How to Get a Local Sponsor in UAE

How to Get a Local Sponsor in UAE
The UAE laws dictate that a local UAE citizen has to be the sponsor for a business venture to be registered in UAE Mainland. The sponsor would be granted a 51% share of the company with the purpose of liaising with the government department and authorities. Although recently the restrictions have relaxed this mandate for many business activities, to incentivize more foreign investments, activities that lie outside the positive list of economic sectors and activities still follow the rule of including the local sponsor. 

A difficult task for a newcomer to the UAE is finding a local sponsor who is trustworthy and supportive of your business goals. The most critical step in starting a business in Dubai is locating a local sponsor. This is mainly due to the fact that a non-cooperative sponsor can make it difficult to regulate your business. When it comes to finding a local sponsor for your business in Dubai, it is important to know exactly what this process entails and why it is important. The best option is to go for corporate sponsorship allowing for a professional and secure process. If you wondering about how to get a local sponsor in UAE, A&A Associate is here to assist you at every step of the way to find the right sponsor for your company. Call us now to discuss your business requirements. 

What is Local Sponsorship in UAE?

In the United Arab Emirates, there are different types of company registrations like Mainland, Free Zone & Offshore. In order to do any business on the mainland, the presence of a UAE national was mandatory until Resolution No. 16 was passed by the UAE Council of Ministers in March 2020. This was not the case with free zones where 100% foreign ownership was always the case. However, to deal with business outside the free zone, a local service agent is mandatory. Its always advisable to know the local agent you are associating with to avoid future troubles 

Setting up a limited liability company required a business partner, according to the Commercial Company's Law. Local sponsors played an important role in trade licenses whenever their presence is mandatory. In most cases, if a UAE national enters a partnership or sponsorship agreement with a foreign investor, they must hold at least 51% of the company's shares, as stated in Article 10 (1) of the Federal Law No. 2 of 2015. The company's income, profits, and losses do not have to be split between you and the company. Foreign investors can run the firm with autonomy once the local partner waives their rights to the business, usually for an annual fee. An Investor's Right Protection Contract allows you to contract for local sponsorship in the United Arab Emirates at your discretion.

Business Activities That Still Require Local Sponsorship

As discussed earlier, resolution No.16 relaxed the need for local sponsorship in many business activities. However, the below-mentioned business activities still need the sponsorship of an Emirati.
Umrah and Pilgrimage services
Pharmacies and other medical retail outlets
Oil exploration and production
Security, investigation, military (including manufacturing of military equipment)
Financing and other banking activities
Electricity and Water provision
Fishing and related services
Telecommunication services (both audio & visual)
Air and Road transport
Publishing and Printing 
Commercial agency
Quarantines, blood banks, and venom/poison banks
Certain recruitment activities

What Makes a Local Sponsor Necessary?

A UAE national, also known as a local sponsor, is an important part of any startup's foundation in Dubai or the rest of the UAE in the above-mentioned activities. To comply with UAE commercial company law, you will need a local sponsor there. With a local sponsor in the United Arab Emirates, you can take advantage of the unique advantages of establishing a limited liability company. A local partner in the UAE industry aids the company's local trade efforts. Such LLCs with a local sponsor are tax-free in their entirety, and foreign investors can choose to liquidate their entire investment at any time. 

Free zone firms and professional services firms without local sponsors can open unlimited divisions or branches across the country and apply for a wide range of private ventures. They are also eligible for investor status, which grants them and their dependents the right to reside in the United States.

Responsibilities of a Local Sponsor

A local sponsor's role extends beyond simply distributing company stock. Instead, the local sponsor is in charge of several crucial matters, as listed below:
Cancellation of employees' work visa
Termination of workers' employment status
Closing the bank accounts
To pay off any outstanding debts, if any exist
It is possible for the Local Service Agent to communicate directly with government officials on behalf of the company and to assist with the renewal process
To sign on behalf of a foreign business partner, a local authority must be able to understand and interpret the business contracts for business registration that are written in Arabic

Who can be Your Local Sponsor?

In the United Arab Emirates, companies can receive sponsorship in a variety of forms. The following are the details:
1. Corporate local sponsor
To open a business in Dubai, a company must have a local sponsor. The sponsor is a UAE national. An individual or a group of expats will own the other 49.9 per cent of a company's stock, which is owned by a corporate sponsor. An LLC in Dubai can be opened with a sponsor of this type. Depending on the type of business that the investors plan to conduct in Dubai, the corporate sponsors can come from any local or federal government agency.
2. Local individual sponsor 
When an Emirati national sponsors the business and owns a majority stake in the company, this is known as an Emirati-owned company. Each individual sponsor must be a UAE national, regardless of gender, and they can be male or female. The local sponsor does not necessarily have to be a business owner or actively involved in the business community. A commercial business in Dubai can benefit from this type of sponsorship. An individual should own at least 51% of the company's stock.
3. Local service agent as a sponsor
A local resident can act as a representative and has no civil responsibility or monetary compulsions but comes with an annual fee. They are not a partner in the company and can serve as the company's agent without owning any stock in the company. This form of local sponsorship is required for a representative, foreign branch, or professional licence in mainland UAE.

Choosing the Right Local Agent Is of Utmost Importance

The market in the United Arab Emirates is booming. Businessmen from all over the world are constantly striving to take advantage of current trends to the fullest extent possible. Local laws and regulations restricting foreign investment necessitate the need for a strong business partnership. As a business owner, you need a trusted partner to help you grow your business and protect your legal rights in the UAE. Having a working knowledge of the local agent you are working with is always a good idea in the event of a problem.

Your business partner will assist in the efficient establishment of the company, provide advice on local law enforcement and regulations, and make connections. By doing so, you will have an easier time making it work. It is even more critical to have a well-connected agent on the ground who can provide real value to your company because of the market's diversity. The key to starting a mainland business is to pick a location that is right for you. Investigate your choices. Educate yourself on the potential downsides and benefits. Remember, whoever signs on the dotted line will be considered an equal partner in your company.

Legally registered and reputed consultancies are the best way to get your sponsors, as they are aware of them and have prior agreements. A&A Associate LLC is an expert in finding trustworthy Local Sponsors in Dubai and throughout the United Arab Emirates. Being a registered and reputed consultancy, we offer the best way to get your sponsors and guide you through all the required agreements. Feel free to get in touch with one of our knowledgeable representatives to discuss your business requirements. 

A&A Associate provides a wide range of services, including UAE business setup, feasibility studies, business plans, VAT-compliant financial accounting and auditing, legal consultation, corporate structuring, and trademark registration. We know how to keep your Dubai business set up on schedule and stress-free. You can get a free consultation anytime for free. Give us a ring for additional information. 

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