Since always, full ex-pat ownership for business proprietors in Dubai and the UAE was not allowed, and they had to own just a part of their companies. The remaining part has had to be shared with UAE nationals. Now, things have changed. Expats and foreigners can enjoy 100% business ownership in Dubai.
In this article, you will learn everything about how you, as a foreigner, can have 100% business ownership in Dubai. When you finish reading this, you will have a better understanding of the benefits of this new law. Let us observe:
1. The Foreign Direct Investment Law of the United Arab Emirates
2. What did the amendment alter?
3. Why was the law changed to allow for 100 percent ownership of businesses in the UAE?
4. The new amendment’s key points
5. Why did the UAE enact the Full Ownership Law?
6. What can UAE entrepreneurs expect from the amendment?
7. Who is eligible for full ownership of a company’s operations in the UAE?
8. Frequent questions
9. How can Connect Group help you?
1. The Foreign Direct Investment Law of the United Arab Emirates
Until recently, the general rule was that all UAE Mainland Companies required 51 percent shareholding by UAE nationals. This is when foreign nationals wanted to set up a shop in Dubai or the UAE (or entities wholly owned by UAE nationals). The UAE Companies Law included this requirement that you had to accept.
It has always been possible to alter the economic interests of the foreign shareholder and the local shareholder to a certain extent. Some foreign investors have often entered into so-called “side agreements” with the local shareholder. However, when it comes to the economic ownership and decision-making of the company, uncertainty has always remained as to the effectiveness of such agreements.
Foreign ownership restrictions in specific business sectors (known as the Positive List) were relaxed by the Foreign Direct Investment Law (FDI Law) passed in 2018. This allowed up to 100 percent foreign ownership of businesses on the Positive List.
However, to qualify for the foreign ownership exemption, the applicant had to meet several relatively onerous requirements, such as
- Significant share capital contributions
- The use of technology
- And the employment of UAE nationals
Furthermore, final approval was delegated to the appropriate licensing authority.
2. What did the amendment alter?
According to our understanding, the new law will amend the Companies Law to eliminate the general requirement for 51 percent shareholding by UAE nationals. This will allow for 100 percent foreign ownership of UAE LLCs established on the mainland. Additionally, there is the requirement that a foreign company’s branch engages a UAE national to act as its agent.
In short, anyone, regardless of nationality, can now gain 100% business ownership in Dubai or even on the UAE Mainland. These amendments represent a significant departure from the controlled sectorial approach of the FDI Law. Concerning this, we understand it will be repealed once the new law comes into force.
Hence, local licensing authorities in each Emirate will retain the authority to impose an element of UAE national ownership. Additionally, we understand that certain strategically important sectors, such as oil and gas, telecommunications, and utilities, will remain subject to foreign ownership restrictions.
The majority of the new law’s changes took effect on June 1st, 2021. Companies had a one-year grace period to make any changes required by the new law.
3. Why was the law changed to allow for 100 percent ownership of businesses in the UAE?
The UAE has a stable economy, and many business investors want to invest in Dubai. Following the influx of foreign investors in the UAE, the old law was initially enacted. This law required sponsors or partners to participate in a minimum of 51% of the profits of foreign investors. As a result, the ex-pat business investors received 49%.
Nonetheless, on June 1st, 2021, the law was revised to allow 100% ex-pat ownership of companies in the UAE for the following reasons:
- Improving a fruitful and productive company establishment in the UAE
- To boost the country’s economy by allowing 100% ex-pat ownership of businesses in the UAE
- To make it easier to do business in the country
- Accepting the country’s changing business model
- To entice business ex-pats to invest in the UAE and other parts of the country
- Creating a business-friendly competitive environment
In addition, in our agency, we provide investors with outstanding ideas for the improvement of their business.
4. The new amendment’s key points
The following are the key changes in shareholding patterns as a result of the new amendment:
- It removes the requirement for UAE companies to have a majority of Emirati shareholders and local agents when registering a company in Dubai.
- It allows 100 percent foreign ownership of companies located on the Mainland of the UAE. For example, onshore companies, are subject to the policies outlined by the UAE cabinet in the form of a cabinet resolution.
- A joint-stock company can now sell 70% of its shares in an initial public offering (IPO). Previously, this percentage could have been as low as 30%. If the company engages in an activity that causes the company to lose money, the shareholders have the right to sue the company in court.
- It gives local governments authority over required capitalization, shareholding percentages, and approval for onshore company establishments subject to cabinet resolution policies. Previously, these powers were reserved for the Ministry of Economy or the respective Emirate’s Economic Departments.
- Meetings of companies do not need to be presided over by an Emirati. They are now open to both Emiratis and Expatriates.
- Similarly, the ban on Expatriates serving on the board of directors of the company has been lifted.
- Due to the global pandemic, annual general meetings can now include electronic voting.
- There is a provision in the law that allows for the removal of executive officers or company chairs if they abuse their positions of power.
