Business

100% Foreign Ownership in the UAE

If you are planning to expand your business in the Land of Arabs, then this is the time to take the 100% benefit of it.  The United Arab Emirates (UAE) has dynamically increased engagement in its business periphery. The new policy amended by the UAE provides 100% foreign ownership in the UAE across multiple industries. The UAE provides various incentives and regulations to boost the foreign investment sector by making it a desirable hub for international initiatives to expand. Recently, the UAE Government revised and announced the federal Commercial Companies Law, allowing foreign ventures to own their respective businesses fully. This change excludes the previous gap of 49%, permitting investors to hold up to 100% ownership.

What Does It Mean: 100% Foreign Ownership in UAE?

100% foreign ownership in UAE means that foreigners can now obtain 100% foreign ownership in UAE in cooperation or partnering with a Local Service Agent (LSA). Earlier in UAE foreigners were limited to owning a maximum of 49% of their companies, and rest 51% belong to a UAE national also known as Emirati sponsor or partner. However, the new policy or an amendment has exempted foreign investors from minimum percentage ownership of UAE nationals, thus implementing a 100% foreign ownership in UAE.

What has changed with the new policy?

In the past, business owners were limited to owning a maximum of 49% of their companies’ shares. The rest of the 51% belonged to the UAE government nation. With this new law, foreign investors were exempted from the minimum percentage of ownership of UAE citizens. New investors or other professionals can set up company formation in UAE without any local broker.

This implies we can now enjoy 100% foreign ownership in Arab land by partnering with the LSA (Local Service Agent). These agents will help you with all the licensing and paperwork process without shareholding in your company. Thus, all the power now comes into the investors’ hands.

What is the eligibility for 100% foreign ownership in the UAE?

Given below are the list of eligibility criteria for 100% foreign ownership in the UAE:

1. Dubai

As per the list released by the Department of Economic Development (DED), the new amended law will be applied to 1061 out of 2300 of the total economic activities. Trading and manufacturing and about half of the business activities across the sectors are eligible for 100% ownership. The professional service activities continue to benefit the entrepreneurs. Moreover, they need a local agent to strictly follow the establishment of the legal structure in the place of an LLC.

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2. Abu Dhabi

Here, the case is a little different. Investors must follow the 51-49 shareholding statistics. Most of the trading activities in Abu Dhabi still require investors to partner with an Emirati sponsor.

3. Other Emirates

Applying 100% ownership of business stands different from one Emirate to another. The updated regulations have already been introduced in Dubai and Abu Dhabi. The rest of the other states are expected to develop their own.

Why were the laws updated to permit full ownership of businesses in the UAE?

Given below are the reasons behind the laws updated to permit full ownership of business in the UAE:

  1. Establish a favorable legislative framework to support the formation of companies
  2. Allowing 100% ownership of businesses in the UAE will enhance the preparedness of the country’s economy
  3. Enhance the business environment’s friendliness
  4. Assist in preparing for the future by enhancing investment and business prospects
  5. Elevate the competitiveness of the business environment in line with the swift economic changes and global economic advancements
  6. Address the changing requirements of the UAE business community
  7. Significantly increase the country’s appeal to expatriate investors, businesses, and startups
  8. Enable foreign investors to have full operational and legal authority over their companies without unwanted interference
  9. Attract entrepreneurial individuals from across the world to establish their businesses and benefit from UAE’s 100% foreign ownership.

Key Points: New Amendment

The key points mentioned below are regarding the new amendments:

1. Executives Liability

According to the new provisions, executive officers or company chairs can be removed if they misuse power.

2. Board of Directors

The ban on foreign investors from serving on boards of directors has been lifted.

3. Digital Balloting

Digital balloting can be utilised due to the global pandemic over the prohibition on expatriates.

4. County Government

Local authorities can now determine domestic companies’ capitalisation and ownership percentages. This responsibility was previously held by the Ministry of Economy or the Economic Departments of each Emirate.

5. Investors Lead Company Meetings

Company meetings no longer need to be controlled by Emiratis offshore; investors can now take on this role.

6. Share of IPO Increased

Companies sharing joint stock can now quickly sell up to 70% of their shares through an IPO.

7. Shareholder Lawsuits

If the directors or managers cause financial losses, the shareholders can sue the company.

8. Abolishing Emirati Shareholder Requirement

The Emirati shareholders or local agents no longer need local agents during the company registration in Dubai.

9. 100% Foreign Ownership

Investors can fully own onshore companies in the UAE, especially those subject to UAE cabinet policies.

