Business partners in the United Arab Emirates are required to be located in the country in order to do business there. Many international investors are unfamiliar with the idea of forming a business relationship with a UAE citizen, which is referred to as a Local Sponsor in Dubai, United Arab Emirates.
The following article is essential reading if you are evaluating the necessity for a local partnership or local sponsorship, or if you are unsure if you need a local partner to do business in Dubai.
Table of Contents
So, who is a local partner in this case?
A local partner or a local sponsor is an Emirati citizen who may or may not have the necessary qualifications for the particular business activity in question.
Every UAE national who enters into an agreement of a local partnership with a foreign investor must hold at least 51 percent of the shares in the share capital of the LLC, according to the directives specified by the UAE Commercial Companies Law. Article 10 (1) of the Federal Law No. 2 of 2015 states that every LLC must have at least 51 percent of the shares in the share capital of the LLC. The regulation states that every business formed must have one or more UAE partners who each own at least 51 percent of the firm’s share capital in order to be valid.
Is it necessary to have a local partner when starting a company in the UAE?
Not all company formations in the UAE Mainland require the involvement of a local sponsor. Professional businesses, for example, do not need a sponsor from the UAE or a partnership with a UAE citizen, and they may be owned entirely by foreigners without any restrictions. Even modest companies in Dubai and other areas of the UAE, such as a salon, a cafeteria, coffee shops, information technology services, consulting licences, and so on, do not need a local partnership and may operate with 100 percent ownership.
Businesses such as general trade and firms that need commercial licences, on the other hand, are required to have a local sponsor who holds a minimum of 51 percent of the company’s shares. The application of this provision may be a difficult experience for foreign investors in certain cases.
What are the different kinds of local partners or sponsors in the United Arab Emirates?
There are primarily three kinds of local partnership or sponsorship accessible to businesses and entrepreneurs across the United Arab Emirates, and they are as follows:
A corporate partnership is a kind of partnership in which a UAE business owns 51 percent of the stock and liabilities of a company that is held by an individual or group of partners from a foreign country or territory.
In the UAE, individual sponsorship is defined as the act of an Emirati citizen acting in his or her own capacity as the local sponsor of a business.
When a local Emirati just acts as a representative of a business in all administrative interactions with government agencies, this is referred to as a Local Service Agent. It is mostly suited to professional businesses, and the local service agent does not own any stock in your firm.
How can you find a dependable local partner in the United Arab Emirates?
Finding a dependable local partner in a foreign nation may be challenging for most investors and entrepreneurs, especially in emerging markets. Sharing the bulk of your assets with an unknown business company may also be terrifying for some investors.