UAE Local Sponsor Guide...

One of the most historically significant aspects of forming a UAE mainland company has been the requirement of a local sponsor. However, recent landmark legal changes have dramatically altered this landscape. This guide clarifies the current roles of local sponsors and local service agents (LSA) in 2025.

Understanding these roles is crucial for correctly structuring your onshore business and ensuring you retain the right level of control and ownership.

The Traditional Role: The 51% Local Sponsor

Historically, any foreign investor wanting to set up a commercial or industrial LLC on the mainland was required to partner with a UAE national (an Emirati citizen), who would legally hold 51% of the company's shares. This individual was known as the local sponsor.

While the sponsor held the majority shares, a common practice was to draft legal agreements, such as a side agreement or nominee agreement, to grant the foreign investor full operational control and 100% of the profits. The sponsor was typically paid a fixed annual fee.

The Game Changer: 100% Foreign Ownership

The landscape has now changed completely. The UAE government has amended the Commercial Companies Law to permit 100% foreign ownership for over 1,000 commercial and industrial activities on the mainland. This means for most new trading or manufacturing businesses, the requirement for a 51% local sponsor has been entirely eliminated.

This change makes setting up a mainland company more secure and attractive than ever before. Our mainland formation service always ensures your company is structured to give you the maximum possible ownership.

The Local Service Agent (LSA): A Different Role

It is critical not to confuse a local sponsor with a Local Service Agent (LSA). The LSA is required for a different type of business: a professional license.

If your business provides professional services (e.g., as a consultant, doctor, lawyer, or artisan), you are eligible for 100% foreign ownership under a Sole Proprietorship or Civil Company structure. However, the law mandates that you appoint a UAE national as a Local Service Agent. The LSA's role is purely administrative; they act as your representative for government paperwork but have zero shares, no liability, and no say in the business operations. They are simply paid a fixed annual fee for their service.

When is a Local Sponsor Still Needed?

While largely phased out for new businesses, the 51% local sponsor model is still required for a small number of strategic and regulated business activities, often related to national security or key infrastructure sectors. Our consultants will immediately identify if your specific activity falls into this rare category during your free consultation.

Navigating the nuances of corporate structuring is our expertise. We provide reliable and secure corporate sponsorship and LSA services, ensuring your interests are always protected. Contact us today to discuss the perfect structure for your mainland business.