Role of UAE partner/ Local Service Agent in UAE
There has always been a little bit of confusion when it comes to the provisions provided, regarding the appointment of a Local Service Agent / Partner. Many investors have the impression that an Emirati is usually the one in command of the business. It is true though, that appointing a Local Service Agent is a compulsory limitation, but only when establishing a business outside the free zones. The confirmation of a local partner depends mainly on the structure of the company and the activity they choose.
As stated by the United Arab Emirates Commercial Company’s Law and UAE Civil Law, local sponsorship in Dubai is mandatory for business formation. The local sponsors / UAE partners / Nominee shareholders are either UAE residents or they belong to a company whose shareholders are 100% UAE nationals. The Local sponsors can act as the Local Service Agents who are remunerated by a stipulated amount in the contract.
- To establish a Limited Liability Company on the mainland, the foreign investors are allowed to hold only 49% of the shares while the local sponsor holds 51% of the shares. Total profits belong to the investor while the local sponsor is paid by terms in the contract.
In the establishment of professional and representative offices, the foreign shareholders own 100% of their business but they do require the appointment of a local sponsor. The local sponsor has no right to any of the shares. Their fee is arranged in a side agreement and has to be signed while establishing the business.
The role of a Local Service Agent:
- They are not involved in the day-to-day running of the business; there is no interference from their side.
- They are responsible for facilitating a smooth-running business for foreign investors. This is done by interacting with the concerned Government departments or Municipalities, on behalf of the organization that they work for, to obtain visas, licenses or approvals.
- Their experience acts as a buffer if any problems crop up.
- Their sponsorship fees are reasonable compared to the services they provide.
Local service agents employed in Dubai are reasonable and honest. A POA is taken from them and they are bound by a side agreement. With a local partner it is common to tweak the conditions in favor of the foreign owners of the company. Visit companysetup.ae for more details.