Dubai has long been a welcoming and a striking business environment for businesspersons from every corner of the globe. It’s a significant reason why most of the inhabitants in the UAE are foreign nationals. However, while the draw of the Emirate is clearly enough to attract so many to do business here, that’s not to say that getting started isn’t without its twists and complexities. Or indeed that there is nothing that can be done to make the Emirates even more attractive to overseas entrepreneurs.
One such quirk that is often cited as a barrier to foreign entrepreneurs starting businesses in the UAE is the country’s law regarding foreign ownership. The law states that, if foreign national wants to set up a business in the UAE mainland, he/she must appoint a Local Sponsor (UAE national) who will have the majority (51%) of shares in the company. In comparison, the ex-pat will have the remaining (49%) shares in the company. Therefore, the involvement of local sponsors in Dubai is paramount to the incorporation of mainland companies in Dubai, as stated by the UAE commercial companies’ law and the UAE civil law. One should know that the above rule is mandatory for Limited Liability Company formation in Dubai. In contrast, the formation of the Professional or Representative Office does not require local partners for their establishments in Dubai. They can be 100% foreign-owned by foreign shareholders.
Let us know more about the Local Sponsor in Dubai.
Role of the Local Sponsor in Dubai
The local sponsor appointed by the company in Dubai takes no role in the day-to-day running of the company’s business. The sponsor, in exchange for the fee, hands over the control of the business to the foreign investor with the help of a power of attorney. This also helps all earnings to be held in the name of the business and nothing in the name of the local sponsor. They are responsible for liaising with the necessary government department on behalf of their organization in the obtaining of visas, immigration approvals, and other licenses.
Who can be a Local Sponsor?
There are different types of sponsors in the UAE, as mentioned below.
1.Corporate Local Sponsor
Corporate sponsor refers to the corporate firm that will own the majority of shares in the business. This type of sponsor is common and very appropriate for starting an LLC in Dubai. The corporate sponsors can be of any local or government authority, depending on the nature of the business which the investors want to set up in Dubai.
2.Individual Local Sponsor
As the name proposes, this is when an Individual Emirati nationals sponsor the business and hold a 51% of shares of the company. Individual sponsors must be the citizen of UAE and can be male or female. It may not be essential for the local sponsor to be involved in business activity or being a businessperson. This type of sponsorship is suitable for opening a commercial business in Dubai.
3.Local Service Agent as Sponsor
The local service agent is a resident, and he/she will be the representative of the company without holding any shares. If you are eager to open a professional business in Dubai, then this form of local sponsorship is suitable.
Responsibilities of a Local Sponsor in Dubai
Here are a few responsibilities that a local sponsor must fulfill.
- Cancellation of employee work visa
- Cancellation of the labor status for employees
- Closing the bank accounts
- To settle any outstanding debt if there is any
- Deal with the government officials and ministries on behalf of the businesses and also facilitate the renewal process
- Interpreting the business contracts for company registration that are in Arabic
How can Commitbiz help?
If you are looking for a reliable local sponsor in the UAE, then you are in the right place. We know that choosing the right local sponsor as a foreigner might be a daunting task, but don’t worry - as Commitbiz has got you covered here. If you want to get the best local sponsor at a very cost-effective rate. Contact us, and we will connect you with your local sponsor today!
What is the Local Sponsor Fee in Dubai?
The local sponsors have to be paid a fee annually, this fee will be determined by the type of business you’re doing.
The average rate for a Local sponsor is AED 8000 (USD 2178).
How can I find a Local Service Agent in Dubai?
It’s always recommended to appoint a business setup company since the process of appointing a Local agent is complex, exhaustive, and time-consuming.
Commitbiz Management Consultants have a proven track record for helping foreign businesses with all their business setup-related activities, like appointing Local service agents, license work, documentation, etc.
When is there no need for a Local Sponsor in Dubai?
Setup up your business in a Freezone.
For a Mainland-based business for contracting, manufacturing, packaging, & trading businesses you don’t need local agents.
Gulf Country citizens are also exempted from appointing a local service agent. They are also allowed to do partnerships with businesses.
Is a refund possible for the fees paid to a local sponsor in Dubai?