Drafting Sponsorship Agreements
Hire Expert for Drafting Sponsorship Agreements
A sponsorship agreement in the UAE (also called a Local Service Agent agreement) is a legal contract between a UAE national and a foreign investor or individual. Federal Decree‑Law No. 32 of 2021(as amended), now permits 100% foreign ownership in most mainland sectors, but certain activities still require local sponsor or local service agent presence. Certain activities still require a local sponsor (with equity in strategic/strategic‑impact sectors under Cabinet Resolution No. 55 of 2021 and related emirate rules) or a Local Service Agent, for example to conduct restricted activities, obtain professional licences, or register commercial agencies under Federal Law No. 3 of 2022.
These agreements help businesses in the UAE to comply with local laws because they require local partnerships for residency, business setup and local commercial activities.
At HHS Lawyers, we will assist you with our drafting lawyer.
- We draft simple, clear and tailor made UAE sponsorship contracts, which protect your financial and business rights.
- We will ensure that your agreement complies with the most recent UAE Commercial Companies Law and Agency Law.
- We help you with the UAE Public Notary process so that your contract is legally binding.
- If there is a dispute, we advise on termination clauses and represent you at the Commercial Agencies Committee or in UAE Courts.
- We liaise with authorities in the UAE for all your approvals while ensuring that your setup is compliant. Learn more about our legal Drafting services.
What Is a Sponsorship Agreement?
A sponsorship agreement in the UAE (also known as a Local Service Agent agreement or side agreement) is a legal document that defines the relationship between a UAE national and a foreign investor in situations where local involvement is still required. Updates to the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021, as amended) now allow 100% foreign ownership in most mainland business activities through emirate-level positive lists for the vast majority of commercial, industrial, and professional activities, as specified in the “positive lists” of eligible activities published by each emirate’s Department of Economic Development (DED) or equivalent authority.
However, some sectors still require a UAE national partner (with equity in restricted or strategic activities) or a Local Service Agent (for professional licenses with no equity). The sponsorship agreement clearly sets out the role of the local party — usually administrative and government liaison support for LSAs, or a silent partner in limited equity cases — along with any fixed annual fees. LSAs do not receive a share of company profits.
Purpose & Legal Importance of Sponsorship Agreement
The primary purpose of a sponsorship agreement is to provide legal security to both parties and ensure transparency in business dealings.
- Regulatory Compliance: UAE authorities require businesses to present written contracts which require notarization before they will approve trade licenses and residency visa applications.
- Risk Mitigation: Foreign investors need a formal contract to protect their operational control rights which prevents financial disputes about profit sharing.
- Operational Clarity: The clear operational framework served to specify the limits on sponsor activity, usually to the clerical or governmental liaison role.
- Consequences of Non-Compliance: When a person fails to draft a proper agreement, the licensing authority may reject the license renewal. Moreover, the person may face criminal or civil sanctions. Subsequently, they won’t be able to enforce their rights in UAE Courts.
Who Needs a Sponsorship or LSA Agreement in the UAE
- Foreign Investors (Restricted or Strategic Sectors)
Foreign investors who want to set up a mainland LLC in restricted or strategic sectors must have a UAE national sponsor because 100% foreign ownership is not allowed for these activities under Cabinet Decision No. 55 of 2021 and emirate‑level positive lists.
- Professional Service Providers (LSA Required)
Professionals such as consultants, doctors, engineers, auditors, and other service providers need a professional or civil license.
These licenses require a Local Service Agent (LSA) — a UAE national who provides government liaison and administrative support.
The LSA has no ownership and receives only a fixed annual fee.
- Commercial Agents (Registered UAE Agents)
International brands that want to distribute products in the UAE must appoint a registered local commercial agent under Federal Law No. 3 of 2022. These commercial agency agreements must be registered with the Ministry of Economy, and the agent must be a UAE national or a majority‑UAE‑owned company.
Note: Most mainland activities now allow 100% foreign ownership. But professional licenses (consultancy, engineering, auditing, legal, and medical) still require a Local Service Agent (LSA) if the owner is non‑GCC. The LSA must be a UAE national, has no ownership or profit share, and is paid a fixed annual fee for government liaison only. For any Advice please check official websites or seek legal advice. See our Corporate Lawyers in Dubai page.)
Required Documents for UAE Sponsorship/LSA Agreements
| Document Category | Foreign Investor / Partner | UAE National Sponsor / LSA |
| Personal ID | Clear colored Passport copy (valid 6+ months) | Clear colored Passport copy |
| Residency Proof | UAE Entry Stamp or valid Residency Visa | Emirates ID (front and back) |
| Local ID | Emirates ID (if already a resident) | Family Book (Khulasat Al Qaid) |
| Employment Status | NOC (No Objection Certificate) from current sponsor (if employed in UAE) | N/A |
| Business Approval | Initial Approval Certificate from DED/DET | N/A |
| Trade Name | Trade Name Reservation Certificate | N/A |
| Legal Contract | Memorandum of Association (MOA) | LSA Agreement (if Professional License) |
Process for Drafting a UAE Sponsorship Agreement
Steps to Draft and Execute a Sponsorship/LSA Agreement in the UAE include:
Consultation & Scoping
Determine the required local partnership needs which include assessing whether a UAE national partner is necessary for strategic sectors, whether a Local Service Agent (LSA) is needed for professional licenses, or whether a registered commercial agent is required for distribution agreements.
