How to Set Up a Business in UAE Mainland with Full-Foreign Ownership?

by Zaara 25, Jan 2021

How to Set Up a Business in UAE Mainland with Full-Foreign Ownership?

Incorporating your company in the UAE mainland is comparatively easy and profitable. But, one drawback that shouldn’t go unnoticed is the lack of complete ownership. Anyone wanting to establish a business in the UAE Mainland is aware that the laws prohibit full-foreign ownership. An ex-pat cannot set up a business in any UAE Mainland’s without a Local Sponsor.

But it looks like things have changed.

The government of the UAE has planned to give complete ownership to foreign nationals. That means you no longer will have to rely on local sponsors to begin your own company.

Background

When the Foreign Direct Investment Law, Decree-Law No. 19 of 2018, was issued and published in Q4 2018 is intended to relax the tight restrictions on foreign ownership and allow up to 100% ownership of mainland UAE companies in specific sectors. At that time, the list of activities that would be opened to allow 100% foreign ownership was called The Positive List. (A separate Negative List, on the contrary, is a list of activities that will not be opened to foreign ownership.)

What has Changed?

Earlier if a foreign expat wanted to setup their business in UAE, they had to have a local sponsor who owned 51% of shares in the business and the expat would own the remaining 49%. Even though the local sponsor would be a silent partner and charge an agreed yearly fee, foreign expats would largely have a tough time finding someone to trust with more than half of their company shares. Only few activities in the professional and services industries and certain free zones allowed expats to have 100% ownership of business in UAE.   Now, however, the amendments exempt expatriate investors from the minimum percentage ownership of UAE nationals. Thus, allowing natural and legal persons to establish companies in the UAE Mainland without the need for a local partner.  The revised laws will be applicable to several categories of business licenses, including 122 economic activities across 13 sectors under the Positive List. Therefore, foreign investors can now have 100% ownership of business in UAE. Nevertheless, the law will not adhere to some companies that are excluded based on decisions by the Cabinet and those that are either entirely owned by federal or local governments or their subsidiaries. 

What does the Positive List Include?

As mentioned above, the joyous list covers activities, including the requirements and share capital requirement for each sector under three categories - agriculture, industrial, and service sector. The list of 122 activities approved under each industry will be eligible for 100% Foreign Investor ownership, an initiative that opens opportunities for Foreign Investors who intend to enter the UAE Mainland market.

The list of activities include:

  1. Administrative and support services
  2. Agriculture
  3. Art and entertainment
  4. Construction
  5. Educational activities
  6. Healthcare
  7. Hospitality and food services
  8. Information and communication
  9. Manufacturing
  10. Professional, scientific and technical activities
  11. Renewable energy
  12. Space
  13. Transport and storage

What are the Criteria and Requirement for 100% Ownership?

There are a few conditions to be met to get the advantage of full foreign ownership.

1. Share Capital Requirement

Depending upon the industry and business activity, share capital requirements can vary between 2 and 100 million AED. Industries, for example, related to Hospital activities, will require a Share Capital of 100 million AED. For other industries such as Manufacturing, Share Capital requirements change depending on the type of manufacturing activity. For example, the Manufacture of Sports equipment will need 3 million share capital, whereas the Manufacture of Machinery equipment will need 100 million AED share capital.

2. Other Conditions

There are a few conditions that the Foreign Investor must satisfy, which again will vary upon the sector/activity. However, mentioned below are some of the terms that must be met:

  1. Use of new Technology
  2. Recognition of a high added value
  3. Contribute to Research & Development
  4. Meet the requirements of UAE Licensing entities

Why were Laws Revised to Allow 100% Foreign Ownership?

  • Identification of a high added value
  • Contribute to Research and Development
  • Meet the needs of the UAE licensing entities

Who can apply for Full-Foreign Ownership?

It includes –

  • Create a fertile legislative environment for the company establishments. 
  • Facilitating 100% ownership of business in 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 start-ups

1. FDI Projects listed under the Positive List

The procedure to apply for complete ownership is -

  1. Select Business Activity in Positive List and Legal Form (Limited Liability Company or Private Joint Stock Company)

Note: FDI Capital should not be less than the minimum requirement

  1. Submit FDI Licence application for approval
  2. Reserve a business name
  3. Obtain approvals of entities related to FDI company activity
  4. Obtain permission and receive FDI Licence after paying fees
  5. Opening of Bank Account on behalf of the company
  6. Register the Licence with the Ministry of Economy

For FDI Licence applications of sectors within the Positive List, the maximum period for approval is five working days.

2. The existing company who would like to change to an FDI Company

A current company may transform into an FDI company. The legal form is one of the types specified for FDI companies – specifically a mainland UAE LLC or Private Joint Stock Company.

3. A Project Licence not under the Positive List

It is also possible to apply if the project Licence is not under the positive list - for example, sectors such as retail, real estate activities, F&B, and hotels. The foreign investor should submit their application for review to the Competent Authority of FDI. If sent to the FDI Committee for consideration, the recommendation will subsequently be forwarded to the UAE Cabinet.

The application procedure in Dubai is transparent with the FDI handling applications in tandem with the Department of Economic Development (DED) and the Ministry of Economic.

How can we help?

If you want to set up a full foreign ownership business in Dubai Mainland, or if you have an existing company in mainland UAE and you are considering applying for 100% ownership, then please do get in touch, and our team of experts will be happy to assist and advise you on eligibility and the steps and process required. Contact us today for more information.