UAE Allows 100% Foreign Ownership of Companies
The UAE in November 2020, declared that the landmark reform permitting foreign investors 100 percent ownership of businesses would take effect from December 1, 2020. There have been several updates since then. Last month, a senior official confirmed that the UAE’s Ministry of Economy was working on new legislation to incorporate 10 sectors into the Commercial Companies Law. In a further update, this month the UAE Ministry of Economy has now stated that the amendment to the Commercial Companies Law will come into effect from first June 2021, to permit 100% foreign ownership of onshore organizations in the UAE. Abu Dhabi Department of Economic Development (ADDED) has released a list of 1,105 activities that would be eligible for 100% foreign ownership. According to the change in Law, foreigners who to invest in the UAE will no longer need Emirati shareholders.
"The decision is one of many decisions and initiatives to provide incentives for the private sector in Abu Dhabi and to enhance the status of Abu Dhabi on the global investment map," said Mohamed Ali Al Shorafa, Chairman of ADDED.
DED Activity List
The Dubai Department of Economic Development has now released a list of more than 1000 economic activities that would be eligible for 100% foreign ownership.
The immediate execution of foreign ownership by June 1, 2021, says Dubai Economy with following features:
- The total number of economic activities has reached more than 2300
- Applies to over 1000 commercial and industrial activities
- No specific capital or any additional fees for foreign investors.
- Branches of foreign companies don't require a local company agent
- Does not apply to professional activities
- Does not apply to the economic activities with a strategic impact, which include 7 sectors only.
- Investors can conduct professional business in Dubai provided the appointment of a local services agent
It was on Wednesday that the UAE affirmed it will permit full foreign ownership in businesses distinguished as being in non-strategic areas. The Departments of Economic Development (DED) in each of the emirates would draw up the list of such business activities
Scope of the Law
Foreign people who set up investment projects on the UAE's mainland and fulfill the requirements are subject to the law. Other requirements include the ability of the investment project to:
- Use new technology
- Realize the high added value
- Contribute to research and development
- Meet the conditions of licensing entities in the UAE.
Meet the conditions of licensing entities in the UAE.
Abu Dhabi has compiled a list of 1,105 commercial and industrial activities that will permit 100 percent ownership by non-UAE nationals. Owners of existing organizations do have the right to adjust their status, provided they "comply with the regulations on activities or other applicable limitations". It's unclear whether other business activities would be added to this list at a later stage. Other emirates and their Economic Departments will shortly release their own business activity listings that allow for 100% foreign ownership.
Not Having 100% Foreign Ownership
Banking and finance, including the fast-emerging fintech space, as well as remittances, will remain activities that require a UAE national as majority partner, according to sources.
Other strategic categories would be services in utilities and telecom, as well as those businesses working under the Commercial Agency Law.
- Production of petroleum materials and exploration
- Military areas, explosives and military equipment, investigations, manufacturing of arms, security, devices, and clothing
- Banking and financing activities, payment systems, and cash handling
- Insurance services
- Hajj pilgrimage and Umrah services and other activities are referenced in article 7 of the FDI law.
As per the Commercial Companies Law, Law No. 2 of 2015, foreign shareholders were restricted to owning a maximum of 49% in a 'Limited Liability Company’ operating as an onshore UAE business. As a local sponsor, this requires an Emirati citizen or 100% Emirati-owned organization to hold the remaining 51% share.
In other companies, international businesses of certain categories were allowed to have a local service agent (Emirati national) who did not own any shares but were compensated as part of the business setup agreement. The amended rule permits natural and legal persons to establish and own a 100 percent stake in their organizations, regardless of nationality. The law, on the other hand, will not apply to certain companies that are excluded based on the Cabinet decisions and those companies that are either wholly owned by federal or local governments or their subsidiaries.
How This Influences New Businesses in the UAE
In case you're a businessperson who was reluctant to begin a company in Dubai or UAE, because of ownership restrictions, you don't have to worry about that anymore. New investors in the UAE market have a competitive benefit in terms of ease of business establishment. Under the new law non-Emiratis of all nationalities can completely own their business if it comes in the list of sectors allowed.
Why the UAE Executed the Full Ownership Law
By eliminating existing roadblocks and opening up the economy, the UAE desires to capitalize on its already present appeal as a market for foreign investors, businesses, startups, and top ability from around the world, while additionally putting the country in a better position as it prepares for post-Covid recovery and redesigns its vision for the next 50 years
What are the Benefits of 100% Ownership?
By having 100% ownership, foreign national does not need to depend on local UAE national for any signature or representation of the organization in any government department, not needed any documents of UAE national in bank KYC, no sharing of any capital or profits of the organization to UAE national, at the same time once it’s a mainland organization foreign national can take semi-government and government projects can do the business in the local market freely.
- 100% Ownership
- The right to use Real Estate
- Make a financial transfer for project returns outside the country
- The licensed foreign investment organizations are treated like UAE national companies,
- and additional privileges like insert partners, transfer ownership to a new investor, amending the article of association, change the legal form of the company, etc.