UAE has a highly resourceful and prosperous business ecosystem that supports more than a 100 sectors inhabited by businesses from over 200 different nationalities.
According to the Pinkerton Risk Index Report of 2017, UAE ranked on the 5th spot as the considered in the top 5 safest places in Asia-Pacific and the Middle East to conduct business
Among its specialized zones, mainland company setup is the most sought after UAE business setup solution for foreign investors. Forming an LLC company in Dubai mainland involves the appointment of a local sponsor who has 51% share eligibility in the company. Despite the local sponsor holding the majority shares of the company, the entrepreneur maintains complete control over the business’s administration and operations. Hence, it is crucial for expat investors to readily understand the role of local sponsorship and how it works in UAE.
What is a Local Sponsorship?
Local sponsorship is a mandatory condition where the expat is required to submit his/her 51% company shares to an Emirati or GCC national when setting up an LLC business in mainland UAE. The type of sponsorship depends on the company activity and legal structure.
Types of Sponsorships
There are three types of local sponsorships investors can avail in UAE, individual sponsorship, corporate sponsorship and Local Service Agent (LSA) as explained below.
In a Corporate sponsorship structure, an Emirati-owned company or a GCC company owns 51% shares of a company that is owned by a group or an individual of foreign origin. Since the foreign-owned business is sponsored by a company, trading Companies, Manufacturing units and other Dubai mainland LLC businesses can benefit from the corporate sponsor in terms of professionalism and transparency.
Individual sponsorship is where an Emirati national over the age 21 sponsors a company owned by an individual or a group of partners of foreign origin in his/her own individual capacity. Such sponsorships are quite common in UAE where the Emirati National can be a business owner, a professional or a government employee and own 51% shares of the company, or transfers the power of attorney to the foreign partner depending on the terms and conditions discussed.
Local Service Agent
Local Service Agent liaisons with the government departments as the company’s representative but will not own 51% shares or any liability of the company. An LSA is required when a foreign professional, artisan, engineer or doctor plans to set up business in UAE and offer his/her professional expertise. As per the commercial agreement, the LSA will be paid a fixed annual fee in most cases; however, it may also depend on the agent’s social and family prominence in UAE. Other than professional licenses, an LSA can also be appointed for a branch of foreign companies and representative offices.
How can IBG help resolve all your sponsorship related worries?
Access to Sponsor
Usually, investors extend their partnership with a local sponsor if the prospect is trustworthy and can exhibit an established track record. During the business setup process when time is of the essence, a trustworthy local sponsor always comes in handy than a stranger to work with. Here at IBG, we connect you with professional and transparent local sponsors in Dubai who are happy to let you run your business your way.
Unavailability of Sponsor
The sponsor’s availability is vital to the entrepreneur’s everyday process. Without the sponsor, the business may be left in a precarious position that will likely disrupt day-to-day operations. To keep track on your sponsor it is recommended to contact a professional consultant at IBG Consulting who will recommend the most professional and transparent sponsors in the UAE.
When drawing up the contract it is wise to remain informed about the system of fees structured by the sponsor. Unfortunately, many times these contracts sideline the fee terms and avoid straightforward language. The investor can consult with the professional consultants at IBG Consulting to get a good grip on the local sponsorship fees, which ranges from AED 7,500 and goes up to AED 30,000+ depending on the business activity, terms of the contract and profile of the local sponsor.