Find a Local Sponsor in the UAE: Key Steps and Benefits

Understanding the Role of a Local Sponsor in Dubai

What is Local Sponsorship? An Overview

Local sponsorship is a legal arrangement in the United Arab Emirates (UAE) that historically allowed foreign investors to establish a business on the mainland through a UAE national or a UAE‑owned company holding a majority stake in the business. 

Under the previous regime, a local sponsor typically had to hold at least 51% of the shares in a limited liability company (LLC). Today, following reforms to the UAE Commercial Companies Law and related decisions of the competent authorities, most commercial and industrial activities on the mainland can be owned 100% by foreign investors, without a mandatory local shareholder or agent, while a UAE national shareholder or local service agent is still required only for a limited range of strategically regulated or otherwise restricted activities. 

For this reason, local sponsorship remains a crucial step only for those business activities where the law still requires a UAE national shareholder or agent, while in many other cases foreign entrepreneurs can establish a mainland company with 100% foreign ownership.

Navigating the Legal Requirements for Foreign Investors

Before engaging a local sponsor, foreign investors should confirm whether their intended activity falls under the list of activities eligible for 100% foreign ownership under the current Commercial Companies Law and the latest activity lists of the relevant licensing authorities (such as Dubai Economy and Tourism). For many non‑strategic commercial and industrial activities, a UAE national shareholder or local service agent is no longer legally required

Here are a few key points to consider:

• Business Licensing: Before engaging a local sponsor, investors must determine the type of business license required and verify whether their activity allows 100% foreign ownership or still requires a UAE national shareholder or local service agent.
• Sponsorship Agreements: It is crucial to formalize the relationship with your local sponsor through a detailed sponsorship agreement.
• Government Approvals: Certain business activities may require additional approvals from government authorities. Additionally, it is important to note that the UAE Commercial Companies Law does not require foreign companies opening a branch to appoint a local national sponsor or agent.

Benefits of Partnering with a Local Sponsor

The decision to partner with a local sponsor should be driven by legal requirements and strategic considerations. In some regulated sectors a local sponsor or agent is mandatory, while in other cases it is an optional structuring tool rather than an obligation, since 100% foreign ownership may be available.

Partnering with a local sponsor offers several advantages that can significantly impact a foreign entrepreneur's success in Dubai:

• Market Insights: Local sponsors have a deep understanding of the UAE market, including consumer preferences and industry trends.
• Networking Opportunities: A local sponsor often has established connections within the business community.
• Administrative Support: Navigating the bureaucratic landscape in the UAE can be challenging.
• Cultural Understanding: A local sponsor can offer guidance on etiquette and communication styles.

Diverse Local Sponsorship Options in Dubai

Choosing an Emirati National: The Traditional Approach

One of the traditional methods for securing local sponsorship in Dubai is partnering with an Emirati national. Historically this structure was widely used for most mainland LLCs, where a UAE national held 51% of the shares. Today it remains relevant primarily in sectors and activities where a UAE national shareholder is still required by law, or where foreign investors choose this model for strategic or commercial reasons despite the availability of 100% foreign ownership for many activities. This traditional approach has been a long-standing practice in the UAE and offers several benefits:

• Cultural Insight: An Emirati sponsor provides invaluable cultural insights and local knowledge.
• Trust and Reputation: Partnering with a local national can enhance your business’s credibility.
• Direct Access: An Emirati sponsor can facilitate direct communication with local authorities. While this remains a standard approach for strategic sectors, it is no longer mandatory for general trading or services where 100% foreign ownership is allowed.

Corporate Sponsorship: A Strategic Choice

Corporate sponsorship involves partnering with a UAE‑based company that meets the local ownership requirements. In regulated sectors where a UAE national shareholder is still mandatory, a corporate sponsor can act as the Emirati partner, while for other activities it can serve as a structured way to involve a local corporate nominee even when 100% foreign ownership is legally possible.

• Broader Resources: Corporate sponsors often provide a range of services and resources.
• Flexibility in Terms: Corporate sponsorship agreements can be more flexible than individual sponsorships.
• Industry Expertise: Many corporate sponsors specialize in specific industries. It is also vital to distinguish local sponsorship from a "registered commercial agent." While sponsorship concerns company ownership, a registered commercial agent is used for exclusive distribution. To be registered in the Ministry’s Commercial Agencies Register, the agent must meet strict UAE nationality or ownership conditions

Understanding the Role of Local Service Agents

An alternative option for meeting local requirements in certain cases is to appoint a local service agent (LSA). While not technically sponsors and not shareholders, local service agents can assist foreign investors in fulfilling specific legal requirements for establishing and maintaining a business in the UAE, particularly for some professional licences and branches of foreign companies on the mainland.

• Administrative Support: Local service agents can handle various administrative tasks. An LSA agreement is specifically required for those establishing a sole proprietorship or a professional establishment on the mainland.
• No Ownership Stake: Unlike traditional local sponsors, local service agents do not take an ownership stake in your business.
• Cost-Effective Solution: Hiring a local service agent may be a more cost-effective solution.

Do You Actually Need a Local Sponsor in 2026?

Recent changes in UAE company law mean that many foreign investors can now operate on the mainland without a mandatory local sponsor. Whether you need one depends on your activity, structure and licensing authority:

• Cases where a local sponsor / agent is typically not required: Many non‑strategic commercial and industrial activities on the mainland that are eligible for 100% foreign ownership, as well as most free zone companies where no Emirati shareholder is needed.
• Cases where a UAE national shareholder or local service agent is still required: Selected regulated sectors such as banking, insurance, oil and gas and some transport or utilities activities, as well as specific professional licences and branches, where the competent authority explicitly requires a UAE national shareholder or agent.

