Individual sponsor and Corporate sponsor in the UAE
Local sponsor is a common phrase used in the United Arab Emirates (UAE) for Mainland companies. A sponsor will be a UAE or GCC nation with 51% share of the Mainland LLC company. It can be an individual or a corporate. Generally, the United Arab Emirates is considered as a land of business opportunities in the Middle East. Most of the people wish to set up or start a business in the UAE. The government policy or the rules and regulations of the land always supports the existing businessmen and attract the investors to invest or to start a new business in the UAE. In the UAE there are more than fifty free zones. This shows how businesses are flourished in the region. Mainly there are three types of company in the UAE.
Out of these three types of companies in the UAE, the requirement of sponsorship will appear in the case of mainland companies only. Free zone companies in the UAE cannot do business directly with Mainland companies and offshore companies also cannot do any business with in the country directly or indirectly. However, the type of entity we have to choose depends upon our business activity and the business model. For example, if we are planning to do service or trade with the local market, we should form a mainland company. In order to form a mainland company in the UAE, as per the rule of the land, the investor requires a sponsor and the sponsor will be entitled to hold fifty-one percentage of the share in the company. Mainly in the UAE, there are two types of sponsorship. They are:
Individual Local Sponsorship
Individual sponsorship is clearly mentioned in the name itself. It means the sponsor will be an individual. The individual sponsor can be a UAE or GCC nationality and they will own the majority part of the share. The main benefits of the individual sponsor are mentioned below:
Mainly expatriate prefers individual sponsor from a potential or well-known family in the UAE. This is with the intentions to get the new business opportunity through their reference. So that the investor can enter into the new business market.
To form a company with an individual sponsor the documents required are very minimal and to get approvals are very easy as well. To process the company formation with a local sponsor is less time-consuming.
For the sponsor, yearly we have to pay a sponsorship fee. This fee will be agreed between the local sponsor and an expatriate before forming the company. So, the annual fee will be cheaper for an individual sponsor compared to a corporate sponsor.
To find an individual sponsor is easy compared to finding a corporate sponsor. To find an individual sponsor we can check through google or through any references.
Corporate sponsorship means instead of an individual a corporate or a company will sponsor your company to complete the formation process and help to run your company. The corporate sponsor usually has a physical office where the clients and go and meet the concerned person. This is also known as turnkey projects. This kind of company is a hundred percent owned by the United Arab Emirates nationality or GCC nationality. The expatriate can easily access or contact the corporate sponsor for their labor/establishment or visa purpose. The main benefits of corporate sponsorship are mentioned below.
The legal security is more for corporate sponsorship compared to individual sponsor. Even economic department also legally support and protect the corporate sponsor.
The government and all the relevant authority has taken steps to make the process of company formation with corporate sponsor transparent with less paperwork.
Considering the corporate sponsorship, the expatriates are getting more freedom to conduct business activity. Also, a corporate sponsor fee will be fixed from the initial stage itself. Corporate sponsors are providing all the side agreements to the expatriates mentioning the expatriates will be of hundred percent ownership of the company. The corporate sponsors are only as a sponsor for their company as per the rule of the land. Also, the corporate sponsors are giving full powers to the expatriates like banking, borrowings and also labour & immigration powers. Also, the corporate sponsor will mention they will not be liable for any liability from the bank or third parties.
The corporate sponsor is always giving the side agreement where they will mention at any point of time expatriate can change the sponsor if they need and they are ready to sign the documents. Which means the corporate sponsor is giving full power to change the sponsor. Emirates Chartered Accountants Group houses a team of professionals by assisting the clients to find sponsorships for their businesses and assures you with 100% assistance in obtaining an authentic, genuine, and reliable sponsor.
To Set Up Business in UAE Free Zones
Mr. Ragesh Mattummal, Partner
+971 50 3578031