Dubai agents, sponsors, distributors or partners
A Dubai company may find it difficult to function in the city without a local partner, agent, sponsor or distributor to assist with i) handling government bureaucracy including issuing exit and re-entry visas or ii) helping our Client navigate through the upper echelons of the Ministries iii) assisting with logistics; If required, Healy Consultants Group will be happy to introduce our Client to local partners, agents or distributors;
Local agent and sponsors
- Certain types of entities in Dubai require the appointment of a Local Service Agent (LSA) (also referred to as ”local sponsor”). The LSA must be an Emirati national;
- The LSA acts as a representative of the company. The role of the LSA is limited to administrative dealings such as i) dealing with Government Authorities, ii) assisting to secure employment visas and iii) facilitating the annual renewal of the business license;
- Our client is therefore solely and fully responsible for the management of the company and its bank accounts. The LSA contract will clearly stipulate the same, be signed by both parties and be registered with the Dubai Courts;
- The LSA usually receives a pre-fixed lump sum every year. Unless included in the contract, the LSA does not receive a percentage of profits or turnover;
- Before contracting a local agent or distributor, Healy Consultants recommends i) visiting Dubai for a face to face meeting with the agent; ii) obtaining detailed due diligence from the agent including passport copy, resume, professional reference letters, etc. and iii) engaging a local lawyer or accountant to critically review legal agreements;
- Free Zone companies looking to trade with UAE mainland, including importing or exporting products to/from UAE mainland, require the appointment of a local distributor (also referred to as “commercial agent” or “sales representative”;
- The UAE Commercial Agency Law regulates the appointment of commercial agents, sales representatives and distributors within Dubai;
- The local distributor or commercial agent must be a Emirati national individual or an Emirati company owned 100% by nationals;
- The local distributor will supply services, sell, distribute goods or conduct trading activities in its own name and on behalf of our Client. In exchange they receive an annual fixed fee and/or a commission on the deals made with UAE mainland companies;
- For it to be legal, the trade agency agreement must be notarized and registered with the Ministry of Economy and Trade. The commercial agents must also be registered with this Authority;
Benefits of agents
- Government departments play a facilitator role in a Dubai resident company. All firms deal with government departments on a regular basis; agents can help foreign companies deal with bureaucracy;
- Whilst English is widely spoken in business and government circles, all correspondence with the government authorities is conducted in Arabic. The agent will be of great help with this matter;
- UAE nationals prefer to do business with someone after they are properly introduced and have met face-to-face. A Dubai agent can act as a “go-between” to vouch for the reliability of both parties.
Problems with visas
- Disputes with agents causes serious problems for a Dubai company. It is important foreign investors take steps to protect themselves including i) completing thorough due diligence of the proposed agent ii) retaining legal counsel to review and approve a well-drafted agency agreement;
- Commercial agents are entitled to an exclusive territory encompassing at least one Emirate for the specified products. If the agent is not the consignee, he is entitled to prevent company products being imported into the UAE;
- Commercial agents are entitled to receive compensation from the principal if the agency is terminated or not renewed without substantial justification. The agent can prevent the foreign company appointing a replacement agent;
- Most Dubai work visas and licenses are sponsored by UAE nationals, giving the latter indirect control over the business.
- Dubai mainland entities holding a i) trading ii) commercial or iii) industrial license require the appointment of a 51% Emirati shareholder (also referred to as “local partner” or ”local sponsor”);
- For the most part, the local partners act as passive nominee national shareholders. Consequently they are not involved in daily business activities nor bank accounts. That said, their assistance is often needed i) to liaise with Government authorities ii) when the use of the local language is needed iii) for visa sponsorships or iv) to utilize their local connections or v) sign documentation;
- Even if the local partner acts as a silent partner, Article 91 of the Federal Law states that a sponsor shall have all the rights associated with the description of the partners. To protect the interest of both parties, it is essential to thoroughly prepare and sign a Memorandum or Understanding (MOU) outlining the roles, powers and responsibilities of each side of the agreement;
- For all the above, the fees payable to a 51% Emirati shareholder is high, when compared to that of a Local Service Agent (LSA);
- Before registering a 51% local LLC, Healy Consultants Group recommends our Client to consider registering i) a Dubai free zone company or ii) a Dubai branch instead. Both these entities allow 100% foreign ownership;
Frequently asked questions
Will I need to travel for Dubai company formation?No. Healy Consultants does not require our Clients to travel to Dubai for the company formation process.
I want to form a company in Dubai. How can I find an agent in Dubai?Healy Consultants will assist our Clients in finding the right agents based on their business activities and requirements in Dubai.
How long does it take to complete Dubai company formation?It takes on average 15 weeks to complete Dubai business formation including engagement planning, incorporation, corporate bank account opening and internet banking approval.