The Local Business Sponsor In UAE
People who have business interests or entities set up in the UAE will already know that the regulatory and planning policies in the country are quite different from the west, and place a general importance on local actors in several aspects.
The foremost example of this is the 51% shareholding requirement for businesses and commercial entities that have been set up in the mainland. This requirement does not bind companies located in the one of the freezones in the city.
The gist of the rule suggests that entities that are situated in the city, usually in the form of a limited liability company, are required to have 51% of the shares being controlled by an Emirati partner.
Companies that require this rule to be applied are usually referred to as mainland companies, and provide for a local sponsor to represent the company in the many affairs having to deal with ministries and government departments.
Since the rule is compulsory, finding a local national who is reliable and understands the nature of the company can be difficult, which is why pro service companies also offer services in this regard.
Local sponsors in UAE - ACT Pro & Business Services fall broadly in three classifications.
Corporate (Sponsoring Entity)
The first type is a corporate sponsor, whereby instead of a single person holding 51% of the shares, it is a company owned by Emirati nationals that plays this role.
The shareholding requirement does not involve only the shares of the company or assets, but also applies to the liabilities of a business established by foreigners.
As such, the nationals involved are responsible for all the actions, and not just its revenue.
This arrangement best suits ventures that want to take the form of a limited liability company, or trading and manufacturing businesses.
Just as a local corporate entity holds a majority stake in a corporate sponsorship, in this case, the same is done by an individual in their private capacity.
The two players have the option to implement variations to the general arrangement, which often takes place in the form of the local national giving up the power of attorney for an annual fee.
Service agents are usually appointed by foreign professionals providing services in the UAE. The 51% shareholding requirement does not apply in this case, and the agent only provides representation in dealings with government agencies.
The agreement will make mention of the annual fee to be paid to this agent.