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Mainland Company Formation in Dubai without a Local Sponsor

Mainland Company Formation in Dubai without a Local Sponsor

Dubai has become one of the most popular destinations for foreign investors and entrepreneurs in the past decade. The government has established various free zones offering strategic locations and tax exemptions to foreign investors who want to set up their business in Dubai. Historically, forming a mainland company in Dubai was not possible without a local sponsor as it was mandated by the commercial companies law to provide 51% shares of the company to the local sponsor. Still, after the introduction of an amendment in June 2021, a foreign investor can form a company in Dubai mainland without any local sponsor and can own 100% of the company. With this rule, the Dubai mainland has access to an exceptional infrastructure and a global workforce and has become an excellent place for a foreign investor to form a company.

Advantages of Mainland Company Formation in Dubai

There are three jurisdictions in the UAE where you can form a company, i.e., mainland, offshore and free zone. Companies formed in the Dubai mainland have no restrictions on expanding their business operations all across the UAE. A mainland company can expand its business to all the UAE markets without having any issues regarding trade permissions from the government.

Dubai Mainland provides a strategic location for entrepreneurs to expand their business in the UAE and global markets. There are no restrictions on a Mainland company that wants to expand its business to the global market and get international exposure.

Dubai mainland gives you access to one of the best infrastructure and workforces around the globe. These facilities play an important role in the growth of your company.

By forming a company in Dubai mainland, you have the luxury of applying for high-paying government contracts, which are not available to the companies operating within the free trade zones of Dubai. These government contracts aid your company’s economic growth and enhance your reputation across the UAE markets.

After the amendment that provides 100% ownership to the foreign investors on the mainland, total control of the company resides with you.

Types of Local Sponsors in Dubai

A local sponsor or partner is a UAE national who holds 51% shares of your company and helps you establish your company in the Dubai mainland. According to the Department of Economic Development, you need a local sponsor if your company engages in business activities related to oil, gas, insurance, banking, transport, security and military services. There are three kinds of local sponsors in Dubai, as listed below for your understanding:

Individual Sponsor: If you want to form a company in the Dubai mainland that engages in commercial business activities, this is your best option. An individual sponsor can be a government employee, a business person or a private UAE national individual. He or she would hold 51% of your company shares and help you form a mainland company in Dubai.

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Corporate Sponsor: If you want to form a company that engages in manufacturing or trading activities, hiring a corporate sponsor will be a good option. A corporation operating in the UAE qualifies to be a corporate sponsor. It will also hold 51% of your company shares and will help you form a company in Dubai mainland.

Local service agent: If you want to start a business under the professional services category, i.e., doctor, engineer or CA, you need to hire a local service agent as your local partner to form your company in Dubai.

Need of a Local Sponsor for Mainland Company Formation in Dubai

After the 2021 amendment to the commercial company law of UAE, the role of a local sponsor has been restricted to a limited set of businesses, i.e., oil, gas, insurance, medical retail, banking, security and military services. Apart from these, a whopping number of 1061 commercial activities have been permitted to operate without any local sponsor. We will discuss these activities below.  

Mainland Company Formation in Dubai without a Local Sponsor: Is it Possible?

After the introduction of the amendment to the commercial companies law in 2021, it is possible to form a company in Dubai mainland without any local sponsor. More than 1000s of commercial activities have been listed by the Department of Economic Development that don’t require a local sponsor, and you can own 100% of your business. These activities include education, wholesale, retail, food, beverages, technology, professional services, education, hospitality and tourism sectors. Apart from these commercial activities, some of the central sectors like banking, insurance, gas, oil and telecom sectors still have a mandatory requirement to have a local sponsor who will own 51% of the shares of your company.

Process of Mainland Company Formation in Dubai

The first step to forming a company in the Dubai Mainland is choosing an industry in which you want to conduct your business. More than 2000 activities are specified by the Department of Economic Development in which you can decide to conduct your business. Unlike free zone companies, mainland companies have zero restrictions concerning the type of business activities they engage in. 

After choosing the types of business activity, such as agriculture, manufacturing, tourism, education, etc., the next step is to decide what ownership structure your company would like to follow. You can decide to form your company as a private limited company, public company, sole establishment, or a limited liability company.

After deciding on the company structure, you need to choose a name for your company and register it with the Department of Economic Development. While choosing the name, you should be careful about the fact that it should not be identical or similar to any existing registered company in the UAE. Your company’s name should be unique and connect with your target consumers.

