GNcareers, from Gulf News

The ‘local’ link in business

Understand the role of your local partner or service agentImage Credit: Supplied

Dubai, with its vibrant and encouraging approach to growth and economic development, is a great place for one to embark on a business venture. While businesses in free zones can be 100% foreign owned, business ventures need to have local participation in the rest of the emirate.

The nature of local participation and their responsibilities towards the business depend on the nature of the business, whether it falls within the Commercial Companies Law (CCL) or the Civil Code.

A Limited Liability Company (LLC) falls under the control of the CCL and needs a local partner who controls at least 51% of the share capital. In this scenario, the profit and loss distribution can be mutually agreed upon.

The primary responsibility of managing an LLC lies with the foreign or national partner or a third party employed for this specific purpose. The local partner is also financially liable.

However, in the case of an entity formed under the Civil Code, the company can be 100% foreign-owned but it has to appoint an Emirati service agent (or sponsor) from the same emirate.

Local service agents are not involved in the day-to-day management of the company or its operations. They are representatives who also assist and guide in drafting legal agreements and other business documents, and help in obtaining visas, labor cards and dealing with government offices and entities. They are paid a lump sum and/or a percentage of the company’s profits or turnover.

Handy Hints

• Firms formed under Civil Code need an LSA/sponsor

• LSAs assist in drafting legal agreements/documents

• LSAs are paid a lump sum/percentage of profits

Source: Binu Sivan, Special to Classifieds,

The writer is a freelancer