- July 30, 2020
- Posted by: DBS Editorial Team
- Category: Business Setup in UAE
Business setup in the UAE requires a local sponsor. However, foreign entrepreneurs are not familiar with the term. ‘Local sponsor’ is a general term used to describe the nominee shareholder of the company. The sponsor has to be a citizen of the UAE with a family membership card. The local sponsor is typically a sleeping partner in the business. And it is mandatory for a local sponsor to own at least 51% of the shares of the company. This is a requirement for mainland company setups only.
Why local sponsors are required for business setup in the UAE?
Under Federal Law No. 2 of 2015 for Commercial Companies a foreign investor must partner with a UAE local to start a business in the region. The UAE national becomes the local sponsor and holds a 51% share and liability of the company. Whilst the UAE sponsor is the main shareholder of the company. However, the local sponsor handover the Power of Attorney (POA) to the foreign partner in return for a fixed annual fee. A side agreement is made for the security of all the parties involved.
What are the types of local sponsors for business setup in the UAE?
Corporate Local Sponsor
A corporate sponsor is basically a corporate body or firm which is established and registered in Dubai. These firms can provide local sponsorship to foreign companies that are willing to set up a business in Dubai. The corporate firm sponsoring the foreign firm will hold 51% of the equity shares; the remaining 49% shares will be with the foreign shareholders. This type of local sponsorship option is very common and the most suitable one for setting up an LLC in Dubai.
Individual Local Sponsor
An individual sponsor is a local resident who can take part as a local sponsor of foreign companies in Dubai. It is not mandatory for the local sponsor to be actively involved in business activity. S/he can be anybody, a government officer or any other businessperson. This form of local sponsorship is suitable when you are starting a commercial business or an industry in Dubai. An individual sponsor must hold at least 51% of the total equity shares of the business.
What is the difference between a local service agent and a local sponsor?
A local service agent is also a UAE local resident. However, unlike a local sponsor the local service agent does not hold any shares in the company. The agent is only required to suffice all the formalities delegated by the DED in the process of setting up a company. Commercial trade licenses in mainland requires local sponsorship. Whereas, professional business setup needs the assistance of local agents.
How to find the best local sponsor or local agent for business setup in the UAE?
Setup your business in the UAE with DBS Business Setup to find the perfect local sponsor or local agent. It is important to that mainland company formation and registration is done under specific conditions. Also, depending on the shareholding structure of the company a local sponsor or local agent can be a mandatory prerequisite.
Nevertheless, with DBS Business Setup you can have the liberty of a secured partnership! We at DBS offer you secure ways to partner with a UAE national. Our agreements are drafted by legal experts and signed in the presences of two-witnesses from each side. This enabled you to have the power of attorney and mutually resting agreements with your UAE local sponsor / agent. We ensure the business setup documents are drafted with utmost efficiency. We also guarantee to keep your security and position intact throughout the contract.
For more detail get in touch with our business setup consultants or meet our local sponsors personally. Book a free consultation! Call us on +97145667485 or WhatsApp +971555813673 to request a call back. You may also submit you enquire here https://www.dubaibusinessservices.com/contact-us/