Setting up a business in Dubai, one of the fastest-growing business hubs in the world offers numerous opportunities for entrepreneurs and investors. However, navigating the legal and regulatory requirements can be complex, especially when a local sponsor is required.
A local sponsor in Dubai is an Emirati individual or company owned by locals that partners with foreign investors to establish businesses in the Dubai mainland. Depends on the activity, local sponsor holds a certain percentage of ownership in the company or acts as a representative or a local agent without any percentage of shares. Understanding the role of a local sponsor, determining if you need one, and finding the right sponsor are crucial steps in ensuring a successful business setup in Dubai.
In this comprehensive guideline, we will explore everything you need to know about local sponsors in Dubai, finding local sponsors for business in Dubai including their significance, industries that require a local sponsor, finding a local sponsor, considerations when hiring one, the duties of a local sponsor, and even alternative options for obtaining a Dubai trade license without a local sponsor.
Let’s delve into the world of local sponsorship in Dubai and empower you with the knowledge to make informed decisions for your business venture. Read to get more information!
Do I need a local sponsor in Dubai?
A local sponsor for business setup in Dubai is very important especially when you are setting your business in Dubai mainland, UAE.
For some business activities, you must have a local sponsor to run your business in Dubai, such as:
Oil exploration and production
The oil industry is considered strategic and requires a local sponsor due to its significance to the country’s economy and national resources.
Security and military services
These industries are closely tied to national security and typically require local sponsorship to ensure compliance with regulations and safeguard sensitive operations.
Banking, financing, and insurance activities
The financial sector is highly regulated and requires a local sponsor to ensure compliance with banking and financial laws and regulations. After that only they can offer bank account services in the UAE.
Water and electricity provision
The provision of essential utilities like water and electricity often falls under government-controlled entities, necessitating a local sponsor.
Fishing and related services
Fishing is regulated to preserve marine resources, and a local sponsor is required to ensure compliance with fishing regulations and environmental conservation.
Road and air transport
Transportation services, especially those involving public safety and infrastructure, typically require local sponsorship to comply with transportation regulations.
Medical retail (Pharmacies)
The healthcare industry, including medical retail and pharmacies, may require a local sponsor to ensure compliance with health and pharmaceutical regulations.
Industries involved in the storage and handling of sensitive materials, such as blood, toxins, or quarantine facilities, typically require local sponsorship for safety and regulatory reasons.
*For businesses outside of these industries and others, you may have the opportunity to retain 100% ownership of your business but for professional or service-based license, local sponsor is mandatory. However, it is important to note that even in these cases, you will still need to apply to the Dubai Department of Economic Development (DED) for permission to trade. The DED will assess your business activity and determine whether you are eligible for 100% foreign ownership.*
It’s important to mention that regulations and requirements can change over time, so it is crucial to research and stay updated on the specific regulations and guidelines related to your industry and business activity. Consulting with our business consultants in Dubai can help you navigate through the process and ensure compliance with the latest UAE regulations.
How to find local sponsors in UAE?
Finding a reliable and trustworthy local sponsor is crucial for establishing your business in Dubai. But with Emirates Business Setup, you don’t need to get worried about how to find a local sponsor in UAE. We are here to help.
Here are three points to be noted when Dubai local sponsor is required:
1. Engage with business consultants
Professional business consultants or company formation specialists can provide valuable assistance in finding a suitable local sponsor in UAE. They possess in-depth knowledge and extensive contacts within the local business community, making them well-equipped to connect you with potential sponsors.
2. Attend networking events
Participating in business networking events, trade shows, and exhibitions can offer excellent opportunities to meet potential local sponsors in Abu Dhabi, Dubai, and over UAE. These events facilitate connections and help build relationships with individuals and organizations who may be interested in partnering with you.
3. Local business associations
Contacting local business associations, chambers of commerce, or industry-specific organizations can provide valuable insights and connections to potential local sponsors. These associations are often well-connected and can guide you in finding the right sponsor for your business.
Types of Dubai local sponsors
A question that arises in an entrepreneur or company owner’s mind is if we find a local sponsor in Dubai, which sponsor will fit into their relevant business activities? For that reason, in Dubai, you will come across two primary types of local sponsors:
A. Individual local sponsor
An Emirati individual or UAE resident acts as a local sponsor in your business. This person may or may not have an active role in the day-to-day operations of the business.
B. Corporate local sponsor
A local company can act as a sponsor, especially in cases where specific licenses or approvals are required from government authorities. Corporate sponsors may have a more significant role in business operations and can provide additional expertise and support.
