Local Sponsorship & Local Service Agent in Dubai, UAE

Although many businesses in the UAE can now be 100% foreign owned, there are some remaining business activities where a local partner may be required or where a company may voluntarily opt to have a local partner for benefits to the business in the UAE.

Corporate sponsorship *: This is the preferred choice of local sponsorship within the UAE. A UAE national company (Local Sponsor) holds a 51% share and obligations of an organisation and the remaining 49% is owned by an individual or group of foreign investors. In this type of sponsorship, the business is sponsored by a company, rather than an individual.

Individual Sponsorship *: Individual sponsorship is a more common type of local sponsorship in Dubai. A UAE national (Local Sponsor) in his/her individual capacity becomes your sponsor and holds a 51% share and liability of the company. Whilst the Emirati sponsor is the main shareholder of the company, he/she can hand over the Power of Attorney (POA) to the foreign partner in return for a fixed annual fee.

*Depending on entity type

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Requirements

Corporate Nominee vs Individual Sponsor

When setting up a local company as per the UAE Companies Law and UAE Civil Law, the expatriate shareholders may still be required to nominate a Local Service Agent or a Local Partner (Sponsor), who holds shares percentages (commonly 1-51%), when establishing a company.

Considerations	Corporate Nominee	Individual Sponsor / Local Partner
Signatories	Multiple Signatories - PPG are always available to attend signings when required	Single Signatory - This can cause significant issues and delays if/when the individual leaves the country or is unavailable for signature
Succession	Succession Protection - In the case of a death or incapacity of one of the PPG local shareholders, the Company or Branch that PPG sponsor will not be affected	In case of the death of the Individual Sponsor, then Sharia law comes into play and all company files and licences can be frozen whilst probate is undertaken. The heirs will split the assets and new contracts and agreements will be required. The company will be unable to do business during this time and this can lead to massive disruption
Agreements	Side Agreements – The agreements are with a Corporate Entity (PPG) not an individual and therefore have a stronger basis in Companies Law. They are legally binding providing full protection to the foreign party	With an individual Local Shareholder or Sponsor, the side agreements are seen as less robust. Powers of attorney can be revoked by the sponsor unilaterally and in case of a dispute, the Sharia Courts will have final decision which can often fall in favour of the Local Sponsor
Number of Sponsorship Control	Controlled number of clients - PPG limits the number of companies that we partner with in any one corporate entity which reduces cross partner risk and safeguards clients’ day-to-day activities. In addition, PPG maintain a level of oversight to ensure that there are no labour blocks or issues that might affect other partnered clients	Uncontrolled number of company sponsorships - Often individual local partners / sponsors will partner will many ‘unknown’ other companies with no oversight. If there are any issues with any of these other companies, it can cause the client company significant issues, such as labour blocks, court cases, delays and fines
Locations/Availability	PPG is physically located in all emirates, with a team of over 35 Operations and PRO staff and multiples e-cards and signatories, PPG are always available to assist the client and staff with signatures, PRO services and support	An Individual Sponsor may have to travel from/to different Emirates, or his/her e-signature card may be being used in multiple locations by multiple unconnected companies and PROs causing time delays and further problems
Reliability	PPG has a full range of Emiratis with the required family books and with no conflict or PEP status. This allows us to offer a multitude of solutions for different activities, locations and approvals – e.g. ADNOC/SPC approval, Dubai Municipality Approvals, Insurance, Recruitment, RERA etc	If an individual sponsor is from another emirate, it could limit the company on what they can achieve in certain instances. Certain activities require local partner exclusivity and external approvals that the individual may not be able to obtain
Exit Clause	90 day exit / sale / transfer clause with no penalty. PPG provide the client with a clear exit plan and ensure the foreign party has 100% control of IP, brand and profit & loss, thus allowing the foreign client to build a business which they fully own and control	With an individual in practice there is no exit clause that can be enforced and this presents a significant risk to the foreign party in the event of a sale of the business (for example). It is much more difficult to fully secure 100% control and ownership

** Municipality approvals are required for certain activities. This will limit the use of Corporate Nominees as the sponsor on some occasions.

How can we help?

As a leading company formation specialist, Sovereign PPG act as a corporate partner for foreign investors wishing to establish a business in the UAE and assume the role of the 51% Emirati shareholder, allowing foreign investors to retain effective control of their business. Through Sovereign PPG’s secure and trusted nominee structure, this model ensures that foreign investors’ interests are protected in accordance with the law.

In the case of a Foreign Branch, Sovereign PPG can be employed as a local service agent in order to quickly and efficiently handle all governmental administration requirements, whilst still enabling the foreign investor to retain 100% financial and management control.

Companies who wish to operate in mainland UAE are required to have a local sponsor. The type of sponsorship available depends on the type of business to be conducted by the company and therefore the legal business structure selected

To change your local sponsor in Dubai, you must amend your Memorandum of Association (MOA) and trade licenses to reflect the new change in ownership and shares. For this to occur, a board resolution from existing shareholders agreeing to this change must be acquired.

After, the new MOA must be registered at the Dubai Economic Department (DED), with subsequent fees paid.

Local partners are usually given the option of a set annual fee or percentage of the company’s profits. In return, they are expected to provide signatures on contracts, and process government and business regulation formalities. The latter can include closing bank accounts, terminating employee work visas, and settling outstanding debts.

Local Sponsor – 51% Partner
A Local Sponsor is a 51% shareholder in a Limited Liability Company also known as an LLC. In Mainland UAE a foreign investor can only hold 49% of the company shares and the remaining 51% of the shares must be held by a local Emirati. The legal structure of an LLC requires the local partner to be named as a shareholder on the Trade licence as well as in the Memorandum of Association (MOA) which is a constitutional document for the LLC and is signed in front of and notarized by a Public Notary. However, to enable the foreign investor to manage and operate the company with autonomy the local partner will waive their rights to the business including the profit within the MOA in return for an annual fee.

Local Service Agent

A Local Service Agent is required for all Foreign Branch, Representative or Professional licences in mainland UAE. The Local Service Agent is not a partner in the company and the ownership of the company lies 100% with the foreign investor. The role of the Local Agent is to be the representative of the company within the Governmental departments and to facilitate registrations with the various municipalities