In this blog post, we have jotted the entire concept of the requirement of a Sponsor for the Process of Company Registration in Dubai
A person or organization that takes on certain obligations in support of another person, a group, or an activity, such as when acting as a supporter, endorser, advisor, underwriter, surety, etc., is referred to as a sponsor. A sponsor is also a person or organization accountable to another person or organization, mainly when that accountability involves matters of law, finance, or religion. In Company Registration in Dubai is also you found sponsors.
Law Requirements For Sponsors
The federal government of the United Arab Emirates is in charge of the seven states that make up the country. A constitution was used to create the Federation of the United Arab Emirates in 1971. The principal legislative body of the United Arab Emirates is the federal supreme council.
The Federal Supreme Council, which ratifies and issues federal laws such as UAE labour law, employment law, Company Registration in Dubai, and UAE immigration law, has legislative and executive functions. According to the law, to establish a limited liability company or a firm in mainland Dubai, you must have a local sponsor who is a UAE person and owns 51% of your business. The local sponsor will be compensated annually for this service.
Is A Local Sponsor Necessary?
Any type of business must have a local sponsor who will possess a 51 per cent stake in the company, with foreign investors owning the remaining 49 per cent.
Types of Local Sponsors
To benefit Dubai residents, the UAE government has made it mandatory for foreigners to be sponsored by UAE nationals or UAE-owned businesses.Foreign companies must pay annual fees to these local sponsors in order to use their services, and companies must also give a certain percentage of their stock to these local sponsors.
Businesses can choose from three types of sponsorship:
Individual Sponsorship
These are UAE residents who are Emirati nationals and can provide sponsorship to foreign investors in their capacity. These Emirati nationals will represent and work for foreigners in Dubai. These local individual sponsors will hold 51 per cent of the company’s shares and liability, but they can transfer power of attorney to their foreign partners in exchange for the agreed-upon fees for their services. These local sponsors are not required to invest in the business because they charge fees for the services to take responsibility for foreign investors.
Local Service Agents
These are another type of local sponsors in Dubai who are local professional representatives. Suppose a doctor, engineer, or artisan wants to make company formation in dubai to provide their services. In that case, they will need a local service agent to represent them in dealings with government departments. These local service agents receive pre-agreed fees from professionals in exchange for their services and have no ownership or liability in the business.
Corporate Sponsorship
In contrast to individuals, these sponsors are Company Registration in Dubai that provide sponsorship to expatriates and will represent their foreign partners locally in Dubai. Corporate sponsors function similarly to individual sponsors in that these companies will hold 51 per cent of the company’s assets and liabilities and will be responsible for the company. Corporate sponsors, like individual sponsors, are not required to invest in the business and charge predetermined annual fees for their services.
Depending on the business needs foreign investors want to start in Dubai, these corporate sponsors could be any local or government authority. These authorities have different fee structures based on the benefits they provide.
Role and Responsibilities of a Local Sponsor
A foreign company must have a local sponsor if it wants to incorporate a business in Dubai Mainland. These sponsors assumed foreign investors’ responsibilities and represented them in dealings with government agencies.
Dubai is a multicultural city where most transactions and business contracts are conducted in English. However, for business registration, a local authority is required who can understand and interpret these documents and sign on behalf of their foreign business partners.
Risk involvement of a Local Sponsor
Local sponsors are not required to invest in the business, but they hold 51 per cent of the company’s shares and liability because a local sponsor is responsible for your dealings in Dubai.
A sponsor’s risk value is also high because they are a 51 per cent partner in the company.
For example, if a company fails, the local sponsor is responsible for;
- The company issued cheques
- For company employees and the cancellation of their work visas
- To close business and bank accounts
As a result, when local sponsors provide sponsorship, they assume certain risks.
How to Find the Right and Perfect Local Sponsor in Dubai
According to government regulations, foreign nationals who have obtained residence status can set up their own business in a non-free zone area, but 51 per cent of your company must be owned by a local UAE national.A well-educated local sponsor can help your business grow by connecting you to other resources, partners, and networks.
Sponsor Fees in Dubai
When registering a company in the UAE, there are two types of fees: governmental and third-party fees. We consider governmental fees obligatory and mandatory, such as the fees required to register your own company. In contrast, third-party fees are the fees of some non-process-involved companies that assist us in doing the same work that can be done without them.
When you have to pay third-party fees in any case, such as offshore agent fees, third-party fees are unavoidable. In our previous video, we explained in detail why the offshore registration process is designed so that you cannot register an offshore company without paying a registered agent, mentioning that this is a worldwide common practice of offshore company formation, and the UAE is no exception.
If you want to review this information, please watch the previous video, which will explain why.In such cases, agent’s fees can be considered an integral part of governmental fees because you cannot proceed without paying third-party fees – they are mandatory.
Conclusion
If you form a mainland company (LLC or sole proprietorship), you must pay governmental registration fees, governmental office rental fees, and local sponsor/agent fees. In some free zones, you must pay governmental fees plus/minus governmental office rental fees plus/minus capital deposit fees when registering a free zone company.
When you register an offshore company, you must pay offshore agent and government registration fees. Local sponsor service is critical for a company’s survival in the Dubai market. There are numerous advantages to using a local sponsor service for any foreign company looking to establish a presence on the Dubai mainland. For more information, you can get help from Vakilsearch.
