Danny Dotson
The UAE has been attracting thousands of foreign investors for several years. The allure of its economic structure, abundant commercial opportunities, geographic reach, and high standard of living makes the country a popular place to start a company. However, many foreign investors are not introduced to or are unaware about the concept of corporate sponsorship in the UAE.
What is corporate sponsorship in the UAE?
Corporate sponsorship, when used generally, is the act of a company offering financial support to a person, event, or another organisation.
But it holds a different meaning in relation to company formation in the UAE. As per UAE law, a foreign-owned company wanting to register a business in UAE mainland is required to partner with a local sponsor. A local sponsor can be either of the following:
- Individual sponsor – must be an Emirati (UAE national) only
- Corporate sponsor – a UAE-based company fully owned by an Emirati (UAE national)
What is the difference between local and corporate sponsorship?
The type of sponsorship where a company, that is 100% owned by a UAE national, partners with another company owned by a foreign national, is called corporate sponsorship.
Local sponsorship is the type of sponsorship where an Emirati becomes a partner in his/her individual capacity and, by law, holds 51% shares in the foreign-owned business.
Corporate sponsorship is better than local sponsorship because
- there is zero interference of the sponsor, which enables the businessman to avail complete operational ownership and 100% profit share,
- it offers more security to the entrepreneur since it is usually too risky to partner with a local whom you do not know,
- it ensures timely completion of paperwork and document processing,
- You also don’t need to worry about succession planning if you opt for corporate sponsorship.
100% ownership, 0% apprehension
Foreign investors are often apprehensive about the extent to which UAE local partners may control their business, hence, question the security of such partnerships/sponsorship. Nevertheless, the agreement of corporate sponsorship in the UAE, which is also called ‘Investor Rights Protection Contract’, creates a reliable and secure channel for foreign investors.
With the corporate sponsorship agreement, foreign investors can find a trustworthy partner and secure their rights. The agreement is drafted on mutual terms and 100% operational ownership is given to foreign investors, along with the company’s power of attorney. The sponsor only charges a nominal annual fee for these procedures.
Do all types of companies require sponsorship in the UAE?
No, not all types of companies require sponsorship in the UAE. Companies and/or activities that require a commercial or industrial license need a local sponsor. However, professional companies do not require sponsorship. They only need a local agent who will represent the company in all the administrative works. A local agent does not hold any shares in the business and is paid an annual fee, as per mutual agreement.
For example: If a professional such as a doctor, accountant, or engineer wants to set up a company in the UAE, they will not need a local sponsor for company incorporation; only a local agent to comply with the UAE’s laws.
How to find a local sponsor or corporate sponsorship services in the UAE?
- You can visit expat forums where there are many Emiratis willing to sponsor businesses in Dubai mainland, or connect with Emiratis on LinkedIn and send them your pitch for getting business sponsorship. Be careful when you look for a sponsor and beware of frauds.
Do not rely on verbal agreements; contract. Clarify about all hidden costs and sponsor fees involved and keep all your conversations documented (via e-mails).
- The best and safest means to finding sponsorship for your business is to get in touch with a business setup consultant. The consultant will get you in touch with a reliable and trustworthy sponsor, and can also help you with legal formalities, bank dealings, office rentals, staff hiring, and much more.
