When Do I Need A Local Sponsor or Corporate Sponsor / Corporate Nominee in Dubai & UAE?When setting up a mainland or onshore business in Dubai and the UAE you will require a local sponsor to be involved for the company registration and license processing. The below describes the license options available and how Creation Business Consultants can provide a safe and trusted corporate sponsor/corporate nominee option for your business setup. |
Is Dubai Planning A New Gaming Free Zone?
February 20, 2020
How To Expand Your Company Through Merger Or Acquisition
March 15, 2020
Dubai and UAE Local Sponsorship Guide
Published on February 23rd, 2020.
WHICH GOVERNMENT DEPARTMENT ISSUES A MAINLAND COMPANY LICENSE IN DUBAI & UAE?
The Department of Economic Department (DED) in the relevant Emirate such as: Abu Dhabi, Dubai, Ajman, Fujairah, Ras al Khaimah, Sharjah, and Umm al Quwain are the regulatory authorities responsible for issuing a business with an industrial, professional, or commercial license. Due to the nature of certain business activities there may be additional external government approvals required for the business trade license to be issued and the company setup to be completed and operational.
WHICH LICENSE TYPES ARE AVAILABLE IN THE UAE?
The 3 main license types that are available for new business registrations are:
- Commercial license – issued to a business engaged primarily in trading activity
- Professional license – issued to professionals with certain skills, qualifications, or service providers
- Industrial license – issued to a company involved with manufacturing or industrial activity
WHAT IS THE DIFFERENCE BETWEEN EACH LICENSE TYPE?
| PARTICULARS | COMMERCIAL | INDUSTRIAL | PROFESSIONAL |
|---|---|---|---|
| BUSINESS ACTIVITY | Involves businesses selling tangible products. Often the legal license type is commercial. Examples of commercial licenses are general trading, garment trading, and electronic trading etc. | Involves companies specialised in manufacturing, casting, moulding, assembly, or processing activities. Also including any production from raw materials to semi-finished goods and supplies. | Involves businesses that is qualified with a certain skill set or knowledge in a certain industry or field in exchange for a fee. Examples of a professional license type include accounting, events organisation and medical. |
| OWNERSHIP | Foreign investors can hold 49% shares and 51% of the shares can be held by a UAE national or corporate nominee. | Foreign investors can hold 49% shares and 51% of the shares can be held by a UAE national or corporate nominee. | Foreign investor will have 100% ownership. License registration requirement is to have a local service agent. |
| SHARE CAPITAL | Minimum share capital is AED 300,000 (not paid up). | Minimum share capital is AED 300,000 (not paid up). | Company not limited by share capital. |
| LIABILITY | Commercial license is issued for a limited liability company (LLC). Shareholders are limited by the company debts and liabilities. | Industrial license is issued for a limited liability company (LLC). Shareholders are limited by the company debts and liabilities. | Provides the professional license holder the ability to establish a business with sole responsibility for all debts and liabilities (unlimited). |
| GOVERNMENT FEES | Commercial license type fees range from AED 8,000 to AED 20,000+. | Industrial license type fees range from AED 10,000 to AED 30,000+ (depending on approvals for certain business activities. | Professional license type fees range from AED 8,000 to AED 20,000+ (depending on approvals for certain business activities. |
IS A LOCAL SPONSOR REQUIRED FOR A COMMERCIAL, PROFESSIONAL, & INDUSTRIAL LICENSE?
Yes, all license types will require a local sponsor, corporate sponsor, or corporate nominee to complete the business license registration.
WHAT IS THE DIFFERENCE BETWEEN A LOCAL SPONSOR & CORPORATE SPONSOR / CORPORATE NOMINEE?
LOCAL SPONSOR
An individual local sponsor is where a UAE national in their own personal capacity holds 51% of shares in a mainland limited liability company. The Emirati sponsor – being the majority shareholder of the LLC may give a Power of Attorney to the foreigner in exchange for a fixed annual fee. There are a few business activities where the requirement is for a local sponsor to have certain qualifications and experience and they must hold 100% of the shares in the mainland company again in exchange for a fixed annual fee.
CORPORATE SPONSOR / CORPORATE NOMINEE
Referring to Article 10 – UAE Commercial Companies Law (CCL) specifies that a UAE mainland Limited Liability Company must have a minimum of 51% share capital owned by a UAE national. Often this arrangement is required for a mainland Department of Economic Development (DED) commercial license type or an industrial license business registration. Creation Business Consultants provide a corporate sponsor or corporate nominee agreement to satisfy this legal requirement.
CORPORATE – LOCAL SERVICE AGENT
Article 329 – CCL specifies that a professional license company must have an appointed agent. Often this arrangement is required for a mainland DED professional license registration. Creation Business Consultants provide a National Service Agent (NSA) also known as a Local Service Agent (LSA) to satisfy this requirement.
UAE COMMERCIAL COMPANIES LAW AND LOCAL SPONSORS
To meet the company registration requirements set by UAE Commercial Companies Law and by the Economic Development Department, investors and entrepreneurs seeking to open their company or a branch office in the UAE can choose between an individual sponsor or a corporate sponsor to meet their sponsorship requirements.
- Individual Sponsors – Individual sponsors are UAE Emirati Nationals who agree to provide sponsorship to foreign investors. These Emirati Nationals enter into a contractual agreement to represent foreign investors in the UAE. Under the Commercial Companies Law, local individual sponsors are required to hold 51% of company shares and liability. Selecting an individual partner can prove a daunting task, as you are essentially trusting this individual with your business. As an individual sponsor may also want to share in organizational responsibilities.
When you partner with an individual sponsor, there is the possibility that they may want to receive a percentage of the business profits. Additionally, they may want to be actively involved in business management, operations, and voting direction of your company. Furthermore, you will need to ensure you have a plan in place should the sponsor not be available, become difficult to work with, become sick, or pass away.
- Corporate Sponsorship – Designed to provide you with complete peace of mind, corporate sponsorship safeguards your interests while ensuring you are fully compliant with commercial regulations and laws. Additionally, corporate sponsor services allow you to form a company in mainland UAE while maintaining 100% control of your company. Just like with an individual sponsor, corporate sponsors hold 51% shares and liabilities of the business.
Among the many benefit of entering into a corporate nominee sponsorship include:
- Full control of your company
- 100% financial benefits
- Full control of company voting rights
- Access to protective side agreements designed to provide greater shareholder protection
- Any and all documentation your business will need
At Creation Business Consultants, we recommend opting for a corporate sponsor or corporate nominee program. However, the type of local sponsor you select will depend on your industry and the specific needs of your company. Some business activities may require a local sponsor to hold certain qualifications as part of the requirements to complete their Company Trade License Agreement. For example, architectural or engineering business activities may request a local sponsor to hold certain educational qualifications. As you set up your company in the UAE, it’s important to seek the advice of an expert who understands your industry, as well as the needs of your company, to help you find the safest option for local sponsorship requirements.
CREATION BUSINESS CONSULTANTS
Should you wish to know more about setting up a mainland company in Dubai and the UAE or you want us to set up your business in Dubai and complete your UAE business registration contact info@creationbc.com or call +971 4 878 6240 for your free consultation.