Drafting the Agreement
The contract should be created in Arabic and English and must contain:
• fixed annual fees for LSAs
• administrative and government-liaison duties
• management rights (foreign investor usually retains full control)
• exit and termination clauses
• any sector-specific obligations
Legal Review
The agreement must meet the requirements of UAE Civil Transactions Law, UAE Commercial Companies Law, and all applicable regulations, including Ministry of Economy rules for commercial agencies.
Notarization
The parties need to sign the document at a UAE Public Notary or through authorized digital notary services for the agreement to become legally binding. We offer professional support for Private Notary services to ensure full compliance.
Registration
The Ministry of Economy requires all commercial agency agreements to be registered.
The DED/DET requires LSA agreements and sponsorship documents to be submitted during the business license approval process.
Cost & Timeline
The total cost and time for drafting a sponsorship agreement vary based on the complexity and the authority involved.
| Factor | Estimated Range / Details |
| Drafting Fees | Varies based on the complexity of the business structure. |
| Notary Public Fees | Typically between AED 300 to AED 1,500 depending on the document type. |
| Processing Time | 2 to 5 working days for drafting and notarization. |
| Variations | Costs may increase if the agreement requires attestation from the Ministry of Foreign Affairs (MOFA) for international use. |
Legal Validity & Recognition
The UAE courts, the Department of Economic Development (DED) and the Ministry of Human Resources and Emiratisation fully acknowledge all sponsorship agreements that have been created and signed before the notaries in the UAE. A notarized agreement serves as primary evidence in the event of a commercial dispute. Legal experts must create “side agreements” which conflict with the public MOA because they need to establish their legal validity according to UAE regulations.
Frequently Asked Questions (FAQs)
Q1. Is a local sponsor still required for all UAE businesses?
No. After the 2020–2021 updates to the UAE Commercial Companies Law (Federal Decree-Law No. 32 of 2021, as amended), 100% foreign ownership is allowed for most mainland business activities listed in the emirate-level positive lists. However, certain activities still require a local sponsor (with equity in strategic or strategic-impact sectors under Cabinet Resolution No. 55 of 2021 and related emirate rules) or a Local Service Agent, for example to conduct restricted activities, obtain professional licences, or register commercial agencies under Federal Law No. 3 of 2022.
Q2. What is the difference between a Local Sponsor and a Local Service Agent?
A Local Sponsor for LLC companies typically owns 51% of business shares according to official regulations. A Local Service Agent for professional licenses provides government support services at an annual fixed cost without receiving any ownership stake.
Q3. Can a sponsorship agreement be terminated at any time?
The agreement contains termination terms which both parties must follow. Many contracts require a notice period (often one year for commercial agencies) or mutual consent. If parties fail to reach agreement, disputes may be resolved through UAE Courts or the relevant committees.
Q4. Must the sponsorship agreement be in Arabic?
Yes. To be notarized and accepted by UAE authorities, the agreement must be in Arabic. Most businesses prepare bilingual contracts (Arabic and English) so both parties clearly understand the terms.
Q5. Does a sponsor have a right to the company’s profits?
When a UAE national holds equity in a company (for example, in restricted or strategic sectors), they are legally entitled to receive a profit share based on their ownership percentage stated in the Memorandum of Association (MOA).
However, for Local Service Agents (LSAs) — commonly used for professional licenses — the arrangement is different. An LSA does not receive profit share or ownership. Instead, the LSA is paid a fixed annual fee, as clearly stated in the LSA agreement.
Q6. Can I use a corporate entity as a sponsor instead of an individual?
Yes, corporate sponsorship is common and often preferred by large businesses as it provides more stability and continuity than an individual sponsor.
Talk to Expert
The updated UAE Commercial Companies Law (Federal Decree‑Law No. 32 of 2021, as amended) now permits foreign investors from all countries to establish complete ownership businesses in mainland UAE territories.
The agreements establish the financial obligations, administrative responsibilities and exit procedures that both the UAE national and the foreign party must follow to achieve essential legal protection. The agreement requires current UAE federal laws to be followed for its enforcement. It must be written in bilingual format with Arabic as the main language, and notary verification must be obtained to maintain business operations.
At HHS Lawyers, our drafting lawyers will create a UAE sponsorship agreement for you which protects your rights while maintaining full legal compliance through complete notarization and proper compliance with all requirements.
