How to Change a Local Sponsor in Dubai

Dubai’s booming business landscape has heightened competition, necessitating careful planning for setting up a business. One critical requirement for foreign investors is finding a local sponsor who will hold the majority stake in the business. This is essential for acquiring a mainland license in Dubai, Abu Dhabi, and other emirates in the UAE. However, there are situations where a change in the local sponsor becomes necessary. Here’s a comprehensive guide on how to change your local sponsor in Dubai.

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What is a Local Sponsor?

A local sponsor is an individual or entity that provides support, sponsorship, or assistance to a business within a specific region, holding 51% of the company’s shares as mandated by law.

Main Reasons for Changing a Local Sponsor in Dubai

While the operational powers of the company lie with the director or manager, a local sponsor in Dubai plays a crucial role in the company’s immigration and labor-related matters. Here are the main reasons for changing a local sponsor:

  1. Inaccessibility to the Local Sponsor

Many business owners do not have direct access to their local sponsor, relying instead on PROs, consultants, or lawyers. This lack of direct communication and essential details (such as passport information, contact details, etc.) can lead to a desire for change.

  1. Unavailability of the Local Sponsor

Unavailability of the local sponsor can cause communication and legal issues, impacting business relationships and hindering expansion efforts.

  1. Restricted Rights

Local sponsors hold a significant ownership percentage, often imposing restrictions on the foreign business owner regarding control, decision-making, and profit-sharing.

  1. Migration and Labor Rights

Changing local sponsors might be necessary due to migration and labor rights issues, including:

– Seeking better job opportunities or working conditions.

– Addressing non-payment of wages, poor working conditions, or mistreatment.

– Pursuing career growth or changes in employment status.

– Benefiting from improved legal protections.

  1. Uncertainty of Procedures

Uncertainty in procedures can lead to inefficiencies, regulatory risks, communication challenges, and mismanagement, prompting the need for a new sponsor.

  1. Documentation

Legal documentation formalizes the sponsor relationship. Changes in business strategies, disagreements, or alterations in corporate structure may necessitate updating sponsorship agreements.

  1. Dispute Resolution

Disputes over interests, lack of cooperation, contract defaults, and legal issues can lead to the decision to change the local sponsor.

Procedure to Change a Local Sponsor in Dubai

Changing a local sponsor involves several legalities and formalities. Here’s a step-by-step guide:

  1. Deal with the New Sponsor

Identify and make agreements with a new local sponsor who understands the business requirements and agrees to the company’s terms and conditions.

  1. Termination of Agreement with Current Sponsor

Terminate all agreements with the current sponsor by following the contract terms, providing notice, and settling all dues. Submit the termination notice to the Department of Economic Development (DED).

  1. Obtain a No Objection Certificate (NOC)

Obtain a NOC from the current sponsor, indicating their approval of the change in sponsorship. This document is required by the authorities.

  1. Amend Trade Licenses

Apply for an amendment to the trade licenses with the DED to reflect the new sponsorship. Submit all relevant documents for approval.

  1. Provide Documents of the New Sponsor

Submit the necessary documents of the new sponsor, including personal documents, passport copies, and visa copies, to the relevant authorities.

  1. Get Approvals from the DED

The DED will review the application and the new sponsor’s eligibility. If everything is in order, they will approve the change.

  1. Update Immigration Records and Inform Government Departments

Update immigration records, including canceling the old visa and applying for a new one under the new sponsorship. Inform other relevant government departments or agencies about the change.

Conclusion

Dubai is a hub for business incorporation and development, necessitating a local sponsor for business growth and expansion. Due to various market changes, updating your local sponsor from time to time may be necessary. While this procedure can be complex, Unicorn Global Solutionsis here to help. Our experts can guide you through the process, ensuring compliance and a smooth transition. Contact us today for professional assistance in changing your company’s sponsor. Text us on WhatsApp or call us today.

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