Different Types of Sponsorship in UAE

by Vidhya Sethuraman 18, Nov 2022

Sponsorship in UAE

The UAE is known as a business center in the Middle East, and many business people are one major reason for the rise in business setup in UAE. The UAE government recognizes the importance of the UAE in the business world. It has created various free zones with rules and regulations to help companies prosper.

Each company can require the assistance of a sponsor, and sponsorship in UAE depends on the location where it is established. This sponsor may be a small business or a large corporation. If the company is founded in dedicated free zones, no sponsor is required if it is based on the mainland, then there is a necessity for a sponsor.

Foreign entrepreneurs who want to establish a Dubai Mainland company must find a local sponsor for licensing purposes. You'll need local sponsorship to start a business on the Mainland of Dubai. Local support can take three different forms. Establishing a business in Dubai Mainland can be achieved by individual sponsorship, corporate sponsorship, or a local service agent. The type of support you'll need will be determined by the kind of company you're planning.

Local Sponsor UAE

Individual local sponsors with a strong reputation in the country hold 51% of your company in the papers.

  • Local sponsor UAE entails a single Emirati national and cannot interfere with the company's everyday operations.
  • Individual sponsors must be UAE residents, male or female, over the age of 21.
  • An individual sponsor does not need previous business experience in your chosen field. On the other hand, the sponsor should be a professional, a business owner, or a government employee.
  • The local sponsor will hand over the full power of attorney and complete ownership of the company and its day-to-day operations to the foreign investor in exchange for a fixed annual fee.
  • All profits are kept under the company's name rather than the local sponsor's.
  • A local sponsor is needed for both commercial and industrial licenses.

Corporate Sponsorship

corporate sponsor and local sponsor are similar to a local individual sponsor. Instead of an individual, a corporate sponsor is an organization or a group of people who help you run your company.

  • Individual sponsorship is equivalent to corporate sponsorship.
  • A UAE national business is the corporate sponsor, not an individual UAE citizen.
  • The business is 51 percent owned —in papers—by the corporate sponsor.
  • The corporate sponsor provides a fixed fee or profit share to allow the foreign investor to complete control over the company. Also, foreign entrepreneurs hold 100% of the company's profits and real influence.
  • Corporate sponsorship is less risky because it is transparent and organized from beginning to end. It ensures that a first-tier legal counsel checks agreements and terms are set from the start, giving entrepreneurs more security and legal protection.
  • Dealing with individual sponsors can lead to ownership issues if one of the partners dies or retires too soon. To minimize this risk, you'll need to incorporate "succession planning," a legally binding strategy. On the other hand, a corporate sponsor eliminates the need for succession planning.
  • Instead of just one individual, corporate sponsorship gives you the support of a whole company.
  • One of the essential benefits of a corporate sponsor is that it can never get in the way of the company's operations.

Local Service Agent UAE

A local service agent - in UAE is an individual or a company that follows UAE regulations.

  • Local service agents are needed when professionals such as doctors, engineers, and chartered accountants start their businesses in their fields of expertise.
  • International entrepreneurs may apply for a professional license and 100% company ownership by partnering with a local service agent. They also have complete control over company activities. Regional Service Agents do not have disciplinary authority.
  • In all administrative relations with government authorities, however, the local service agent serves as their spokesperson. The position of the Local Service Agent is that of a signatory for all government-related tasks.
  • The local service agent has no ownership of the business.
  • For their work, local service agents are charged an annual fee, and the ‘local service agent agreement UAE’ is something you want to give more care to.

When establishing a business in the United Arab Emirates, international management must ensure that a sponsor is engaged. The business activities will decide the type of sponsor carried out, its position in the region, and the company's preferences.

According to the DED, before establishing a business in the region, management must find a sponsor who will own 51 percent of its stock. Sometimes, its management will give the sponsor a predetermined sum of money. In return, the sponsor will assist the foreign government in learning about UAE customs and navigating different company setup procedures.

To start a UAE company, you'll have to choose between a local individual sponsor and a corporate sponsor. If you need any help finding a sponsor or figuring out how to start a company, Commitbiz can help. Commitbiz's experts will ensure that your business has no potential issues. For details on the various services offered by Commitbiz, Contact Us. We will be happy to help.

FAQs

What is individual sponsorship in UAE?

An individual sponsorship is an emirati who holds 51% stake in your business. 

What is corporate sponsorship in UAE?

Here, the sponsor is a corporate and not an individual.

What is a local service agent in UAE?

Local service agent owns nothing of the company. He acts as the representative of the company.

Which is best to have - individual sponsorship or corporate sponsorship or a local service agent?

It depends on the company structure and the jurisdiction you incorporate etc…

How to set up a company without sponsorship?

You can prefer incorporating a Free Zone as it gives you complete ownership. 

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