‘Local sponsor’ / Service Agent is a general term used in the UAE to refer to local service agents and nominee shareholders (sleeping partners) in mainland companies with foreign investment. A sponsor has to be an Emirati (UAE national) with a family membership card (Gincia). Operating a business in the Dubai Mainland area requires a local sponsor to be mandatorily appointed. This requirement as mandated by the relevant law has is now being relaxed and thereby providing 100% ownership of businesses to certain investor who wish to establish their onshore business in UAE. Read more for more information below :
UAE Companies Law Changes in Effect as of 1 April 2021
Federal Law by Decree No (26) of 2020 (“Decree”) amending certain provisions of Federal Law No (2) of 2015 on Commercial Companies (“Companies Law”) was issued last year by the UAE President His Highness Sheikh Khalifa bin Zayed Al Nahyan. The Decree introduced substantial amendments to the Companies Law that were to come into effect after six months from publishing the amendments in the UAE’s Official Gazette, i.e. on 1 April 2021. Those amendments included removal of the requirement:
- For a company to be owned 51% by UAE national(s) (“Local Ownership Restriction”);
- To appoint a UAE national as the local service agent for branches of foreign or free zone companies.
What has changed ?
The following changes, based on the Decree, are already implemented:
- Branches of foreign or free zone companies can directly be registered in the UAE without the need to appoint a local service agent.
- The existing branches of foreign or free zone companies can terminate the engagement of their local service agent, under
- a termination agreement executed before the notary public; or
- a letter from the local service agent confirming that their fees for having acted as the local service agent have been settled by the foreign party.
However, it is important to note that the above developments do not apply to sole establishments and civil partnership companies. The appointment of local service agent for sole establishments and civil partnership companies still remains a mandatory requirement.
What is yet to come ?
Since the Local Ownership Restriction has been removed under the Decree, the Federal Cabinet of Ministers of the UAE, on the recommendation of the Companies Law Committee, shall issue a resolution defining the activities with a strategic impact (“Strategic Activities List”) and controls for licensing the companies that undertake any of these activities. The Strategic Activities List is expected to be published by the authorities in due course. Once it is enacted, it could potentially allow numerous businesses to hold controlling stakes in the onshore (Mainland) businesses, subject to satisfying any capital requirement to be determined by the local authorities.
Our team is well equipped to advise you on how :
- You can benefit from the Decree and the conditions for implementing the changes, as well as assist you in respect of Formation of a branch office in the UAE;
- You can terminate the agreement with the local service agent;
- You can adapt to changes to the board composition, of a public joint-stock company;