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The rules around local sponsors changed a lot in 2021. A lot of old advice is still being repeated because of that.
What is a local sponsor in Dubai?
A local sponsor is usually a UAE national who holds a share in a mainland company. Before the ownership law reform, many mainland licences required a UAE national to hold the majority stake. Since the 2020 reform, most mainland activities allow up to 100% foreign ownership, so far fewer businesses need a sponsor now. Mainland company setup in Dubai today works very differently from the way it did ten years ago.
What a local sponsor does
Where a sponsor arrangement still applies, the sponsor usually holds an equity stake in the company. In return, they normally receive an agreed fee instead of taking part in day-to-day operations. The exact terms belong in a shareholder agreement between the founder and the sponsor.
This is different from a service agent, which we cover further down. A sponsor holds equity. A service agent does not.
Do you still need one after the 2021 law?
For most commercial and industrial mainland activities, no. The reform allows up to 100% foreign ownership for most business activities, which removed the old rule that required a UAE national to hold the majority share in most cases.
Some sectors are treated differently. Cabinet Resolution No. (55) of 2021 lists a specific set of activities with “strategic impact” that still carry UAE ownership requirements:
- Security and defence work
- Banks, insurance, and money-exchange businesses
- Money printing
- Telecommunications
- Hajj and Umrah services
- Quran memorisation centres
- Fisheries services (its own category, requiring full Emirati ownership with no foreign investment allowed at all)
For every activity on this list except fisheries, the relevant federal regulator, not the free zone or DET, decides the minimum Emirati ownership share and how many board seats a foreign investor may hold, case by case.
Some professional and civil licence categories also use a different setup altogether: a local service agent instead of an equity sponsor. Check your specific activity against the current rules before you assume either way, because this depends on your exact business activity and licensing authority.
How to find a reliable sponsor
If your activity is one of the smaller set that still requires local ownership, treat the relationship like any other business partnership. Put every term in writing: the fee structure, the sponsor’s role, and an exit or buyout clause if the relationship ends.
A setup consultant familiar with Dubai’s Department of Economy and Tourism requirements can also confirm whether your specific activity needs a sponsor at all before you start looking for one. Many founders spend time sourcing a sponsor for an activity that no longer requires one.
If your activity does fall on the strategic-impact list, the approval process runs through more than one authority. You submit your application to the licensing department in the emirate where you’re forming the company, and it forwards the file to the federal regulator responsible for that activity, the UAE Central Bank for banking and insurance, for example. That regulator decides the minimum Emirati ownership share, whether you can appoint board members, and any other conditions, before sending approval back to the local licensing authority. This adds real time to your setup timeline, so plan for it from the start rather than finding out halfway through the application.
Sponsor vs service agent
These two roles get confused constantly, and they are not the same thing. A sponsor holds equity in the company. A service agent holds none and works in an administrative capacity for a fixed fee.
That difference decides whether you give up ownership or just pay for paperwork, and it depends on which licence category your activity falls into. Our full comparison of what a local service agent does covers each role, which structures need which, and what to check in the agreement.
If you are still deciding between a free zone and mainland setup, our comparison of free zone vs mainland in Dubai covers the ownership differences between the two routes directly.
DIFC and ADGM work differently
Free zone financial centres, DIFC in Dubai and ADGM in Abu Dhabi, run under their own legal and regulatory frameworks rather than the federal Commercial Companies Law that governs mainland sponsorship. Companies licensed inside these centres already operate with full foreign ownership under the centres’ own rules. If your activity is financial services and you are comparing DIFC or ADGM with a standard mainland or free zone setup, the sponsor question does not apply in the same way, although the centre’s own licensing and capital requirements still need separate checks.
Conclusion
Local sponsorship is no longer the blanket requirement it once was. Most mainland activities now allow full foreign ownership. Where a sponsor or service agent is still required, know exactly which role applies to your activity, and put the relationship in writing from day one.
Not sure whether your activity needs a sponsor? Our team can check your ownership structure before you commit to anything, as part of mainland business setup in the UAE.
This guide is general information. Ownership requirements differ by business activity and licensing authority. Check with the relevant authority or a setup consultant for your own case.
FAQs
Do I still need a local sponsor for a mainland company in the UAE?
For most commercial and industrial activities, no. The 2020 reform, effective in 2021, allows up to 100% foreign ownership for most mainland activities.
What is the difference between a local sponsor and a local service agent?
A sponsor holds equity in the company. A service agent has no ownership stake and handles administrative work for certain professional and civil licence categories.
Which UAE business activities still require a local sponsor?
Activities classified as strategic impact, along with certain professional and civil licence categories, may still have ownership or service agent requirements. Check your specific activity with the licensing authority.
What counts as a “strategic impact” activity in the UAE?
Cabinet Resolution No. (55) of 2021 lists security and defence work, banking and insurance, money printing, telecommunications, Hajj and Umrah services, Quran memorisation centres, and fisheries services. Fisheries require full Emirati ownership. The other categories need case-by-case regulatory approval on ownership share.
