The UAE’s company formation process is known to be fast and straightforward. However, it is only this way if carried out with the help of a local expert.
In reality, the company incorporation process out here is not without its complexities. To those with the expertise to overcome them, it can be fast and painless. To those without this knowledge, it can be a challenge.
One of the areas that causes most confusion is the issue of local sponsors. Traditionally, overseas entrepreneurs always needed to work with a local sponsor in order to form a UAE business. The local sponsor would hold a 51% stake in the business, with the expat entrepreneur retaining the rest.
This rule has relaxed somewhat in recent years. However, sponsors are still required in some cases. These sponsors can either be local individuals or corporate entities. Corporate sponsorship is often the best option, allowing for a professional and secure process.
To find out if your business requires a local sponsor – and to discover the many benefits of corporate sponsorship – keep reading.
What is Corporate Sponsorship in Dubai, UAE
Sponsorship in the UAE is the process whereby a local business or individual holds a 51% stake in an organisation. Sponsors usually have no say in decision making and do not receive a profit share. They are usually paid a fee for their service. This was traditionally the only way for non-GCC citizens to operate UAE mainland businesses.
Corporate sponsorship is where a UAE-owned and -registered company, rather than an individual, holds a 51% share in your business. Again, the sponsoring company does not take a share of the profits or exercise control over the business. Corporate sponsors are paid an annual fee for this service.
Individual sponsorship is much the same, however in this case, it is an individual Emirati citizen that holds the 51% stake in your business. Individual sponsors must be professionals, UAE government employees or UAE business owners.
While individual sponsorship is often the cheaper option, it does not offer the same protections as the corporate alternative. To ensure a smooth process, legal clarity and total control over your business and its profits, it is always advisable to work with a corporate sponsor.
With a corporate sponsor, long-term protections can be put in place to protect your profits, assets and powers of administration and decision making, allowing you to stay in total control of your business.
Do you need a local sponsor to do business in Dubai, UAE?
Whether or not you require a local sponsor will depend on several factors including your nationality, your license type and the industry in which you wish to do business.
If you are a non-GCC national wishing to set up a UAE mainland LLC with a commercial or industrial license, then you may need to acquire the services of a local sponsor.
If, however, you wish to undertake activities in any of the following industries, you will definitely require a local sponsor.
- Oil exploration and production
- Investigation, security, military (including manufacturing of military weapons, explosives, dress, and equipment)
- Banking and financing activities
- Pilgrimage and Umrah services
- Certain recruitment activities
- Water and electricity provision
- Fishing and related services
- Post, telecommunication and other audio-visual services
- Road and air transport
- Printing and publishing
- Commercial agency
- Medical retail (including pharmacies)
- Blood banks, quarantines and venom/poison banks
If your chosen activity is not on this list, then 100% company ownership is possible. However, it must be approved by the Foreign Direct Investment Unit and Foreign Direct Investment Committee.
What are the benefits of corporate sponsorship in Dubai, UAE?
If your business does require the services of a local sponsor, there are several great reasons to opt for a corporate over an individual. Key benefits of corporate sponsorship include:
Streamlined process: Acquiring the services of a local sponsor can be an involved undertaking. For this reason, it is advisable to partner with a corporate sponsor who will have procedures in place to ensure the process runs as smoothly as possible.
Zero interference: While most sponsors do not wish to be involved with the day-to-day running of your business, when working with an individual, there is nothing to say this will not change later down the line. Corporate sponsors, however, will never get involved with the running of your business, allowing you to maintain total control of your staff, clients, offering and future direction.
Financial guarantees: As your business becomes more profitable, an individual sponsor could look to stake a claim for a more significant share as payment for their services. A reputable corporate sponsor, on the other hand, will charge a set annual fee, allowing you to retain 100% of your profits.
Clear succession plan: Should an individual sponsor pass away or choose to retire early, their shares in your company are automatically passed to their heir. This can be mitigated through succession planning, however such procedures are not always legally sound and can be costly to set up. As a company cannot die or retire, you have no such concerns with corporate sponsorship.
Legal protection: Entering into a business arrangement with an individual you don’t know can be risky, even if you feel that you have adequate legal protection in place. When you work with a corporate sponsor you have the peace of mind of total legal protection. Reputable corporate sponsors will only work to contracts drafted by first-tier legal counsel, meaning your shareholder rights are always protected, now and in the future.
How to get local sponsorship in Dubai, UAE
The best way to find a local sponsor in Dubai, UAE, is to seek out the services of a reputable Dubai company formation expert – that’s Business Incorporation Zone.
We are a team of company registration professionals who are passionate about bringing the dreams of aspiring entrepreneurs and SMEs to life.
As well as assisting with corporate sponsorship, BIZ can also assist with trade licensing and the opening of corporate bank accounts – even advising on the most appropriate financial institution to suit your specific needs.
We also offer visa and immigration services and can handle all government formalities, permissions, work permits and visas applications that are required to trade in the UAE.
In short, our experts can establish your company on your behalf, find sponsorship if required, make your license and visa applications, and take care of all the necessary admin – leaving you free to get on with running your business.