Foreign investors must understand the importance of the role and functions of local Dubai sponsor. One of the main challenges to start and operate a business in Dubai mainland is to find a local sponsor or service agent who is going to vouch for your trustworthiness in good faith before the competent authorities to let you in the country for the purpose of business, employment, or visit.
The arrangement of a local sponsorship is a compulsory condition for a foreign investor who wishes to start up a business venture or make an investment in Dubai mainland. The mainland Dubai strictly adheres to the UAE government sanctioned shareholding structure which is 51% local share and 49% expat share. A foreign person must find a local sponsor, a UAE national, who is going to hold 51% of the company’s shares. Mostly, local sponsors play the role of a silent or dormant business partners and they do not take part in the administration or management of the business operations and are happy to receive a yearly income from the foreign investor according to the rules of profit-sharing laid down and formally agreed upon in the contract. However, foreign investors sometimes do make some agreements with local sponsors other than the one already inked in black and white but such agreements are not considered as admissible evidence should there arise a need to move to a court for the settlement of some dispute between the local sponsor and foreign investor. The profit and loss sharing ratio can be settled in the contract which does not have to correspond to the ratio of which capital is invested by the local sponsor and foreign investor.
The 51% sharing requirement doesn’t apply to companies or businesses set up in the free zones. 100% ownership is given to the investor.