How to Get a Local Sponsor For Your Business in Abu Dhabi Mainland?
Local sponsor is an obligatory requirement if a foreign
entrepreneur wishes to establish their business in the UAE mainland. The local
partner owns an LLC's 51 percent Emirati share and may either be an
individual or a 100 percent owned company.
An actively involved sponsor will fund their shareholding of 51
percent and also take their benefit share of 51 percent. They will also be
engaged actively in decision-making and company management. A nominee sponsor
does not finance the 51% shareholding but will serve as a silent partner
and hold the 51% shareholding in confidence until the foreign party decides
to sell, share or liquidate the company.
A side agreement is typically formed in such an arrangement
where the candidate transfers management control of the company to the foreign
party and elects the foreign party to earn its share of the income. A fixed
annual fee is remunerated to the candidate sponsor. For all cases, the sponsor
takes visa responsibility for labor and immigration.
So if an entrepreneur is planning to set up a business in
Abu Dhabi, then it is essential to know about the procedures and types of
sponsors. The company can be set up in UAE through Individual Sponsorship,
Corporate sponsorship or local Service Agent.
Types of Sponsors
Individual Sponsorship
This is when individual UAE sponsors own a 51 percent share of
the company. The sponsor must be above 21 years old and can be a male or female
and may or may not run business in the same field. But this individual sponsor
must be either a professional or an employee of the UAE government or an
entrepreneur. But, there is yet another important option in this type of
sponsorship. The sponsor will grant the foreign entrepreneur a power of
attorney and hence the full control of the company and request a fixed
annual sponsor fee.
Corporate Sponsorship
This is equivalent to individual sponsorship, but here sponsor
is the UAE national company. And they keep 51 percent share of your company.
Local Service Agent
A local service agent is compulsory when professionals establish
their business in UAE offering their expert professional service. The agent
will represent the firm in all the activities and will communicate on behalf of
the company with government officials and ministries. Instead of giving them 51
percent of your company, they are paid with a fixed annual payment. It can vary
depending on their activities or services.
The Need for Local Sponsor in Abu Dhabi
Well, if you wish to carry out commercial, industrial or trading
activities in the UAE mainland, then you need to have a local sponsor. However,
there are some exceptions. Professional services businesses do not need local
sponsorship, and neither do branch offices nor representative offices.
Branch offices and representative offices of existing foreign
companies maybe 100 percent foreign-owned and are established through a local
service agent. The branch and representative offices of existing international
companies can be 100% foreign-owned and are set up through a local services
agent. It is crucial to note that neither of these business types is
standalone. They don't have a specific legal identity and are treated as
extensions of their foreign parent company.
Although branch offices and representative offices are similar
in several respects, there is one specific distinction: branch offices may
carry out their business in commercial activities in the mainland of the UAE
and make profits, but they only have to trade in events similar to that of
their parents. On the other hand, A representative office is not allowed to
make profits in the UAE. It must limit its business activities to marketing and
promoting its foreign parent's products and services. Another way to maintain
100 percent ownership of your company is to locate your company in one of the
free zones of the UAE.
Although free zones offer many financial and other benefits,
they do not allow you to trade efficiently in the local UAE market and
therefore are not ideal for entrepreneurs wishing to develop a business in the
mainland.
Things to Focus Before Hiring a Local Sponsor
- Check
if the locality of the investor in Dubai to make signatures or process
govt formalities easier.
- Perform
complete research of the sponsors' family background. A sponsor from a
well-reputed family will be beneficial for the business as the UAE
nationalist most likely to have goodwill in the area.
- Choosing
a government employee as a local sponsor will yield better benefits for
the company because of direct relation to government authorities.
- A
foreign investor can have a verified sponsorship deed agreement
before signing it.
- Be
transparent and consistent about the fees or reward to be paid to the
local sponsor
- An
investor may also seek a bit of advice from a business consultant in Dubai
about a local sponsor. A consultant can provide information on the terms
and conditions of having a local sponsor.
Challenges Faced While Selecting a Local Sponsor
- Getting
to know about your local sponsor before a deal.
- Hidden
costs in the sponsorship fee.
- Throughout
the UAE, contracts, in addition to written or electronic documents, may
take the form of a verbal agreement.
- A
local sponsor's premature death or early retirement will cause an
abundance of problems.
- Finding
the right local UAE mainland sponsor
Advantages of Working With A Local Sponsor
Aside from the key benefit of being able to trade directly
within the UAE market, partnering with a local partner has a range of other
advantages.
- 100%
reliable assistance
- Support
and guidance on registration, licensing and office set-up
- Saves
time and money
- Proper
work progress
- No
suspensions and extra cost
LLCs established with a local partner are 100% tax-free, and the
foreign investor can repatriate 100% of their profits should they wish to.
Companies set up with a local partner often have an added benefit of being able
to open limitless branches in the UAE and apply for a variety of private and
government ventures that are not accessible without a local partner to free
zone or professional services businesses. Finally, foreign entrepreneurs are
granted investor status in the UAE when they start a company in Dubai with
a local partner, enabling them to get residency visas for themselves and their
dependents.
Duties of Local Sponsor in Abu Dhabi
Local sponsor is responsible for some significant dealings, as
mentioned below:
- Cancellation
of employees working visa
- Cancellation
of the labour status for employees
- Closing
bank accounts
- To
settle any outstanding debt (if necessary)
- To
deal with government officials and Ministries on behalf of the businesses
and also facilitates the renewal process
- Interpreting
the business contracts for business registration that are in Arabic, a
local authority is required to understand and interpret these documents
and can sign on behalf of their foreign business partner
Best Way to Get A Local Sponsor
The best way to find a local sponsor in Abu Dhabi is through
connections and local websites which will do the needful for you.
If you want to start a Big business, you will need a local
sponsor in Abu Dhabi and the charges depending on the company and the sponsor
you choose; annual sponsorship starts at AED 25000. For a small business, you
can go for the service agent and the charges will be yearly from AED 5000 to
AED 10000. All agreements between you and the sponsor must be registered in
Dubai courts.
If you don't have proper connections, don't worry!!
There are plenty of consulting firms that will help you to find the best
local sponsor.