A company operating under the professional license category is required as per the UAE laws to select a local service agent to get the trade license. Companies operating in certain jurisdictions and engaging in certain business activities must appoint a local service agent, even if the company acquires 100% ownership. This is only mandatory when starting a business outside of a free zone.
There has always been a little bit of confusion regarding the provisions made for the appointment of a local service partner/local sponsor or agent. Businessmen and investors think that local partner typically runs the business. That is somewhat true but not completely. There are more duties of an Emirati partner. The organization of the company and the sort of activity they choose are the key determinants of whether a local ally will be confirmed.
Here is everything you need to know about a local service agent in UAE.
Table of Contents
Who is a Local Service Agent in Dubai, UAE?
A Local Service Agent or LSA is an Emirati national of the United Arab Emirates who has no financial or legal obligations to the company. He is in charge of making sure the branch can operate smoothly. He helps a branch office, a sole proprietorship, or a civil business launch its commercial operations in the U.A.E. The main duty of a local partner is to function as a liaison between their employer and governmental organizations including the immigration and labor ministries.
He will not, however, be entitled to any legal rights with respect to the earnings, management, business, or property of the regional office. Basically, they are representing the company that hired them. The local collaborator works on agreed-upon annual fees, negotiated as a commercial contract for their services, rather than receiving a profit split from the firm or regional office.
A foreign business may open a representative office that is a federally or locally registered branch facility. Local registrations are governed by the applicable Local Order that is applicable in each Emirate, whereas federal registrations are governed by the UAE Commercial Companies Law.
The agent is responsible for scheduling and attending all meetings with regulatory organizations and government officials on the company’s behalf.
Duties of a Local Service Agent, Dubai
A local ally charges some fees for his services. The following are the primary duties that a native agent must perform in Dubai, U.A.E:
- They are in charge of making sure that the business operations of foreign investors go well.
- They don’t interfere with how the company is managed on a regular basis. They mind their own business.
- They contact suitable governmental organizations or local governments on behalf of the company they work for in order to secure permissions, visas, or licenses.
- If any issues arise, their experience serves as a buffer to solve them as soon as possible.
- The agent offers services in connection with the sales of services or goods in a defined area. It includes shipping and handling orders, marketing the products, doing sales, and giving technical support for the products.
Benefits of Local Sponsorship
- No promise to meet any monetary commitments.
- Kickback, time savings, and speeding up of the procedure.
- Help with document clearance and PRO services in Dubai.
Some Doubts about Emirati Partner
- The paperwork still needs signatures due to a long absence.
- It can be challenging to choose the best and most knowledgeable local agent.
- Leaving immediately without leaving a trace.
- Sometimes hidden costs for additional expenses are included.
Cost of Local Service Agent in UAE
The annual fee of a local sponsor is dependent on the business you plan to conduct in Dubai. But you must consider a number of criteria before you prepare and agree upon the final fee for a local service partner. These include:
- A regional agent taking part in the companies’ formalities
- Your corporate types
- Partnership duration
- Participation of a local sponsor in regular business operations
Legal Forms for a Local Partner:
As part of the company setup and operations in the UAE, the following legal forms require the assistance of a service agent:
A civil company is the first type of legal entity. This business is a partnership, and all of the foreign investors together own 100% of the shares. In these legal structures, the local service providers are typically not owners of the company’s equity and are not actively involved in its management. The cost of the service agent services is typically charged annually.
Keep in mind that the authorities require the agent to meet specific requirements or own some qualifications in order to conduct certain business activities. Due to the civil liability associated with the behavior, the partner would also possess shares in the company. In this scenario, as opposed to being a local service agent, the local representative would act as the local sponsor instead of a local service agent.
Foreign Company Branch
The second form is a branch office, which can either be a representative office or a full foreign local office of a foreign corporation. A representative office cannot engage in commercial trading; rather, it is a sales and marketing office. When the license is approved, a full foreign branch can carry out the parent company’s services.
A service agent is required for both legal forms. To finish the incorporation process, you can do so either as an individual or a corporate vehicle. One of a service agent’s duties is to provide the business with certain essential services. They have no debts or commitments to the corporation, either inside or outside the Emirate.
A sole establishment company, often known as a sole proprietorship company, is the third legal form. An individual, not a company, is the owner of a sole proprietorship in Dubai, Abu Dhabi, or Sharjah. The business is wholly owned by the sole proprietor.
Additionally, he or she oversees all corporate operations and maintains all earnings in full. A solo proprietor is also liable for all financial commitments and debts incurred by the business. If the owner is a national of a nation other than the UAE or the GCC, a local sponsor or a local is required in support of the license.
Local Agent Agreement
This agreement between a native partner and a foreign corporation is legally binding and establishes their partnership. The objective of this agreement is to set forth the rights and obligations of the parties and to define such rights and obligations.
The relationship between the owner and the local service agent (LSA) is described in the LSA agreement. You will make an agreement as soon as you get DED’s initial permission. The agreement can be typed in either Arabic or English, depending on your preference. A Notary Public or an attorney must sign it, and a legal consultancy firm must then legitimize it.
It’s crucial to keep in mind that the agreement you sign will be based on the company’s legal structure. You must prepare a local collaborator agreement in order to engage in professional activities in the UAE. A memorandum of agreement MOA must be signed in order to engage in commercial activity. The following forms of business call for MOA.
- Simple Limited Partnership
- Public Shareholding Company
- Private Shareholding Company
- Limited Liability Company
- Civil Company
- Partnership Company
It’s necessary to get a Memorandum of Association (MOA) if you’re opening a branch in Dubai. However, you must submit an LSA Agreement to the Department of Economic Development if you are establishing a sole establishment (as opposed to a branch) or an incorporated civil business that is owned above 51% by UAE citizens and is not owned by foreign shareholders.
A regional partner contract will outline the way for determining fees based on sales volume as well as other considerations like shared marketing costs. Additionally, it outlines how arguments between the parties regarding these matters or others pertaining to the conduct of their business partnership may surface in the future when new contracts are signed between them once more (or if a party disappears out of nowhere without explanation).
FAQs – Frequently Asked Questions
Do you require a local sponsor in Dubai?
Yes, according to U.A.E legislation, even if a corporation acquires 100% ownership, it is required for businesses engaged in particular commercial activities and operating in certain jurisdictions to appoint a service agent or a local.
Why do you need a local service agent?
Obtaining a trade license requires hiring a native agent for businesses operating under the professional license category.
What is LSA in U.A.E?
A Local Service Agent is a UAE national that does not have any monetary compulsions or civil responsibility to the company that hired him.
How to get a local sponsor in Abu Dhabi?
A local sponsor can be a local or government body that agrees to partner with you for your business incorporation in the U.A.E.
Need a Local Sponsor in Dubai for Business Setup?
RIZ & MONA CONSULTANCY will assist you in getting a local service agent for your business in no time. Our team of experts will guide you to the best option that suits your business requirements. So, you will be having peace of mind knowing you don’t have to do anything and leave everything to us.
You can contact us freely if you need assistance or suggestions for an agent or a local sponsor for your company in the UAE. Our team is fully committed to helping you in every possible way.