All companies registered as a limited liability company in accordance with the UAE Commercial Companies Regulations can be owned only to the extent of 49% by an expatriate or by a non-UAE national. The remaining share, i.e., 51% must be owned by a UAE national, also known as a local sponsor. A local sponsor or a local service agent may be a person or corporate entity that complies with the regulatory company formation requirements for a non-UAE national who wishes to invest and establish a company in any of the emirate in the UAE.
The different types of sponsorship may include:
A corporate sponsorship is one which wherein a UAE national company holds a 51% share in an entity where the remaining 49% is held by one or more person’s being non-UAE nationals. This is the most preferred type of partnership in the UAE.
An individual sponsorship is one which wherein a UAE national holds a 51% share in an entity where the remaining 49% is held by one or more person’s being non-UAE nationals. Though a UAE national may be the main shareholder in the entity, he or she may execute a Power of Attorney (POA) to the non-UAE national partners in return for a fixed annual fee. This is the most common type of partnership in the United Arab Emirates.
Thus while setting up a local company in the UAE in accordance with the local laws, it is of utmost necessity to have a local sponsor, whether it be an individual sponsor or a corporate sponsor. It is to be noted that a local sponsor not only enjoys a share in the entity but is also responsible for certain other actions within his/her capacity of a local sponsor, they being:
· Cancelling employees work visa and their labour status.
· Shutting down of bank accounts and settlement of outstanding debt if any.
· Assistance in dealing with the local authorities and ministries.
· Assistance in facilitating renewals of the entity.
· Assistance in interpreting and understanding agreements or documents that are specifically written in the Arabic language.
· Assistance in signing documents on behalf of a foreign resident partner.
Before choosing a local sponsor, it is very important to have a proper understanding and knowledge of the local sponsor being appointed since it could have the following repercussions:
· A proper background check of the local sponsor.
· The terms of compensation to be agreed with the local sponsor.
· Seeking a local sponsor associated and/or working with government departments since seeking connections thereafter will be a tad bit easy.
With the expansion and development of business sectors in the UAE coupled with the foreign investors desire to set up an entity in the said jurisdiction, it becomes an extremely difficult task as well as critical to obtain a right local sponsor. Since approaching a right local sponsor would render you to manage your business operations smoothly without any hindrance or hassle, would help in getting pivotal connections which would enable to expand your business further and would further assist in providing or contributing to your investments in a constructive and positive manner.
While choosing a local sponsor, each investor and/or foreign would look into the following:
- That there is no interference in the management and/or day to day affairs of the business entity by the local sponsor.
- That the local sponsor would agree for a fixed compensation in the manner mutually agreed between the parties.
- That the local sponsor would help in providing crucial connections which would help in the growth and expansion of the business.
- That there would be no exploitation by the local sponsor in any manner and of whatsoever nature possible.
- That a local sponsor would add value to your business/investment and would at all times protect your rights in the same.
Thus, we at Munshi Atik Chartered Accountants (formerly Enterprise House Chartered Accountants) could assist you in securing a reliable local partner who could partner you in carrying out your business in the UAE. So do not hesitate in approaching us!!!!interpreting
Local Sponsor Arrangement: When you’re setting up a company in the UAE mainland, you are required to have a local sponsor. These local sponsors must be Emirati nationals and they must own at least 51% of your business. The local sponsor is then paid a fee or a share of the profit as agreed during the company formation.
There are three main types of local sponsorship:
- Individual sponsorship.
- Corporate sponsorship.
- Local service agent.
The type of sponsorship you need will depend on the kind of business you’re planning to set up. Munshi Atik Chartered Accountants (formerly Enterprise House Chartered Accountants) can make Local Sponsor Arrangement for your company formation in Dubai or across the Emirates and make setting up a business a cakewalk for you.
For the mainland companies’ local service agents and nominee shareholders (sleeping partners), the word “‘Local Sponsor” is famous in the United Arab Emirates. A sponsor must be from the United Arab Emirates (UAE national) with the family membership card (Family Book). If you plan to operate your own business in the Dubai Mainland area, it is mandatory to get a local sponsor. And Enterprise House guarantees to all business owners for the Local Sponsor Arrangement.
Nominee Partner (Sleeping Partner) in LLCs:
According to the UAE Companies Act and UAE Civil Law, setting up a limited liability company in the mainland requires a minimum of 51% local equity. As per the law of the land, foreign equity in such a company not exceeding 49%, the distribution of the profit can be mutually agreed upon by concerned parties. Foreign partner(s) can get the full operational power or a third party on the memorandum of association. Only UAE nationals or companies owned wholly by UAE nationals may be considered a nominee partner and paid a lump sum amount per year.
Local Service Agent:
The branch of foreign and civil companies (single owner of a partnership) with foreign investments needs to have a local service agent appointed to comply with the rules and regulations.