Responsibilities of a local sponsor in UAE
The specific duties of a local sponsor in UAE may vary depending on the nature of the business and the agreement between the parties.
However, some common responsibilities of a local sponsor in Dubai include:
i. Obtaining necessary approvals
The local sponsor in UAE may assist in obtaining the required mainland business setup Dubai licenses, permits, and approvals from government authorities. They can provide guidance and support throughout the process, leveraging their knowledge of local regulations.
The local sponsor acts as a representative of the business and may interact with government entities and regulatory bodies on behalf of the foreign investor. They can handle official documentation, communicate with relevant authorities, and ensure compliance with local laws and regulations.
iii. Sponsorship fee
In most cases, the local sponsor receives an annual sponsorship fee for their services. The fee is typically negotiated and agreed upon between both parties based on the terms of the partnership agreement. It is important to establish clear expectations regarding the sponsorship fee to avoid any misunderstandings or disputes in the future.
3 things to keep in mind when hiring a local sponsor
When selecting a local sponsor in Dubai, it is essential to consider these three factors:
- Reputation and trustworthiness
It is crucial to choose a local sponsor with a good reputation and a track record of successful partnerships. Conduct thorough research, check references, and consider their experience in the industry. Working with a reputable sponsor increases the likelihood of a successful and mutually beneficial partnership.
- Alignment of interests
Ensure that your business goals and objectives align with those of the local sponsor. It is vital to have a clear understanding of each party’s roles, responsibilities, and expectations to foster a harmonious partnership. Open and transparent communication is key to establishing common ground and building a strong working relationship.
- Legal agreements
Once you have identified a potential Dubai local sponsor, it is crucial to draft a comprehensive legal agreement, such as a sponsorship agreement or a Memorandum of Understanding (MOU). The document should outline the terms and conditions of the partnership, including the distribution of profits, responsibilities, and any other relevant clauses.
Seeking legal advice can help ensure that all legal aspects are covered and protect the rights of both parties involved.
How to change a local sponsor in Dubai?
If, for any reason, you wish to change your local sponsor in Dubai, the process typically involves the following steps:
1. Review the current agreement
Carefully review the existing agreement with your current local sponsor to understand the terms and conditions regarding the termination or transfer of sponsorship. Pay close attention to any clauses related to sponsorship changes or replacements.
2. Mutual agreement or legal resolution
Ideally, both parties should mutually agree on the termination or transfer of sponsorship. Open and honest communication is essential during this process. All dues must be cleared before the changing of previous local sponsors in UAE.
3. Update legal documentation
Once the termination or transfer of sponsorship is agreed upon, it is crucial to update the legal documentation accordingly. This may involve drafting a new sponsorship agreement or modifying the existing one to reflect the changes in sponsorship.
How to get a trade license without a local sponsor in Dubai?
As mentioned earlier, Dubai has implemented measures to allow 100% foreign ownership in all sectors under the free zones. If your business falls within these sectors in those relevant free zones, you may be eligible to obtain a Dubai trade license without the need for a local sponsor. However, it is important to note that this is subject to specific requirements and approvals from the relevant authorities.
Understanding the role of a local sponsor in Dubai is important for entrepreneurs and investors looking to establish businesses in the UAE. While the requirement for a local sponsor depends on the industry and business activity, finding a reliable sponsor and establishing a strong partnership is essential for success. By conducting thorough research, seeking expert advice, and following the appropriate legal procedures, you can navigate the complexities of the local sponsorship system and position your business for growth in Dubai’s dynamic market. Emirates Business Setup also offers business setup services including local sponsorship. If you are looking for a local sponsor in Dubai, contact us to get one!
1. Do I need a local sponsor in Dubai?
The need for a local sponsor in UAE depends on the type of business and industry you want to operate. Some industries require a local sponsor, while others allow 100% foreign ownership.
2. How to change the local sponsor in Dubai?
To change a local sponsor in Dubai, you must review the existing agreement. Additionally, you need to reach a mutual agreement with the current sponsor or seek legal resolution if necessary.
3. What are the local sponsor fees in Dubai?
The local sponsor fees in Dubai can vary and are typically negotiated between the foreign investor and the local sponsor. It is based on their agreement and the nature of the partnership.
4. How to get local sponsors in Dubai?
In Dubai, local sponsors can be found through various channels. You can find them through engaging business consultants, attending networking events, and contacting local business associations or industry-specific organizations.