For this reason, checking the latest rules for your exact activity and emirate is essential before deciding on a sponsorship structure.
 

How to Identify the Right Local Sponsor for Your Business

Research Methods for Finding Potential Sponsors

Conducting thorough research is the first step in identifying potential local sponsors.Before you start searching, confirm whether your planned activity in fact requires a local sponsor or local service agent, or whether you can operate under 100% foreign ownership and rely solely on professional PRO and government liaison services. Here are some effective methods to consider:

• Online Search: Utilize online platforms and directories.
• Industry Forums and Associations: Joining industry-specific groups can provide access to contacts.
• Local Business Guides: Many publications provide comprehensive guides on local businesses.
• Word of Mouth: Personal recommendations can be invaluable.

The Power of Networking in Dubai's Business Scene

Networking is a crucial aspect of doing business in Dubai. Building relationships within the local business community can open doors to finding the right local sponsor.

• Attend Business Events: Participate in local business events and trade shows.
• Join Business Chambers: Becoming a member can provide access to exclusive networking events.
• Engage on Social Media: Utilize platforms like LinkedIn to connect with professionals.
• Seek Introductions: Ask for introductions to local business leaders.

Utilizing Professional Consultancy Services for Guidance

For many entrepreneurs, navigating the local sponsorship landscape can be complex. Professional consultancy services can provide invaluable support.

• Expertise in Local Regulations: Consultants possess extensive knowledge of local laws.
• Access to a Network of Sponsors: Many consultancy firms have established partnerships with local sponsors.
• Choosing the optimal ownership model: A good consultancy will first analyse whether your activity can benefit from 100% foreign ownership and structured PRO support, or whether you legally need a local sponsor or service agent, and then propose the most appropriate structure.
• Due Diligence Support: Consultants can conduct due diligence on potential sponsors.
• Negotiation Assistance: Consultants can assist you in negotiating sponsorship agreements.

Making an Informed Choice: Selecting Your Local Sponsor

Key Attributes of an Ideal Local Sponsor

When searching for a local sponsor, it is essential to look for specific attributes that indicate they will be a valuable partner for your business. Here are some key qualities to consider:

• Reputation and Credibility: Research their background and overall standing within the business community.
• Industry Experience: Your local sponsor should have experience in your specific industry.
• Commitment to Partnership: Look for a sponsor who demonstrates a genuine interest in your success.
• Clear Communication Skills: Effective communication is essential for a successful partnership.
• Financial Stability: A financially stable sponsor is crucial for supporting your business.

Essential Discussions with Prospective Sponsors

Once you have identified potential local sponsors, it is crucial to engage in meaningful discussions to understand their capabilities and expectations better. Here are some essential topics to cover:

• Roles and Responsibilities: Clearly outline the roles of both parties in the sponsorship agreement.
• Profit Sharing and Financial Arrangements: Discuss the financial aspects of the partnership.
• Duration of the Sponsorship: Establish the duration of the sponsorship agreement.
• Exit Strategy: Discuss the process for terminating the sponsorship agreement.
• Conflict Resolution: Talk about how conflicts will be addressed.

Deciphering Legal Contracts: What You Should Know

Understanding the legal aspects of your sponsorship agreement is crucial. Here are some key points to consider:

• Comprehending Terms and Conditions: Thoroughly read and understand the terms outlined in the sponsorship agreement.
• Consulting Legal Experts: Consult with a legal expert familiar with UAE business law.
• Negotiating Terms: Don’t hesitate to negotiate terms that do not align with your goals.
• Clarity on Renewal and Termination: Ensure the contract clearly states the procedures for renewing or terminating the agreement.
• Understanding Liability and Indemnity: Review any clauses related to liability and indemnity.

Transitioning to a New Local Sponsor: A Step-by-Step Approach

Identifying When It's Time to Change Sponsors

Recognizing the right time to change your local sponsor is crucial for your business's success. Here are some signs that may indicate it’s time to consider a transition:

• Lack of Support: If your current sponsor is not providing the necessary support.
• Communication Issues: If you find that your sponsor is unresponsive.
• Disagreements on Business Direction: If your business goals differ significantly from those of your sponsor.
• Poor Reputation: If your sponsor's reputation in the market is declining.
• Contractual Terms: If the terms of your sponsorship agreement are no longer favorable.

Steps to Effectively Change Your Local Sponsor

Once you’ve decided to change your local sponsor, it’s essential to follow a structured approach:

• Assess Your Options: Start by researching potential new sponsors.
• Engage in Discussions: Before finalizing a new sponsorship agreement, engage in discussions with potential sponsors.
• Draft a Termination Agreement: If you have a current sponsorship agreement, draft a termination agreement.
• Notify Your Current Sponsor: Formally notify your current sponsor about your decision.
• Finalize the New Sponsorship Agreement: Once you have secured a new sponsor, finalize the sponsorship agreement.
• Notify Relevant Authorities: After finalizing the new sponsorship agreement, notify relevant government authorities.
• Communicate the Change: Inform your stakeholders about the change in sponsorship.

Legal Considerations in Changing Sponsors

Changing your local sponsor involves several legal considerations:

• Review Existing Contracts: Carefully review your existing sponsorship agreement.
• Consult Legal Experts: It is advisable to consult with legal professionals.
• Document Everything: Ensure that all agreements and communications are well-documented.
• Compliance with Local Laws: Ensure that the new sponsorship agreement complies with all relevant laws.
• Understanding Liability: Be aware of any liability issues that may arise during the transition.
• Update Business Registration: After completing the transition, update your business registration.