What You Need to Know About Local Sponsorship in the UAE

Starting a business in the UAE offers tremendous opportunities, but navigating the legal framework is essential for success. One of the most important requirements for mainland businesses is local sponsorship, a mandatory arrangement that allows foreign investors to legally establish and operate within the UAE mainland.

At Verde, we’ve helped entrepreneurs, SMEs, and global corporations successfully launch their ventures by simplifying the sponsorship process. Here’s a clear breakdown of what local sponsorship is, why it’s required, and how investors can remain protected while expanding into the UAE.

What Is Local Sponsorship in the UAE?

Local sponsorship is a legal requirement under UAE law for certain mainland business activities. It mandates that a UAE national (Emirati) or an Emirati-owned company hold at least 51% ownership of a Limited Liability Company (LLC), while the foreign investor retains 49%.

Although this may sound restrictive, in practice, foreign investors maintain full operational control over their businesses through legally binding agreements, while the sponsor serves primarily as a regulatory requirement.

In most cases, sponsors are compensated through a fixed annual fee instead of sharing in profits, meaning that the investor keeps full financial returns and control of day-to-day operations.

Key Aspects of Local Sponsorship

From our experience guiding businesses across industries, here are the core elements you should understand:

1. Legal Requirement

Foreign investors must appoint a UAE national or a UAE-owned company as a sponsor to establish a mainland LLC. This ensures compliance with UAE commercial laws.

2. Majority Shareholding

The sponsor formally holds at least 51% ownership of the company, fulfilling the government’s mandate for local participation.

3. Full Operational Control

Despite majority shareholding on paper, foreign investors remain in full control of operations, management, and profits through side agreements.

4. Fixed Annual Fee

Instead of taking profit shares, most sponsors charge a predetermined annual sponsorship fee. This ensures stability for both parties.

5. Silent Partner Role

Local sponsors generally act as silent partners, they do not interfere in business operations but provide the legal framework required to trade across the UAE mainland.

Types of Local Sponsors in the UAE

Depending on your business activity and structure, there are different sponsorship models available:

• Individual Sponsor – An Emirati citizen who acts as your local partner. Common for SMEs.

• Corporate Sponsor – A UAE-owned company that serves as the local partner. Preferred by larger or multinational businesses for added professionalism and structured agreements.

• Local Service Agent (LSA) – Relevant for professional licenses (e.g., consultancy, engineering, artistic services). The LSA does not hold shares or ownership but assists with government documentation.

Why Local Sponsorship Is Important

Local sponsorship in the UAE offers several advantages for foreign investors:

• Regulatory Compliance – Ensures your company meets UAE legal requirements.

• Access to the Mainland Market – Enables you to trade across the UAE without restrictions, unlike free zone companies that have geographical limitations.

• Eligibility for Government Contracts – Mainland businesses can bid for lucrative contracts from government entities.

• Enhanced Business Credibility – Builds trust with local clients, banks, and stakeholders.

For international investors, choosing the right sponsor is not just about compliance, it’s a strategic decision that impacts long-term growth and stability.

Protecting Foreign Investors

Understandably, many entrepreneurs are concerned about the 51% ownership rule. At Verde, we ensure investor protection by drafting clear, transparent, and legally binding agreements that safeguard foreign interests.

Typical protective measures include:

• Side agreements defining profit-sharing arrangements.

• Fixed annual sponsorship fees.

• Legal contracts that prevent sponsors from interfering with operations.

With the right setup, investors can confidently operate while retaining 100% financial and operational control of their businesses.

Recent Updates on UAE Sponsorship Laws

Since 2021, the UAE has allowed 100% foreign ownership in certain sectors, reducing the dependency on local sponsorship. However, many industries still require local sponsors, particularly those linked to national security, oil and gas, and other strategic sectors.

This is why working with an experienced consultancy is vital to ensure your business is aligned with the latest regulations and benefits from the best setup structure.

Why Choose Verde for Local Sponsorship in the UAE?

With over a decade of experience in company formation, Verde has established itself as a trusted partner for investors entering the UAE market. Our expertise includes:

• Matching investors with reliable, government-approved sponsors.

• Drafting investor-friendly agreements that guarantee full control.

• Providing end-to-end support from business setup to renewals and beyond.

Building a Strong Business Foundation in the UAE

Local sponsorship is more than just a legal requirement, it’s your gateway to mainland success, growth opportunities, and wider market access.

By partnering with a trusted consultant like Verde, you can simplify the sponsorship process, protect your interests, and focus on scaling your business with confidence.

Book a free consultation with Verde today to secure the right local sponsor and take the next step toward building your UAE business.