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Now you have decided on the name and structure of the company; you should create an MOA (Memorandum of Association) or LSA (Local service agent agreement) depending on your company structure, i.e., MOA for a public company, private company or an LLC and LSA for sole establishment in Dubai mainland.

After creating the MOA or LSA based on your company structure, it’s time to look for the location of the business. As per the commercial company law of the UAE, you should have a physical address to conduct your business operations. After choosing the location, you need to make sure it complies with the Department of Economic Development guidelines and local municipalities to avoid legal disputes.

After finalising the location where you will be setting up your company, you must check whether your business requires additional government approvals. If it does need some, apply for the same and ensure you follow all the local rules and regulations.

The next step is to apply for your trade license as per the type of business activity you are engaging in. You need to pay the specified fees and get your trade license from the Department of Economic Development.

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Licenses required for Mainland Company Formation in Dubai

Mainland company formation in Dubai requires you to apply for specific licenses based on the type of your business activity. There are four kinds of licenses listed below for your understanding:

Industrial license: If your company is engaged in manufacturing or industrial activities, this is the license that you would need to apply for. Examples of manufacturing and industrial activities are factories and warehouses.

Professional License: If your company is engaged in providing professional services like consulting, then you need to apply for a professional license.

Tourism License: If your company provides tour packages and facilities to tourists, you should apply for a tourism license from the Department of Tourism and Commerce Marketing.

Commercial License: If your company is engaged in trading activities such as selling and purchasing goods and services, you need to apply for a commercial license.

Conclusion

Dubai’s mainland provides a strategic location and business-friendly environment for entrepreneurs who want to take their businesses to the global market. With the new law providing 100% ownership to foreign investors, more and more entrepreneurs are opting for mainland company formation in Dubai without a local sponsor. It provides you with more control and flexibility in your company, in combination with an excellent infrastructure and a global workforce.

FAQ’s

  1. What are the benefits of forming a Mainland company in Dubai?

    Mainland company formation in Dubai provides a wide market reach as there are no restrictions concerning the expansion of business activities across the UAE and global markets.

  2. Who is a local sponsor?

    A local sponsor can be any individual, corporate or local service agent who will hold 51% shares of your company and will help you in mainland company formation in Dubai if your company is engaged in business activities related to banking, insurance, oil, gas, telecom, security and military services.

  3. Is Mainland company formation in Dubai without a local sponsor possible?

    Yes, you can form a company in Dubai mainland without any local sponsor. Following the 2021 amendment to the commercial company law, Mainland company formation in Dubai is possible without a local sponsor, and you can own 100% of your business related to 1000s of commercial activities specified by the Department of Economic Development, such as technology, education, food, beverages, tourism etc.

  4. What is a Free Zone company in Dubai?

    A Free Trade Zone is a special economic zone that provides various benefits to foreign investors, like tax exemptions or 100% profits repatriation. It is an initiative by the UAE government to encourage FDI and provide a favourable business environment to foreign investors.

  5. How many Free Zones are there in Dubai?

    A total of 28 free zones are currently in Dubai.

  6. What is the difference between a Mainland company and a Free Zone Company?

    There are various differences between the companies operating in the Dubai mainland and Free Trade Zones, such as:
    Unlike a free zone company, a mainland company has no restrictions in expanding its business operations across all UAE and global markets.
    A free zone company enjoys various benefits like tax exemptions and 100% profit repatriation.
    A mainland company can apply for high-paying government contracts, while a free zone company is ineligible.

  7. Can I switch from a free zone company to a mainland company in Dubai?

    Yes, you can do the same by cancelling your Free zone license and getting a trade license for a mainland company formation in Dubai.

  8. What is the difference between a MOA and an LSA?

    MOA (memorandum of association) is created if your company is a public, private, or LLC. While on the other end, an LSA (local service agent agreement) is created for a sole establishment.

  9. What are the licenses required for Mainland company formation in Dubai?

    Four kinds of licenses are provided to the companies operating in the Dubai mainland based on the nature of their business activity. These four licenses are a commercial license, a tourism license, an industrial license and a professional license.

  10. Are there any restrictions on mainland companies regarding the expansion of their business operations in the other UAE markets?

    No, the mainland companies are free from such restrictions, unlike those operating in the Free Trade Zones of Dubai.

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