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Change of Local Sponsor for an LLC Company in UAE – Key Reasons

The ability to change the Local Sponsor for an LLC Company in UAE is something every investor intending to start a company in the mainland of UAE must be aware of.

A Local Sponsor is an integral part of an LLC Company in the mainland of UAE. Local Sponsors are required for acquiring a mainland license in UAE. A local sponsor or local service agent is a UAE National or a corporate entity founded by UAE Nationals.

The local sponsor holds at least 51% of the new company’s share and the involvement in running the business is minimal.

It is the foreign investor who manages the business operations and the local sponsor acts as a liaison officer between the UAE Immigration and the company for visa processing and related activities.

100% Foreign Ownership In UAE Mainland Company

With the latest cabinet decision on allowing 100% ownership to ex-pats in the mainland; the requirement of a Local Service Agent/ Local Sponsor is eliminated subject to certain conditions.

100% Foreign Ownership in UAE

For the services companies, now it is 100% foreign ownership in the mainland for any business activity and there is no specific capital requirement for setting up a company and obtaining the service license in the mainland.

However, for commercial, and trading licenses in the mainland, there is a certain minimum capital requirement to be fulfilled for the investors to be eligible for 100% ownership.

Criteria for the eligibility of 100% Foreign Ownership In UAE Mainland Company

The share capital requirement varies from AED 2 million to AED 250million depending on the complexity, size, and nature of the business activity and business license category.

Hence for investors who are not able to raise the required capital amount have to appoint a local sponsor and share the ownership as to how it was followed previously.

For companies who wish to shift to 100% ownership and terminate the contract with the local sponsor provided they meet all the criteria can apply for the change of local sponsor to the respective Department of Economic Development of the Emirates.

Key Reasons for Companies Changing their Service Agent or Local Sponsor in UAE

Most of the business operations are handled by the founders, managers, and employees of the company. However, there are immigration and labor-related affairs of the company that requires the involvement of the local sponsor.

It is the PRO of the UAE National that usually represents the individual and most of the interaction happens through the PRO.

1. No access to the local Sponsor or Service Agent

The coordination for appointing the local sponsor is by engaging with the sponsor’s PRO, designated consultants, or a legal advisor.

Often, the details of the Sponsor are not available to the investor and it is the PRO or Consultant preparing the agreement and appoint the national sponsor for the foreign investor.

2. Unavailability of Local Sponsor

The unavailability of a Sponsor is an issue for most investors when it comes to the visa and immigration requirements of the employees, the sponsor’s PRO card is required to process the same.

The Sponsor’s PROs have to liaise with the Sponsor to obtain their card for immigration and visa purposes.

3. Limited Rights for Visa Processing and Immigration

The foreign investor has limited rights when it comes to immigration and visa processing. The local sponsor’s PRO Card and details might be required when a new visa has to be applied or canceled.

Also, for company trade license renewal the local sponsor details are required. Hence, the investor has to approach the PRO or the Business Consultant mostly to get the details to complete the visa processing or allied administrative work.

4. Immigration and Labour rights

The main requirement of local sponsor details is during the immigration, visa processing, visa cancellation, trade license renewal, etc.

Local Sponsor for an LLC Company

The company must create an account with the immigration and labor department and provide the local sponsor details. The Sponsor’s e-signature card is required to apply for work permits.

5. Lack of Process clarity

The foreign investor at times will have no information about the whole process of obtaining the details of the local sponsor by the PRO or the Consultants. The cost involved, receipts, and process flow often remain with the Sponsor’s PRO.

6. Organization Documentation

For appointing a local sponsor there has to be a Memorandum of Association prepared between both the parties.

Similarly, in the case of services companies, there will be a service agent contract and the Business consultants who would be assisting you with the whole administrative process.

There needs to be an end-of-service statement prepared along with the other documentation. A 3 months’ notice period must be maintained before the renewal of the permit.

Change of Local Sponsor

The notification of change the agent must be emailed to the local sponsor or service agent as well as a hardcopy of the statement must be sent to the physical address.

7. Dispute resolution

In case of any dispute with the local sponsor, it is best to resolve the issue by notifying the consultant or the company PRO about the issue.

As a last resort, request for changing the local sponsor before the next renewal. if the sponsor is not in consent with the change in sponsorship, approach a lawyer in UAE and seek their assistance.

8. Documentation

To change the local sponsor agent, the foreign investor has to present the following documents:

  • Company Trade License
  • Memorandum of Association
  • NOC from the Local Sponsor/Local Service Agent
  • Share Certificate, Power of Attorney, Immigration & labor documents,
  • PRO Cards, receipts of yearly sponsorship payments, and any supporting documents.

All the documents are to be submitted to the Department of Economic Development of the respective emirate where the company is registered.

Once the application is approved, the company trade license is updated and the new local sponsor is added to the contract, or if eligible for 100% foreign ownership, the business license will be updated accordingly.

Aurion will assist global investors to seamlessly change the local sponsor in UAE. The investor can benefit from the complete ownership and financial control of the company and ensure the shareholding rights are projected in the company.

Connect with our expert team right away to know more about the process of changing the local sponsor in the UAE.

Contact Us: Aurion Business Consultants