, you can find three types of local sponsors. You may find all of their information below:
1-A local business sponsor
A company or the government that holds a minimum of 51% interest in your business can serve as this local sponsor. Your business type will determine the kind of corporate local sponsor you choose to work with.
2. A single local sponsor
A foreign investor typically wants to form a partnership with a resident of the United Arab Emirates or an Emirate. Despite not being actively involved in business activities, this individual holds a minimum shareholding of 51% in a foreign company.
3. The sponsoring local service agent
This is a national of the United Arab Emirates who serves as your local service agent. While dealing with the government department, this person will represent you. Regarding local laws and ordinances, LSA is typically a passive partner who offers support and guidance.
The local sponsor’s role in your business
You are required by law to share 51% of ownership with a local sponsor if you are a foreign investor. Perhaps you are now wondering what this shareholder’s role will be.
Let’s find out more, then:
Legal counsel
During governmental and legal matters, a local sponsor will assist you. On your behalf, the local sponsor will sign all contracts and applications.
Sponsorship of a visa
The sponsor will provide sponsorship for the work permits and visas of foreign company employees. This individual or company may revoke your employees’ employment status.
Licencing and conformity
You need to pick a seasoned local sponsor who can assist you in obtaining work permits, trade licences, and business approval. Because this specialist is knowledgeable about local rules and ordinances, the sponsor will expedite the approval and application procedure on your behalf. The sponsor can handle this matter as well if your trade licence needs renewal.
Network and local expertise
In the UAE, you need to create new networks and contacts. Thus, a local sponsor will visit you to provide insightful information about the business market in the United Arab Emirates.
Setup Guide for Businesses
You may rely on your local sponsor to assist you with business setup in the United Arab Emirates. This person will assist you with office space leasing and business registration in the United Arab Emirates. The local sponsor will take care of your company’s outstanding debts. This person or business has the authority to close your bank accounts as well.
Where in the United Arab Emirates can I find a local sponsor?
Because it is necessary for you to include a local sponsor in your new business, you must find one. It’s not simple to get a reliable and trustworthy sponsor who will share 51% of your business. However, here is how to accomplish it correctly:
Step 1: Look for a reliable sponsor
Make sure the individual sponsor has a solid reputation and background if you’re going to pick one. It’s a fantastic idea to speak with business consultants like Prosper if you’re unsure about an individual or have some questions. In the UAE, we can assist you in finding a sponsor or service agent who is reliable and trustworthy.
If you decide to work with a corporate sponsor, it’s a good idea to select one that meets your needs as a business. An investigation of the background of the individual or the company sponsor is necessary. Because that person will be dealing with authorities on your behalf, consider their communication abilities as well. Poor communication abilities could be a problem.
Step 2: Choose a fee
The next step is to talk about fees, profits, and advantages if you find a reliable sponsor. For some specific businesses, the annual sponsor fee is approximately 8000 AED, though this can change from business to business.
Try to keep an accurate record of your agreement. Consult our business expert at Prosper if you’re unsure about the typical sponsor fee structure. We’ll make sure you don’t pay more than the going rate and guide you through the competitive market rate.
Step 3: Signing the agreement is the third step
Once you decide on compensation and profit sharing, the signing of an agreement is the next step. Sponsors occasionally make a variety of claims and assert that they have an extensive network. Before signing any contracts, make sure to verify their network and claims rather than taking their word for it.
How may a local sponsor be changed in Dubai?
Would you like your sponsor in Dubai to be changed? The actions you need to take are as follows:
#1: Talk to your current sponsor: you need to inform your present sponsor about this matter. Try to settle any disagreements or problems outside of court, if there are any.
#2 Talk to shareholders about the matter: you should involve other shareholders in this matter. They must know the primary reason you are changing your present sponsor. For this change, try to get to a general agreement.
#3 Prepare the document: if you have decided to change the sponsor after speaking with the current sponsor, you should begin gathering the required paperwork, including labour and immigration records, a notarized memorandum of association (moa), etc.
#4 File a court application: confidentially provide your jurisdiction or court with any required documentation. To request changing your current local sponsor, you need to apply. Once your current local sponsor acknowledges this change, the process will be deemed valid. After the verification procedure is over, the authorities will submit a fresh application to renew your trade licence. The next thing you need to do is find a local sponsor.
In the UAE, Propr assists you in finding a local sponsor. Regarding your company formation or local sponsor hunt in the UAE, our business consultants are here to support and help you. To begin a successful business trip in Dubai, feel free to set up a meeting.