5. Why did the UAE enact the Full Ownership Law?
By removing existing impediments and opening up the economy, the UAE hopes to capitalize on its already strong appeal as a market for:
- Foreign investors
- Businesses
- Startups
- Top talent from around the world
Meanwhile, the government is also putting the country in a better position. At the same time, it prepares for post-COVID recovery and reimagines its vision for the next 50 years. Hence, the government hopes to reap the following benefits:
- Creation of a favorable legal environment for the establishment of businesses in the UAE.
- Increasing the ease of doing business.
- Improvement in the country’s economy as a whole.
- Making plans for the future by increasing investment and commercial opportunities.
- Future-proofed against the various disruptions that are occurring in the global economy.
- Adapting to the changing needs of the UAE business community
- Increasing the country’s appeal to ex-pat investors, businesses/conglomerates/startups, and so on.
6. What can UAE entrepreneurs expect from the amendment?
The jury is still out on the exact impact of the UAE’s 100% foreign ownership law. Allowing foreigners to have 100% business ownership in Dubai (and in the country) should significantly increase the UAE’s attractiveness to overseas investors. Especially those investors who may have been hesitant to enter the UAE market due to previous ownership restrictions.
This is good news for foreign companies that have already established businesses in the UAE with mandatory local participation. They will be able to reconsider those arrangements in light of these developments if they want 100% ownership.
These developments may also spark a lively debate about the long-term advantages of free zones. Free zones generally allow foreign investors to have complete ownership and often provide a more familiar legal regime for them. However, entities established within their region are typically not permitted to trade on the UAE mainland.
As a result of these changes, some businesses that have established themselves in FZ may now find it more appealing to establish themselves onshore. According to previous announcements, all current and previously licensed businesses in the UAE can change their status by the new CCL.
7. Who is eligible for full ownership of a company’s operations in the UAE?
In the UAE, not all Emirates have permitted 100% ex-pat ownership of business companies. As a result, it is preferable to familiarize yourself with what is required and what Emirates has lawfully regulated. It feels better as a foreign investor to have complete control and ownership of your business, even if you are in another country.
7.1 Abu Dhabi
Abu Dhabi allows foreign investors to own 100 percent of a business. However, you will be required to partner with sponsors or Emiratis at some point. When you have established several trading activities within the state, you will need to partner with UAE nationals.
As a result, investors will have to follow the previously established 49-51 percent rule. On the other hand, we can help you to open a company in Abu Dhabi Mainland.
7.2 Dubai
In this state, the law applies to 1,061 of the 2,300 total business activities listed by the DED (Department of Economic Development). As a result, nearly half of the business activities, such as manufacturing, trading, and others, can have 100% business ownership in Dubai.
In contrast, for professional activities, a local service agent may be required and must strictly adhere to the sole establishment of the legal structure rather than an LLC. Moreover, Connect Group can show you the great advantages of setting up a business in Dubai.
8. Frequent questions
8.1 What impact does 100 percent ownership have on new businesses in the UAE?
You may be an entrepreneur who has been hesitant to start a business in Dubai or the UAE due to ownership restrictions. Now you no longer have to worry. In terms of ease of business establishment, new investors in the UAE market have a competitive advantage.
Non-Emiratis of all nationalities can now fully own their businesses under the new law, as long as they are in one of the permitted sectors.
8.2 In the UAE, who can have 100% ownership of an LLC?
The application of a new law to the CCL (Commercial Company Law) has resulted in a new revolution in the UAE business model. For the most part, foreign investors have found it difficult to own business companies in the UAE.
However, all ex-pat business owners cannot own 100% of a Limited Liability Company in the UAE. Even if the law had not been in place, the 49-51 percent could have been effective. Nevertheless, not all Emirates in the UAE have implemented 100 percent ex-pat ownership.
8.3 Can a foreigner own a business in the UAE?
Yes, any foreign investor can establish a business in the UAE, form a large corporation, and carry out trading activities in the UAE. The most important considerations are the nature of your business, the business activities, and the location in which you want to establish your company.
Expats can own a company in the UAE. Because of this, you will be forced to align your business model with the type of FZ where you want to start your business. Each free zone has its jurisdiction that governs its business market.
As a foreign investor, it is your responsibility to research and understand the policies of each zone. As a result, Dubai welcomes all ex-pats from various countries to invest in their city.
Similarly, everything has been simplified to the point where you can apply for your visa through an e-channel system. This is an online portal that prepares your documents. Additionally, we offer visa services. This way, you can get, for example, an investor visa, a Golden Visa, among others.
9. How can Connect Group help you?
Without a doubt, this new change was for the better. Thus, this new law will attract more foreign investors to the country. They will want to opt for 100% business ownership in Dubai. However, if you are one of them, you might need help.
Connect Group can assist companies in establishing a new LLC or Foreign Branch in the UAE. Additionally, we advise on whether your activity is eligible for 100% ownership. Connect Group can also act as a nominee shareholder in the interim period to ensure a clear path to 100% ownership if necessary.
Would you like to obtain more information about business ownership in Dubai? If you have any questions, email us at [email protected]. Then, you will talk to one of our representatives who will answer your questions.
Apply today by sending us your CV to thetalentpoint.com. Furthermore, we will not store CVs that you send to [email protected]. Open your business with us right now!
