To what may be called a new dawn for the country’s business community, the implementation of the amendments made to the Commercial Companies Law (CCL) on 1 June 2021, now allows expats to have 100% foreign ownership of business in UAE.
This blog will explore the new changes and what they mean for entrepreneurs and the UAE economy. The latest laws permit foreign investors to own 100% of the UAE, a revolutionary step towards making this region the prime business hub worldwide.
What is new?
The revised laws regulate the establishment of commercial companies with limited liability structures. A Limited Liability Company (LLC) can now have a single owner or multiple shareholders.
What has changed?
Earlier, expat business owners were limited to owning a maximum of 49% of their companies. The remaining 51% would belong to a UAE national known as an Emirati sponsor or partner.
Only a few activities in the professional services sectors and certain free zones allowed foreigners to own 100% of the UAE.
However, the amendments exempt foreign investors from the minimum percentage ownership of UAE nationals. Thus, natural and legal persons can establish companies in the UAE mainland without needing a local partner.
This implies that expatriates can now enjoy 100% foreign ownership in the UAE by partnering with a local service agent (LSA). An LSA helps you with all the paperwork and licensing procedures without having any shareholding in your company. Therefore, the power to make decisions rests in your hands.
Who is eligible for 100% foreign ownership of business in the UAE?
Dubai
In Dubai, the revised laws will apply to 1,061 out of the 2,300 total economic activities on the list released by the Department of Economic Development (DED). Therefore, about half the business activities across sectors, including trading and manufacturing, qualify for 100% ownership.
For professional services activities, however, 100% ownership of business in UAE continues to benefit the entrepreneurs. They, however, require a local service agent and strictly follow the sole establishment legal structure instead of an LLC.
Abu Dhabi
Meanwhile, most trading activities in Abu Dhabi still require investors to partner with an Emirati sponsor. Therefore, they must follow the 51-49 shareholding provision.
Other Emirates
Implementing 100% ownership of business varies from one Emirate to another. While Dubai and Abu Dhabi have already introduced the updated regulations, other states are also expected to devise their own.
Once the rules are introduced by the jurisdictions concerned, foreign investors can enjoy complete ownership of their business. Shuraa becomes your silent business partner at a nominal cost and assists you in setting up a company with 100% foreign ownership in the UAE.
Why were laws revised to allow 100% ownership of business in UAE?
- Create a fertile legislative environment for the company establishments
- Facilitating 100% ownership of business in the UAE will raise the readiness of the country’s economy
- Improve the ease of doing business
- Help prepare for the future by boosting investment and commercial opportunities
- Raise the competitiveness of the business environment in tune with the rapid economic changes as well as developments taking place in the global economy
- Respond to the evolving needs of the UAE business community
- Give a huge push to the country’s attractiveness to expat investors, businesses and even startups
- Empower foreign investors to have complete operational and legal control over their companies without any unwanted intervention
- Attract business aspirants from around the globe to find a home for their business and enjoy UAE 100% foreign ownership
Key Points in the New Amendment
Below are the key points of the new amendment:
- 100% Foreign Ownership: Investors can now fully own onshore companies in the UAE, subject to UAE cabinet policies.
- Eliminating Emirati Shareholder Requirement: UAE companies no longer need majority Emirati shareholders or local agents during company registration in Dubai.
- Shareholder Lawsuits: Shareholders can sue the company if directors or managers cause financial losses.
- IPO Share Increase: Joint stock companies can now sell up to 70% of their shares through an IPO, up from 30%.
- Company Meetings: Meetings no longer need to be presided over by Emiratis; expatriates can now take on this role.
- Local Government Authority: Local governments now have the power to recognise required capitalisation and shareholding percentages for onshore companies, a role previously held by the Ministry of Economy or Economic Departments of each Emirate.
- Electronic Voting: Annual general meetings can now utilise electronic voting due to the global pandemic.
- Board of Directors: The prohibition on expatriates serving on boards of directors has been lifted.
- Executive Accountability: There are new provisions for removing executive officers or company chairs if they abuse power.
What Entrepreneurs in the UAE Can Expect from the Amendment
The impact of 100% ownership in Dubai mainland is still being determined. However, allowing full foreign ownership in Dubai’s Mainland businesses is expected to boost the UAE’s appeal to international investors, particularly those previously deterred by ownership restrictions.
Foreign companies with mandatory local shareholders may reconsider these arrangements if they desire full legal ownership. This change could also prompt a reevaluation of the long-term benefits of freezones, which allow 100% foreign ownership but restrict mainland trading.
Businesses currently in free zones might now prefer to establish onshore.
All newly licensed or previously established businesses can adjust their statuses according to the new commercial company law.
How 100% Ownership in UAE Affects New Businesses
Entrepreneurs who were previously hesitant to start a company in Dubai or the UAE due to ownership restrictions can now proceed without concern.
The new law allows non-Emiratis of all nationalities to own their businesses fully in permitted sectors. It provides new investors with a competitive advantage and simplifies the business establishment.
How 100% Foreign Ownership in UAE Affects Existing Mainland Businesses
If you own a business in the UAE with mandatory local shareholding, reconsider those arrangements if you want 100% ownership. Existing LLC owners can amend their licenses by transferring shares from UAE nationals to foreign nationals to achieve full ownership.
Existing companies must adjust by January 2, 2022, following the Amendment. This may involve updating LLCs’ Memorandums of Association to comply with new quorum, notice, and meeting requirements.
How 100% Ownership Affects Existing Businesses in UAE Free Zones
UAE Freezones permits 100% foreign ownership but generally restrict entities from trading on the UAE mainland. Despite this limitation, many investors favour Freezones due to incentives like favourable regulatory and tax regimes. However, the new foreign ownership law may decrease demand for Freezones and present challenges in attracting business.
Financial Freezones such as Dubai International Financial Centre (DIFC) and Abu Dhabi Global Market (ADGM) will likely remain popular. Their common law legal frameworks, independent court systems, and robust financial regulatory regimes will continue to attract investors and financial institutions.
How a Foreign National Can Get 100% Ownership in an Existing LLC Company in UAE
Foreign nationals who own an existing LLC in the UAE can achieve 100% ownership by following these steps, ideally with the assistance of a business setup consultant:
- Prepare the application for license amendment.
- Amend the Memorandum of Association (MOA).
- Get pre-approval from the Department of Economic Development (DED).
- Submit the application to the DED.
- Pay the required fees.
One-stop solution for business needs
A pioneer in providing expert company formation services, Shuraa Business Setup has been helping local and international entrepreneurs, and investors take their first steps since 2001. With its customised business solutions, Shuraa has sowed seeds for more than 35,000 firms in the last two decades.
From helping entrepreneurs figure out the most suitable jurisdiction, trade license, and corporate structure based on the nature of their business to obtaining all required documents and approvals from various government agencies for the issuance of visas and licenses, Shuraa takes care of all the steps and formalities so that businesses do not have to worry about the legal procedures.
100% ownership for foreign investors in the UAE is a revolutionary step with the potential to turn the corporate business industry upside down. The UAE’s supportive government has amended the Federal Commercial Companies Law (CCL), and we, at Shuraa, provide you with all the information regarding these changes. Moreover, we assess your business model and recommend ways to ensure your venture becomes eligible for 100% foreign ownership.
Since the law is recent, integrating various governmental departments will take time. To avoid confusion and learn more about how Shuraa can help you navigate the process of obtaining 100 foreign ownership UAE, book a free consultation with Shuraa’s Legal Corporate Advisors.
Call +971 44081900 or WhatsApp +971 501287254 or drop an email to [email protected]