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Sectors that Allow 100% Foreign Ownership in Dubai 

Given below are the list of business sectors that allow 100% foreign ownership in Dubai:

  1. Trading involves buying and selling goods and services from other countries.  
  2. Manufacturing – This process involves the making of goods and products.
  3. Information and communication technology includes software development, e-commerce, and IT services.
  4. Professional services – Services like accounting, consulting, and legal advice are included in services.
  5. Tourism and hospitality—Hotels, restaurants, and tour/taxi services are involved in this process of services.
  6. Certain industries that can’t own 100% of the business as foreign investors in UAE are as follows:
    • Banking and finance – These services include banking, insurance, and investment services. 
    • Defence – This service includes making and providing defence-related products and services. 
    • Civil aviation – Providing air transportation fully operationally is included in civil aviation.

How Does 100% Ownership in the UAE Affect New Businesses?

Foreign investors or entrepreneurs encountering obstacles when launching a company in the UAE or Dubai due to ownership restrictions can now confidently start their venture without any worries. Previously, non-Emiratis did not have complete autonomy when establishing their businesses. This legislation enables individuals of all nationalities to own their businesses in the approved industries. As a result, new investors are offered advantageous benefits, simplifying the business setting.

100% Foreign Ownership in the UAE: Affects Existing Mainland Businesses

If you own a business in the UAE that requires local ownership, you might want to change that setup to get full ownership yourself. The LLC owners can now update their licenses to transfer shares from UAE nationals to foreign nationals, allowing them 100% ownership.

The existing businesses are asked to make these changes by January 2, 2022. Due to new regulations, they may also update their Memorandums of Association to meet new meeting rules, notices, and quorum.

100% Ownership: Affects Existing Businesses in UAE Free Zones

The UAE Free Zone allows 100% foreign ownership but restricts entities from trading on the UAE mainland. With these limitations also, many investors favour Free zones due to the likeable incentives regulatory and tax rules. However, the new foreign ownership law may drop the demand for Free zones and present experiments in attracting business. Economic Free zones like Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) will remain standard. These common law legal frameworks are independent court systems, and solid financial regulatory rules continue to attract investors and monetary establishments. 

How can a non-UAE citizen own 100% of an existing LLC in the UAE?

The following steps can help foreign nationals who own an LLC in the UAE achieve 100% ownership, ideally with the assistance of a business setup consultant.:

  1. Prepare the application to amend the license.
  2. Update the Memorandum of Association (MOA).
  3. Get pre-approval from the Department of Economic Development (DED).
  4. Apply for the DED.
  5. Pay the required fees.
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Takeaway Words

The recent change allowing foreign investors 100% ownership in the UAE marks a groundbreaking development that could significantly impact the corporate business landscape. The UAE government, renowned for its supportive approach, has modified the Federal Commercial Companies Law (CCL) to enable this change. The UAE’s initiative to help 100% foreign ownership marks a significant shift to enhance its appeal as an investment hub. This presents an array of opportunities for foreign investors across different industries, provided they effectively navigate the regulatory framework and understand the unique dynamics of the UAE market. Additionally, we will evaluate your business model and propose strategies to ensure that your enterprise meets 100% foreign ownership criteria.

FAQ

  1. Who are the top foreign investors in the UAE?

    The leading foreign investors are the United Kingdom, India, the United States, France, and Saudi Arabia.

  2. What is 100% foreign ownership in Qatar?

    Foreign ownership refers to the ownership of the country’s assets, such as natural resources, bonds, equity, and property. Qatar has taken significant steps to liberalise its business environment, allowing for 100% foreign ownership in various sectors.

  3. Can a foreign company own property in the UAE?

    Non-UAE national owners are limited to purchasing freehold properties like individual foreign owners. Foreign ownership is permitted in designated zones.

  4. In which sector is FDI 100 per cent allowed?

    According to the amended FDI policy, 100% FDI is allowed in the space sector.

  5. What are the benefits of foreign ownership?

    The most common benefits of foreign ownership are market diversification, tax incentives, subsidies, and overall boost to the economy of the country.

  6. Can Indian citizens own property in the UAE?

    Yes, Indian citizens can buy property in Dubai.

  7. Which country invests most in Dubai?

     India is the top investor in Dubai.

  8. Can you own 100% of a company in Qatar?

    As a Qatari company investor, the partners must own 51% at least of the shares. In some commercial activities, GCC citizens must own up to 100% of the company.

  9. How do I establish a 100% foreign-owned company in Saudi Arabia?

    Saudia Arabia requires foreign investors to have a minimum share capital of SAR 500,000, according to the Ministry of Investments of Saudi Arabia, formerly known as SAGIA.

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