Are you looking to start a business in the UAE mainland but are unsure about the requirements for a local sponsor?

Finding the right local sponsor can be a crucial step toward realizing your business goals in the UAE. While local sponsorship rules and regulations have evolved in recent years, it is still a vital component of doing business in specific industries.

So, whether you are a first-time entrepreneur or a seasoned business owner, understanding the ins and outs of local sponsorship is crucial for business setup. In this blog post, we’ll share seven questions you should ask yourself to find the right local sponsor for your business in the UAE.

Understanding Local Sponsorship in the UAE

If you plan to set up a business in Dubai, one of the first things you will hear about is the requirement for a local sponsor. But what does it really mean?

In simple terms, a local sponsor is a UAE national or a company that holds a 51% stake in your business, while you, as the foreign investor, hold the remaining 49%. However, it is essential to understand that the local sponsor has no role in decision-making or day-to-day operations.

Who Will Need a Local Sponsor?

In Dubai, certain industries require a local sponsor, while others may not. Here is a breakdown of sectors that need a local sponsor:

• Oil exploration and production
• Water and electricity provision
• Printing and publishing
• Post and telecoms services
• Security and military services
• Road and Air transport
• Fishing and related services
• Pilgrimage and Umrah services
• Banking, financing, and insurance activities
• Commercial agency
• Blood banks, quarantines, and venom/poison banks
• Medical retail (including pharmacies)

If your business falls outside these industries and others like them, you can retain 100% ownership. However, you will need to apply for permission to trade from the Dubai Department of Economic Development (DED).

Choosing the Right Local Sponsor in the UAE – 8 Questions to Ask

Finding the right local sponsor is crucial for the success of your business. Your sponsor can provide the necessary support and guidance to help you navigate the UAE’s complex legal and business environment. Because of this reason, it is best to consult a business setup consultant to find the right sponsor.

That being said, here are the seven questions that you must keep in mind when assessing various sponsors in the UAE –

1. What level of involvement do you expect from your local sponsor?

When choosing a local sponsor for your business, it is essential to consider the level of involvement you expect them to have. Would you prefer a sponsor who is actively involved in the day-to-day operations and decision-making of the business and is willing to contribute to the setup and operational costs?

Alternatively, would you prefer a professional corporate sponsorship platform that acts as a nominee partner and provides financial and operational control to the foreign party without taking a share of the profits?

2. How can you ensure the local sponsor will fulfiltheir promises?

Selecting a reliable local sponsor is crucial to the success of a business venture. While promises of introductions and open doors may be enticing, it is essential to ensure that such promises will be delivered. In order to avoid being left with empty promises, consider setting up a contract that remunerates the individual or organization based on their actual delivery rather than structuring the company around such promises.

3. What factors should you consider when selecting a high-profile local sponsor?

When selecting a high-profile local sponsor for your business, it is crucial to consider a range of factors. For example, it is vital to confirm in advance whether the sponsor’s name will appear on your commercial license or whether one of their companies will be listed instead.

Additionally, it’s important to consider how communication with the sponsor and their staff will be handled and ensure that administrative responsibilities are administered efficiently and on time. By carefully evaluating these factors, you can help ensure your business is built on a solid foundation with a reputable and reliable local sponsor.

4. How important is the availability of your local sponsor for the success of your business?

Your local sponsor’s availability is crucial for your business’s success, particularly during the incorporation or registration process. In addition, ongoing access to your sponsor may be required for essential tasks such as signing documents or assisting with government processes. It is important to consider the availability of your sponsor and ensure that they can provide the support you need when you need it.

5. How can you assess the compliance track record of your local sponsor’s other sponsored companies?

Assessing the compliance track record of your local sponsor’s other sponsored companies can help you better understand the risk associated with engaging this sponsor. You may consider requesting references from other companies sponsored by this individual or conducting research to determine whether any of their sponsored companies have been subject to legal or regulatory action.

6. What are the financial terms of your local sponsor’s engagement?

Understand the financial remuneration for your local sponsor based on their level of engagement with your business. Will they take a share of the profits or charge a fixed annual fee? Knowing the financial commitment will help you budget and protect your profits. Additionally, ensure that the agreement outlines how fees may be increased in the future to avoid misunderstandings.

7. What should be considered when planning an exit strategy?

It’s essential to consider a clear exit strategy from the outset to avoid difficulties in terminating agreements with local sponsors in the UAE. It should include defining the terms of the exit and any associated fees, if applicable. It’s important to understand that local sponsors may view liquidation as a failure, and this cultural aspect can impact negotiations.

Navigating The Path With TASC Corporate Services

Selecting the right local sponsor is crucial for foreign companies in the UAE. A well-connected, trustworthy, and responsive sponsor is vital for success. Long-term goals, financial commitments, and exit strategies should be considered while looking for a sponsor. By considering these factors, companies can mitigate risks and achieve long-term success in the UAE market.

Here at TASC Corporate Services, we strive to turn these complexities into a smooth, navigable path for your business journey.

With over 15 years of experience in business setup in UAE, we are uniquely positioned to guide you through every stage of the process. Our team of business setup experts is not only well-versed in the legalities of setting up a business in the UAE but also committed to ensuring your setup process is streamlined and 100% compliant.

No matter your industry or the size of your business, we are here to help you focus on what you do best – running your business – while we handle the rest.Contact us today and let our experts guide you through the process with efficiency, diligence, and full compliance.