In UAE, it’s mandatory to have a local sponsor (UAE national) when setting up a new business. A company must have legal documents to show that 51% of the shares is owned by a local. The Sponsor is a sleeping partner and is only required to fulfil the legal requirement. The sponsor has no rights on the business management, turnover or profits.
We assist companies and individuals by introducing them to trust worthy, dormant and reliable partners. We have stringent procedures to assess suitable nationals as local partners. We only recommend credible individuals as sponsors who have a well established track record of non-interference in the businesses of our clients.
In the case of a professional practice, a local service agent is required, but this agent has no involvement in the company’s business operations, management or profit sharing. The agent merely acts as a representative when drafting legal agreements and establishing other business documentation required in Dubai.
If you are considering sponsorship for your new business or are not satisfied with your current sponsor, we can assist you with suitable business sponsors.
Types of Companies
General Partnership company
It is a firm which consists of two or more partners who are jointly and severally responsible for all the firm’s liabilities. Partnership companies are confined to UAE nationals only because partners are responsible towards the liabilities of the firm by all their assets, which may not applied to foreigners as in most of the cases their assets are usually in abroad.
Professional company means an agreement by which two or more persons agree to serve others against a consideration whether they are equal or unequal in distributing the work, provided that the works are unified or carried out simultaneously.
Therefore it shall be regarded a professional company is any firm which practices a profession as its main object and that partners rely on their livelihood on the intellectual effort they exercise more than on profiting from the business of others. On this basis the professional companies are set up between professionals or partisans and carry out non-commercial activities.
The firms which are registered as professional companies or firms, may only practice specific activities and not extend that to commercial business. Such activities include rendering the following services: Legal practice and consultancy, auditing, organizing and keeping accounting records and books, civil engineering and architecture consultancies and services, managerial and economic consultancies and studies, technical services, medical and curative services, educational services and other similar services.
Joint venture company
A Joint Venture is a type of company where two or more partners agree by contract to share the profits or losses of one or more commercial enterprises, which will be carried on in the name of one of the partners. Contract of Joint Ventures may be written or oral and not required to be notarized. Third parties can recourse only to the partners with whom they deal. However, should the Joint Venture is disclosed to the third parties, all the partners are liable to the third parties. Existence of Joint Venture may be proved by any method of proof.
Public shareholding company
Public Shareholding Company is a company with a capital divided into equal negotiable shares. In such companies a shareholder’s liability is limited by the number of shares held by him. Minimum capital required to form a Public Shareholding Company is AED 10 million (US $ 2,724,796) with a nominal face value of AED 1–100, and for a banking entity it is AED 40 million and insurance and investment companies is AED 25 million.
Private shareholding company
A Private Shareholding Company is incorporated by a number of persons not less than three. Unlike public shareholding company, a private shareholding company cannot invite the public for subscribing in its shares. The minimum share capital to form a private shareholding company is AED 2 million. The Chairman and majority of the Directors in a private shareholding company must be UAE nationals.
Limited liability company
A Limited Liability Company is the most common form of business entity currently formed in UAE. A limited liability company can be formed by a minimum of two and a maximum of 50 persons whose liability is limited to their shares in the company’s capital. The minimum equity participation by UAE national is 51%. Profit or loss distribution can be prescribed and responsibility of management of an LLC can be vested in the foreign or national partners or third party. The shares of such company are not open for subscription by the public and they do not issue negotiable shares.
Sole Proprietorship Firm
The law permits the establishment of a sole proprietorship for the U.A.E. nationals and nationals of the Gulf Co-operation Council.
Establishment by GCC citizen
The states of the Gulf Cooperation Council (the UAE, Saudi Arabia, Sultanate of Oman, Qatar, Kuwait and Bahrain) signed the United Economic Agreement in Riyadh on 7th June 1981, with a view to coordinate and unify economic, financial, monetary, commercial and industrial legislation and UAE endorsed this agreement in 1982.
It is conditional as per the Federal Law No. 2 of 1989 concerning permitting the GCC citizen to conduct a business operation in UAE that the investor should be a natural person residing in UAE and practice the required activity by himself and have a license to practice the activity in his country of origin. In case the investor is a juridical person wishing to conduct retail or wholesale trade then the investor must be in the form of a company of which the share owned by UAE nationals is not less than 50% of the capital.
Appointing a Branch
The Companies Law, in article (313) allows a foreign company to exercise its main activity in the UAE by opening a branch or a representative office. The difference between the two is that the foreign company which opens a branch in the UAE may exercise freely the activities for which it is licensed whereas a representative office may practice only promotional business for the products and services provided by the parent company.
Unlike a foreign branch a representative office cannot conduct business operation or market directly its product. In order to engage a foreign branch to conduct its operation in UAE it should obtain a license from the Ministry of Economy & Planning prior to obtain the license from the concerned authority in the respective Emirate. Foreign companies licensed to operate in UAE may not start their activities before being inscribed in the Ministry’s Register of foreign services.
An agent should be a UAE national. A service agent is not an empowered agent who can bind his principal as explained in the definition of the term “agent” in the Commercial Companies Law. A service agent is not responsible to undertake any financial obligations concerning the activities of the company’s branch or office within the UAE or abroad. He should not interfere in the matters related to the company’s management or activities. His duties towards the company and others are confined to providing such services as required by the principal. These services usually include obtaining of entry/residence permits, acquiring of the necessary licenses or facilitating the processing of its transactions with the government authorities. The service agent is remunerated in lump sum for the services rendered to the foreign company, which sum shall be the subject of an agreement between him and the company.