Why Do I Need a Local Sponsor for My Business Setup in Dubai?

Dubai has become an incubation hub for business innovation, a city full of business opportunities for all business activities in the world. The Dubai government is very keen on facilitating upcoming business entrepreneurs and firms. The city provides a strategic location, state-of-the-art infrastructure, top-notch business facilities, investment-friendly market, and encouragement to foreign direct investment (FDI). Dubai has headed towards the path of revolution and has set up policies which will benefit the business industry in the best form possible.

Business setup in Dubai or any other the part of the UAE might be difficult for foreigners, as they may lack knowledge about the place, its policies, norms or regulatory functions. In order to tackle this situation, Dubai government makes it mandatory for a foreign businessman to have a local sponsor for their business. Any business setup in mainland Dubai must have a local sponsor.

Who is a Local Sponsor?

‘Local sponsor’ is a general term used in the UAE to refer to local service agents and nominee shareholders (sleeping partners) in mainland companies with foreign investment. A sponsor has to be an Emirati (UAE national) with a family membership card.

A local sponsor in the UAE is a sleeping partner in your business, who are mandated to own at least 51% of the shares of the company. He should be a local resident of the country, should hold a valid Dubai passport and have a share in profits (decided on mutual agreements between the parties). But note that the local sponsorship rule is applicable only in the Dubai mainland area and not in Dubai free zone regions.

Type of Local Sponsors

Now that we are clear as to who a local sponsor is and what his role is in the business set up in Dubai, let us have a look at the types of sponsors and sponsorships available for setting up a business in Dubai:

1. Corporate Local Sponsor

A corporate body or firm that is established and registered in Dubai can provide local sponsorship to a foreign company willing to set up a business in Dubai. The corporate firm will sponsor the foreign firm and hold 51% of the equity shares, the remaining 49% remaining with the foreign shareholders. This type of local sponsorship option is common and very suitable for opening up an LLC in Dubai.

2. Individual Local Sponsor

An individual who is a local resident can take part as a local sponsor in Dubai. It is not necessary for the local sponsor to be involved in the business activity or being a business owner. He or she can be a simple person or a government officer or any other businessperson. This form of sponsorship is suitable when you are opening a commercial business or industry in Dubai. The individual sponsor should hold at least 51% of the total equity shares.

3. Local Service Agent as Sponsor

The third type of local sponsor is a service agent who is a local resident and agrees to act as a sponsor for the company in Dubai. If you are willing to open a professional business in Dubai, then this form of local sponsorship is suitable for you.

Things to Know Before Getting a Local Sponsor in Dubai

We have discussed everything about a local sponsor and how important he/she is in the business set up in Dubai. But there are certain aspects which you need to look into before hiring a local sponsor.

Every local sponsor should be checked and cross-checked before being hired. The local sponsor might be a complete stranger or might be a corporate or service agent who might have a completely different background, which needs to be verified before hiring:

• First of all, check whether he/she is a resident of Dubai or not, because if he/she is not living in Dubai then you’d have to travel for signature each time you need to process something in a government department
• Check his or her family background; a sponsor from a well-reputed family in Dubai will be an advantage for your business as he/she may have goodwill in the area
• Qualification status of the sponsor should be verified or else there will an issue of language barrier
• Going for a government employee as a local sponsor in Dubai will yield a great benefit for the company
• Get the sponsorship agreement deed verified before signing it
• Be clear and precise on the fees or compensation to be paid to the local sponsor for his/her services
• And last but not the least, talking with a business consultant in Dubai about local sponsorship might provide you with information on the terms and conditions of having a local sponsor

Conclusion

To conclude, having a local sponsor in Dubai is like a key to handling inflexible situations in business. A local sponsor in Dubai is not a liability but a valuable asset to the company. This rule by the government of Dubai benefits not only the local sponsors but also the companies that hire them because a reputed local sponsor will become a ready-made goodwill for the company. Choosing the right local sponsor might be a daunting task, but not to 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 connect with your local sponsor today!