Is A Local Sponsor Still Needed For Businesses in Abu Dhabi?

12th March 2019

Is a local sponsor still required for businesses in Abu Dhabi? Currently, yes!

What is the requirement for a local sponsor?

A local sponsor is required in different capacities, depending upon the structure of the business on the Abu Dhabi mainland (i.e. not a free zone company). The most common structures and their local partner requirements are as follows:

Limited Liability Company (LLC)

Local sponsor required to hold 51% of the shares. Maximum foreign shareholding currently allowed is 49%.

Foreign Branch

100% owned by a foreign company. A local partner, in this instance referred to as a Service Agent, is required to facilitate the branch registration, but they do not have any ownership of the company. An agreement is entered into and the Foreign company will pay the Service Agent an annual fee.

Establishment

100% owned by a foreign individual. As with the Foreign Branch, a Service Agent is required, but doesn’t have any ownership in the business. The Service Agent will enter into an agreement with the foreign individual and receive an annual fee.

Relaxation of Foreign Ownership Restrictions

It has been long anticipated that the foreign ownership restrictions on LLCs will be relaxed. This was further enhanced towards the end of 2018 when the UAE published its new Foreign Direct Investment Law, Decree Law No. 19 of 2018. However, this will only allow 100% foreign ownership in certain sectors. These sectors are yet to be confirmed.

It is also yet to be announced what the criteria will be for foreign companies to enjoy the 100% ownership. We anticipate that that there will be requirements for knowledge transfer and Emiratisation quotas to open up more opportunities for Emiratis to secure employment in the private sector. Whether there will also be a requirement for a Service Agent is not yet clear.

What makes a good local sponsor?

Whilst a local sponsor is still needed, we suggest considering the following suggestions:

Choose a sponsor who is readily available to sign documents when required. Choose a sponsor who manages all of the companies they currently sponsor – this will mean they actively manage any blocks that may arise in the Ministry of Human Resources & Emiratisation (MOHRE), which could affect you being able to process visas for your own business.

How can Gateway help as your local sponsor?

Gateway provides a corporate nominee local sponsor service. This means, rather than an individual Emirati being the local sponsor it is a Gateway company which is the sponsor. This provides numerous benefits as outlined below, which are all designed to ensure that you can run your business as smoothly as possible:
Ensures your ability to maintain full control of the company, including the management, finances and personnel.
Benefit from the Western-managed corporate local sponsor platform which provides full signatory powers to Western professionals, thus limiting communication barriers and ensuring timely review and availability for signing of documents.
Gateway manages all of the companies sponsored by our Emirati partners, thus we don't get into situations with MOHRE blocks which could prevent all our sponsored companies from processing visas, which in turn could prevent you from doing business. We manage all of our sponsored relationships very closely to ensure your business continuity.
Secures your profit 100% to retain the full amount.
Have peace of mind of a structured agreement thus removing any emotional attachment.
Business continuity during such time of succession, rather than a period of uncertainty where an individual sponsor’s beneficiaries inherit and decide what to do with their shares of the estate (including your business).
Clear termination strategy of three months, avoiding potential exit fees and timely negotiations.
Benefit from a local sponsor which already has Supreme Petroleum Council approval, thus meeting the local partner requirements for such approval. Ideal for companies wanting to work directly with ADNOC in the oil and gas sector.
Benefit from a local sponsor with both partners experienced in Classification, one of whom is an Emirati engineer and the other who is working in the Classification department and will thus fully understand your business requirements. Ideal for construction and engineering companies.

To discuss setting up your Abu Dhabi business with Gateway as your local sponsor or to change your existing local sponsor to Gateway, please email us: info@GatewayToUAE.com

Written by Jenny Hunt, Founding Partner & CEO

Gateway Group of Companies, Abu Dhabi & Dubai UAE