Every country has its own rules and regulations for foreign investors and entrepreneurs. These rules are aimed at assistance for foreign investors as well as aiding the country’s economy and enhancing the economic condition of its citizens. One such factor in the business structure of UAE is the compulsory inclusion of local sponsors for formation of any company in Dubai mainland. These local sponsors are not required for companies in free trade zones. If a company has professional license (civil company), then they will require services of local service agents instead of local sponsors.
Usually these local sponsors are known as sleeping partners. It is considered that they are free from all responsibilities and enjoy monthly or annual income and company share without doing anything. But it is a misconception. These local sponsors not only provide important services to their related companies but they are also liable for company affairs.
Following are few important types of local sponsors in UAE and their responsibilities.
Individual sponsor:
In this type of sponsorship, an Emirati citizen will act as a local sponsor for a company in Dubai mainland. This Emirati citizen will hold 51% shares as well as 51% liability of the corporation. He/she could be a businessman, professional or a government employee.
In this type of sponsorship, it is possible that the sponsor will hand over the power of attorney to (foreign) company owner and receive a fix annual fee. Such sponsor is well-suited for LLC and any trading company.
Corporate Sponsor:
In this situation, a local corporation will act as sponsor for a foreign company. This local company must be owned fully by Emirati citizen/s. Like individual sponsor, this corporate sponsor will also own 51% shares as well as 51% liability of foreign company. This type of sponsorship works well for LLC, trading company and manufacturing company also.
Local Service Agent:
If you have a professional license in Dubai mainland, then your company will register as civil company. In this case, you will appoint a local service agent (LSA) instead of sponsor. This service agent will also be a UAE national. But he/she will not own any share of company and it will be owned fully by its foreign owner. The local service agent will provide administrative assistance in company matters and in return will receive a fix payment. LSAs are also required by branch/representative office of a foreign company.
Services provide by local sponsors:
After knowing the working of various types of local sponsors, we can get important information about the working of these sponsors and the services they provide.
- Sponsors usually don’t interfere in the activities of a company. But they have some powers as they can sign on papers related to immigration and labour affairs of company.
- But these sponsors are not just there to take advantages. Companies can take benefits by appointing local sponsors that have some knowledge about business or local market. In this way, they can assist companies in growth of their business venture. In case of a government employee, he/she can assist in handling matters related to various government departments.
- In case of corporate sponsor, the board of directors of sponsor company holds power of attorney through which they can act on behalf of a foreign company. This may prove nuisance on few occasions but also provide transparency and better planning in any corporation.
- Local service agents also provide some service to corporations. They do so by representing company in different departments and provide assistance in few administrative matters.
Local sponsors or local service agents are necessary for all companies in UAE mainland. Therefore it is very important to choose the right person/corporation for this service. Though, finding a perfect local sponsor is challenging, but it is not impossible at all. You can fully rely on Riz & Mona Consultancy for choosing the right person or corporation for this purpose according to your type of company and your requirements.
