Despite considerable economic setbacks on account of COVID-19, the UAE Government is putting in every effort to stabilise the economic situation and encourage foreign businesses to invest in the country. In addition to traditional and well-developed industries like oil and tourism, the country is working on developing other industries, including construction and infrastructure, imports and exports, trade, as well as agriculture. As technology has become a quintessential part of modern life, major blue-chip companies as well as knowledge and technology-driven small and medium enterprises (SMEs), and startups have been enjoying the benefits offered to companies in the IT sector.
Foreign citizens are able to open a business in the UAE, although there are a number of requirements and limitations that must be taken into consideration.
By UAE Law, foreign companies and individuals, with the exception of GCC companies and individuals, are generally required to have an Emirati partner (individual or company) with a minimum shareholding of 51% in order to form an LLC. The Companies Law in the UAE does not prescribe any minimum share capital for an LLC, defining it as ‘adequate’ share capital to achieve the purpose of its incorporation.
Types of sponsorships
As already covered, there are two methods of forming partnerships with the purpose of setting up a business - with the Emirati individual or with a 100% Emirati-owned company. It is pertinent to note that the concept of local sponsorship is not common outside the GCC region and might potentially be frustrating for foreign investors.
Individual sponsorship: An individual sponsor is an individual Emirati national who has been recommended to sponsor your business by holding 51% of the shares in your company. He or she must be an Emirati citizen over the age of 21, and in the case of some industries or activities, is required to hold certain degree levels and have experience in the same field as that of the new company. In most cases, they are business professionals or government employees. Profits do not have to be shared, to reflect the percentage of shareholding and in most instances, the local sponsor is paid a set annual fee in exchange for full power of attorney and control over the business activities.
Corporate Sponsorship: When it comes to corporate sponsorships, one of the greatest advantages without a doubt, is that the corporate sponsor will never interfere with your business. Additionally, entrepreneurs retain 100% of the financial benefits from the business along with full control. Corporate sponsorship deals provide entrepreneurs with more security - dealing with individual sponsors can present ownership problems in the event that a partner passes away or retires early. When working with a corporate entity, you do not need to worry about succession planning in the case of such unforeseen circumstances.
Corporate sponsorship is similar to having an individual sponsor in that it affords you the same rights. However, the process is less risky as it is transparent from start to finish. It also provides you with the support of an entire corporate team, rather than just one individual.
Advantages of partnering with MBG:
- Our Team of experienced Operations Managers and PROs will ensure a smooth and stress-free incorporation of your company and will provide all the required post incorporation support – Bank Account Opening, Visa Applications, Accounting, Taxation, Risk Advisory, etc.
- We will not interfere with the company’s daily operations.
- You can enjoy 100% of the financial benefits of your business as well as complete freedom, with a mutually agreed-upon fixed yearly service fee required to be paid.
- A side agreement will be prepared and signed to ensure the protection of business owners.
- An Account Manager will be appointed to provide you with timely updates on the progress of work and all such related information.
- You are also provided with a 90-day exit strategy, should you decide to change the local sponsor or liquidate the company. Upon providing us with a reasonable notification, MBG will prepare all the required paperwork and execute the transfer or cancellation of the license with no penalty.
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