Local Sponsors For Foreign Businesses

Owing to the variety of interests rapidly developing in the region, geopolitical interest heightening, and the governments’ wish to be more open to foreign entities and keenness, the recently developing trend for commercial interests in the gulf countries is the consideration of laws and regulations that will get rid of the mandatory need for majority local ownership.

Currently, the legal regime requires for a majority of the interest (usually 51%, to be registered to an Emirati national, while the establishing foreigner owns the rest.

Change The Rule?

While the wind is certainly blowing in that direction, the majority local ownership is the law of the land, and foreign business will do well to understand how it can be impacted through this rule.

Aside from companies located in the free zone, which can be fully foreign owned, business entities in Dubai need to be able to secure a local sponsor, and usually there are three different options available, depending on the need.

Sponsored By Company

Corporate sponsorship refers to when a company owned or operated by Emirati nationals owns 51% of the business established by a foreigner, in which case, instead of a citizen being involved, a corporation will be at the helm.

While this might sound tedious and irrational to some, consider the fact that not only does this company hold ownership, it also as such, responsible for its liabilities and unfortunate circumstances.

This option is usually availed by entities that want to manufacture outside the free zone, or establish a limited liability company.

Sponsored By Individual

For trading companies and limited liability companies, the other option is to secure the service of a Dubai local sponsor, who will bear ownership of 51% of the assets and liabilities.

By law, it is possible for this sponsor to hand over his interest in the company in lieu of a sum paid to him every year.

Agents

Foreigners living or working in Dubai may want to set up a commercial interest even apart from an organization.

This includes professionals exhibiting a certain skill, doctors and artists for example.

In this case, they will require a local service agent, which is going to act a representative of the entity in exchanges with all of the involved government authorities.

This agent will not own 51% of the named company, and will only be paid an annual fee, derived usually from a contractual agreement. These sums differ based on the background of the agent in question.