The Role Of A Local Sponsor In The Mainland License Application Process

In Dubai, businesses that wish to operate outside the free zones must obtain a Dubai mainland license. For foreign investors and companies, one key aspect of this process is the involvement of a local sponsor. Understanding the role of a local sponsor is vital for steering the mainland license application effectively. Here’s a detailed look at what a local sponsor does and why their role is significant.

Mandatory requirement for foreign investors:

In Dubai’s mainland business setup, foreign investors are required to have a local sponsor, who is a UAE national. This requirement stems from the UAE Commercial Companies Law, which mandates that a local sponsor holds at least 51% of the shares in a mainland company. This regulation applies to most types of businesses, ensuring that local nationals retain significant control over business operations within the UAE.

Holding majority shares:

The primary role of a local sponsor is to hold the majority of shares in the company. While the foreign investor retains 49% ownership, the local sponsor possesses 51% of the company’s shares. This arrangement is vital for compliance with UAE regulations and allows the business to operate legally in the mainland. Despite holding a majority of shares, the local sponsor typically does not involve themselves in the day-to-day management of the business.

Facilitating government relations:

Local sponsors play a key role in facilitating interactions with government authorities and regulatory bodies. They assist in steering the bureaucratic processes involved in obtaining various approvals and permits required for business operations. Their local knowledge and connections can expedite procedures, making the setup process smoother and more efficient.

Assisting with legal compliance:

The local sponsor’s involvement ensures that the business adheres to UAE laws and regulations. They help in ensuring that the company complies with local legal requirements, including those related to corporate governance and operational practices. By utilizing their understanding of local laws, sponsors contribute to maintaining the business’s legal standing.

Providing support and guidance:

Local sponsors often provide valuable support and guidance throughout the business setup process. They can assist with understanding local business practices, cultural nuances, and market conditions. Their experience and insights are beneficial for foreign investors unfamiliar with the UAE business environment.