Dubai is one of the seven Emirates and a well-known trading hub in the Mena region. There are several exhibitions and numerous year-round business events in Dubai.
A corporate sponsor in Dubai can be a government or local body that concurs to partner with you for your business incorporation. As per Article 10 (A) of Federal Law No.2 (2015), any Emirati who agrees to become a local sponsor for a foreign business must possess a minimum of 51% equity shares in their organization. The type of venture and company framework you want to have also plays a critical role in finalizing the corporate sponsorship in Dubai.
UAE Business Setup with Local Shareholders
Every year, several foreign investors, entrepreneurs, and founders plan their company formation in the UAE, and often they do their business setup in Dubai mainland. Depending on the requested activity, a Dubai mainland company setup can be mandatory, for example for company formations in the construction sector.
The UAE Commercial Companies Law requires a local shareholder or a corporate sponsor in Dubai for limited liability companies or Dubai mainland companies. This so-called local shareholder is a UAE national and a so-called corporate sponsor is a UAE company, holding 51% of the company shares.
As stipulated by the law, a mainland business setup in Dubai needs a 51% local sponsor, and this often comes in the form of a UAE national, holding 51% of the company shares in his capacity.
Foreign entrepreneurs doing business in the UAE for the first time, find this regulation and its proceedings extremely difficult. Overseas businessmen and businesswomen often do not personally know UAE nationals. They are most likely not willing to distribute 51% of their company shares to them. Generally, foreign founders do not want the 51% local sponsor in UAE to influence their business or to any interfere with their company’s profit every year.
Company Formation with Corporate Sponsor in Dubai
Instead of getting an individual local shareholder on board, several foreign entrepreneurs search for corporate sponsorship services in Dubai. These corporate sponsorship services are provided by UAE companies owned by one or more UAE nationals. Instead of a person, the UAE company will become the 51% local shareholder in the new company. This corporate sponsorship service offers more financial security and individual freedom to the foreign company owner.
Benefits of Corporate Sponsorship in Dubai
UAE company formations like a Limited Liability Company (LLC, Dubai mainland company) need a 51% local sponsor. If a UAE national becomes the sponsor, the Emirati holds 51% of the company shares in his capacity. The UAE national does not have to be a businessman or have any experience in the relevant field. With 51% of the company shares, he can overrule the 49% foreign shareholder. Even can influence several administrative processes and business decisions.
With corporate sponsorship, the foreign entrepreneur maintains complete control. In general, corporate sponsors in Dubai do not want to get involved in the day-to-day business. The foreign business owner keeps his full power and the company’s management.
Often, corporate shareholders holding 51% do not insist on receiving 51% of the corporate profit. Corporate sponsors in Dubai often get an annual lump sum payment only. Therefore, the foreign entrepreneur retains 100% of the financial benefits.
To regulate the rights and obligations of a local sponsor, side agreements are needed. It could be hard to get such documents in place, as they need to be in Arabic. Another advantage of a corporate sponsor in Dubai is, that the company provides side agreements already drafted by their experienced legal counsels. So, the rights and obligations can be secured, and the company formation in UAE can speed up.
Our Corporate Sponsorship Services
Our business setup consultants in Dubai and our PRO services in Dubai can support you with your company formation in UAE. Furthermore, Business Link UAE can act as your corporate sponsor. As your 51% local shareholder, we can provide you with more flexibility. You will remain in charge to secure your company management and you will keep the power over your company assets.
Sponsorship Opportunities for a business startup in Dubai, UAE
Despite being a business hub for commercial, industrial, and trading sectors, the uphill battle for newbies in UAE is to find a local and corporate sponsorship. Especially, when entrepreneurs are willing to operate a business in Dubai, where an ex-pat can only retain a share of 49% and the rest (51%) goes to a local sponsor. The concept is different for free trade zones, where it allows 100 percent foreign ownership, according to new legislation. There are three types of sponsorships for company setup in Dubai, including Local Sponsors Corporate Sponsors, and Local Service Agent. Here we are going to tell you the pros and cons of UAE Local Sponsors Corporate Sponsors and Local Service Agents for company setup in Dubai.
Individual sponsorship in general terms: Local Sponsor in Dubai:
Local sponsorship is much required when you are planning to set up a business outside the free zone in UAE. Business activities like trading or manufacturing units and a limited liability company work well with such sponsorship. To choose an individual or local sponsor, you need to be cogitative and wise because your local partner takes an enormous share of your company. Only a trusted partner or an Emirati national with good repute can help you in the long run, then he/she may be a professional, a UAE government employee, or a reputed businessman.
An Emirati partner or local sponsor could retain a 51% share in this type of sponsorship. UAE Local sponsor will not ask you for any share in company profit as you just need to pay him his annual fee.
Knock-out benefits of individual sponsorship include:
- Inexpensive and affordable,
- Shrink paperwork with the help of a local sponsor, and
- Open doors for new businesses through the association of local partners with foreign ex-pats.
Think on your feet before taking a plunge:
- Sometimes operation efficiency is affected or has a negative influence due to Emirati’s random travel plans.
- Premature retirement or the unfortunate demise of a local sponsor leads to the shifting of legal heirs and causes severe delays in the process.
Ideate your thoughts before opting for corporate sponsorship in Dubai for starting your own business:
When rights are compared, corporate sponsorship is much like an individual sponsorship; however, differs in certain norms. Be assured to get a share of 49% ownership especially when you plan to establish a mainland office; however, 51% ownership goes to corporate sponsors.
Corporate sponsorship is beneficial for the following reasons:
- Expat holds all advantages with 100% financial benefits,
- No intervening from a local partner on day-to-day company activities,
- Secured legal and regulatory agreements,
- Quick documentation process, and
- Succession planning is not required.
The sponsorship has some tribulations as well:
- One of the expensive sponsorships,
- Add-On Paperwork
Get Across Local Service agent in UAE
A local service agent is a UAE national who helps a sole proprietorship, civil business, or branch office set up their business activity. Unlike individual sponsorship, the local service agent works on agreed-upon annual fees, settled as a commercial contract for their services, and does not attain any profit share from the company or branch office. The local service agent is responsible for making all arrangements and meetings with regulatory bodies and government officials on the company’s behalf. He’s the one facilitating renewal licenses off the hook.
Reify the Benefits of having a local service agent in Dubai
- Easily available online,
- Speed up the process, kickback, and save time,
- Help in document clearance and renewals, PRO services in Dubai, and
- No undertaking on any financial obligations.
Reduce doubts
- Finding the right and qualified local agent is quite challenging,
- Sometimes additional costs are hush-hush concerns in the sponsorship fee.
- Sudden absconding without leaving a trace.
- Pending signatures on paperwork due to long absence.
The sponsorship choices rely on the corporation and the individual comfort zone. Where corporate sponsorship for business setups in Dubai provides financial independence and a sense of security, while individual sponsorship is affordable and opens endless business opportunities for newfangled set-ups. Set up an appointment with a Business Link expert. To know more about the ropes of UAE company formation sponsorship and reap its benefits.
How Business Link UAE Can Help to Find Local Sponsors
Business Link UAE assists you in successful company registration in Dubai. By finding a reliable, trustworthy, and secure UAE national or Emirate to act as your local sponsor or service agent. Being the most reputed business setup consultant in Dubai, we specialize in offering back-to-back business solutions ranging from licensing, and local sponsorship to actual office setup in Dubai.
For more information, contact us at 00 971 50 205 2735 or email us at info@businesslinkuae.com.
