As per United Arab Emirates law in relation to mainland business setup, the foreign investors are required to have a local resident, a UAE national, as a sponsor. A Sponsor is typically not involved in the company’s administration mostly and is agreed upon yearly charges according to the contract. Usually, a local sponsor is appointed for the purpose of liaising with the government department and authorities.
Also Read: The UAE’s New Family Sponsorship Policy for Expats
Local sponsor in UAE used to refer to local service agents and nominee shareholders (sleeping partners) in mainland companies with foreign investment. A sponsor has to be a UAE national (Emirati) with a family membership card.
There are different types of local sponsorship available in the UAE and they are as follows:
Corporate local sponsor
A corporate body that is established and registered in Dubai is required to appoint a local sponsor for starting a company in Dubai mainland. The UAE national will hold 51% of the shares of a company owned by individuals or a group of partners with a foreign origin. This type of sponsor is common and very suitable for opening an LLC in Dubai. The corporate sponsors can be of any local or government authority, depending upon the requirement of the business which the investors want to start in Dubai.
Individual local sponsor
As the name suggests, this is when an individual Emirati national sponsors the business and holds a 51% stake in the company. Individual sponsors must be UAE citizens and can be male or female. It may not be necessary for the local sponsor to be involved in the business activity or be a business owner. This type of sponsorship is suitable for opening a commercial business in Dubai. The individual sponsor should hold at least 51% of total equity shares.
Local service agent as a sponsor
The third type of local sponsor is a service agent who is a local resident and agrees to act as a sponsor. If you are willing to open a professional business in Dubai then this form of local sponsorship is suitable.
Things to know before hiring a local sponsor
A local sponsor should be cross checked before hiring. Here are some points to remember:
Check if the local sponsor is a resident of Dubai. If the sponsor is not a resident of Dubai then the investor has to travel each time for signatures or process govt formalities.
- Have a complete check of the sponsor’s family background. A sponsor from a well reputed family in Dubai will be an advantage for the business as the UAE national is most likely to have goodwill in the area.
- Going for a government employee as a local sponsor in Dubai will yield better benefits for the company because of its direct connection to government agencies.
- A foreign investor may have a sponsorship deed agreement verified before signing it.
- Be clear and precise on the fees or compensation to pay to the local sponsor as wells scope of sponsors services
- An investor may also seek advice from a business consultant in Dubai about a local sponsor. A consultant can provide information on the terms and conditions of having a local sponsor.
Duties of Local Sponsor in UAE
Local sponsor is responsible for some important dealings as mentioned below:
- Cancellation of employees work visa
- Cancellation of the labor status for employees
- Closing bank accounts
- To settle any outstanding debt (if necessary)
- The Local Service Agent can deal with the government officials and Ministries on behalf of the businesses and also facilitates the renewal process.
- Interpreting the business contracts for business registration that are in Arabic, local authority is required to understand and interpret these documents and can sign on the behalf of their foreign business partner
Also Read: 4 Things to Consider while Setting up Business in Dubai
Business setup in UAE
A local sponsor in Dubai is a valuable asset to the company. This rule by the government of Dubai benefits not only local sponsors but also companies that will help them because a local sponsor will become a ready made goodwill for the company. We at FAR consulting middles east can handle all your local sponsor related requirements proficiently so that you can concentrate on business growth contact us today for our services in UAE.