Local UAE company is a company which is registered in partnership with UAE national (“Local partner”), where latter owns 51% of company shares. For limited liability companies partnership with UAE National is mandatory. As everywhere, there are certain exceptions that we cover below.
As stated above, to register a local company in most of cases partnership with UAE national is required.
New Local company requires a Local partner who is often referred to as a local sponsor. Local partner owns 51% of the company by law. There is a general practice to execute side agreements and opt for “silent partner option”, where a Local partner is paid an annual fee in return for giving up management control of the company to foreign investor. However, in case of any dispute between shareholders in the future, all side agreements are deemed null and void as in conflict with governing UAE laws.
Shall a new Local company be required, we suggest to our clients a proper structuring scheme and trusted Local partners.
It is important to mention that Local partner is not required in all cases when you set up a local UAE company. Local partner is required for any trading activities, unless a new company is a branch of a foreign entity. In case of a branch of a foreign entity (trading activities) and in case of professional services, local company may be 100% foreign owned, however such company requires a local agent.
Local agent (or Local Service Agent) is a UAE national or a UAE local company which is appointed against annual remuneration to carry out administrative functions only and assist with license renewals, visa applications and alike.
Any UAE citizen can become a Local agent, except the cases where special qualification is required. A local company 100% owned by a UAE citizen can also become a Local agent. Unlike Local partner, Local agent has no interest in a company, he is not a shareholder and cannot be held liable for company’s activity. Local agent does not take part in business management and decision making. His role is limited to administrative support, such as license renewal and visa assistance for a fixed annual remuneration.
Local agent is generally appointed by means of execution and attestation of the relevant agreement in notary public. Terms of cooperation are discussed with any Local Agent individually. The agreement term is one year only and company has the right to unilaterally appoint a new Local Agent if Local Agent’s performance is not considered satisfactory. We may recommend and assist our clients with appointment of a Local agent.
Local company in UAE can be registered as a branch of a foreign company. As we mentioned before, though company will be 100% owned by mother company in home jurisdiction, such branch shall abide by UAE laws and appoint a Local Service Agent.
Another important condition when setting up a branch company is that business activities of a mother company and its UAE local branch must fully coincide. To clarify, a mother company engaged in legal services cannot establish a local branch in the UAE engaged in trading. As such, it is important to consider this information as well.
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