Monday, 16 November 2020

Why do you need a local business setup in Dubai?

 

Dubai is one of the most favourable entrepreneurial hotspots for setting up a business, and understandably so. It is one of the fastest-growing cities, a flourishing Emirate in the United Arab Emirates known for its luxurious lifestyle and ultramodern framework. 

The enthusiasm of the Dubai Government in helping and facilitating the construction of upcoming state-of-the-art offices and entrepreneur-friendly economic policies make it a go-to place for new business prospects. The city's strategic location, modern infrastructure, and its investment-friendly market significantly contribute to its appeal. The fact that Dubai encourages Foreign Direct Investment (FDI) also presents an added benefit.

To set up a business in Dubai mainland as a foreign investor, it is first and foremost mandatory to have a local sponsor. Now, you must be wondering, who is a local sponsor? 

The term ‘local sponsor’ is a general term used in the UAE to refer to agents or  individuals that serve as the nominee shareholders in mainland companies with foreign investments. So, if you are planning on starting a business in Dubai, you need to have a local sponsor.

There are a few conditions or pointers to keep in mind when you are looking for a local sponsor:

  • It is compulsory that the said local sponsor is a UAE-national, also known as an Emirati.

  • He/she needs to have a valid UAE passport and a family membership card.

  • He/she will mandatorily own up to 51% of the total shares of your company.

There are three types of local sponsors in Dubai that you need to choose from, depending on your business.

Corporate Local Sponsor:

The local sponsor of Dubai will hold 51% of total company share and also 49% of total liabilities. The local sponsor must be an Emirati, which means a UAE national. These sponsors are the people who have a corporate firm established in Dubai, and they provide local sponsorship to upcoming companies with foreign investments.

Individual Local Sponsor:

This sponsor can only be an Emirati individual or an official. If you are looking to open a commercial business, these should be your best guide for local sponsors.

Local service agent as local sponsor:

Local service agents, again, can only be Emiratis. Not any resident of Dubai. Unlike local sponsors, they don't have any shareholding rights. They are only paid mutually agreed fees. And they can only be brought on board for a professional license. 

Having known the types of local sponsors, there are certain things you might want to do before declaring someone as your local sponsor.

  • Make sure you do a thorough background check of the said person. Ensure that he/she is a resident of Dubai. This is important as whenever you need to get something cleared at the government offices, you will need to travel to their place of residence every time their signature is required.

  • You need to ascertain whether he/she has goodwill in that particular area. They will be an added advantage to your reach and setup of the business.

  • Make sure they have no language barrier else it may hinder your business.

  • Have a government agent as your preferred local sponsor. This agent will help you with proper guidance regarding your company. This intimate support benefits your business.  

  • Be very careful and get the verification procedure of your sponsorship deed done before getting the signature.

  • Be very clear and precise about your financial requisites and local sponsor fees in Dubai. Make sure that you and your local sponsor are on the same page regarding the fee and compensation.

To summarize, if you have any plans to set up a business in Dubai, you need to keep various points in mind. Having a local sponsor and legal support are not only valuable assets for your business, these are also financially beneficial. You don’t need succession planning if you opt for a local service agent as your local sponsor.

He/she will be the perfect key to dealing with inflexible or slightly messy situations. The Dubai Government has made this rule keeping with the best interests of both the foreign investors as well as the local sponsors.






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